Liberty and justice for all United States persons abroad

The Isaac Brock Society

Posted on by Posted in FATCA, Tax Treaties 43 Comments

According to an article by Michael Cohn in Accounting Today, a multi-lateral tax enforcement group has been formed. The Joint Chiefs of Global Tax Enforcement (or J5 for short), intend to “collaborate in fighting international and transnational tax crimes and money laundering.”

Membership of the J5 includes the heads of tax crime and senior officials from Internal Revenue Service Criminal Investigation (IRS CI), Her Majesty’s Revenue & Customs (HMRC) in the U.K., the Australian Criminal Intelligence Commission (ACIC) and Australian Taxation Office (ATO), the Canada Revenue Agency (CRA), and the Dutch Fiscal Information and Investigation Service (FIOD).

Leaders of the group met Thursday in Montreal to formulate their plans. The J5 plans to work together to gather and share information and intelligence, as well as conduct operations and build capacity for tax crime enforcement officials. Areas of focus include cybercrime and cryptocurrency, data analytics, and enablers and facilitators of tax crimes. The alliance will concentrate on building international enforcement capacity, as well as enhancing operational capability by piloting new approaches and conducting joint operations, to bring perpetrators who enable and facilitate offshore tax crime to justice

While it sounds like the planned operations will be aimed at bigger fish, what will be interesting to see is how Canada and the Netherlands proceed. Both countries have Mutual Collection Assistance provisions in their tax treaties with the U.S. (as do France, Sweden and Denmark) that indicate they will not collect from their own citizens if they were citizens when the tax was incurred. And of course, in the case of Canada, no collection of FBAR penalties. Unless I misunderstand, it sounds like the J5 intend to move into enforcement, which sounds like collection to me.

It appears that in addition to provisions in any number of DTA’s, we now have several “information exchange” programs/policies/statutes such as Foreign Account Tax Compliance Act (#FATCA) , the Common Reporting Standard (#)CRS and the OECD’s CONVENTION ON MUTUAL ADMINISTRATIVE ASSISTANCE IN TAX MATTERS . It is difficult enough to read ONE treaty and comprehend what is covered. How is one to evaluate ALL of the aspects that are touched upon by these different programs?

Up to now the one principle that protected one from extraterritorial collection was the revenue rule. A
paper I came across years ago (dated 2004) by Professor Vern Krishna was already predicting the fall of the “revenue rule.” This paper was written a few months after the U.S. passed the American Jobs Creation Act, (see page 154 from link) while removing the issue of intent* to avoid paying tax when renouncing, also created the notion of “tax citizenship.” When relinquishing or renouncing, the requirements of notifying the State Department and filing information with the IRS were added to the process. Four years away from the H.E.A.R.T. Act (the Exit Tax 877A) and 6 years from
H.I.R.E. Act ( FATCA).

In tax law, absent special enforcement treaties, sovereign countries do not enforce the revenue laws
of other countries (the “revenue rule”).

To overcome this rule, many countries negotiate bilateral treaties for information disclosure and
mutual enforcement assistance to counter tax evasion.

In theory, the common law revenue rule reflects the principle that a country has exclusive
sovereignty over its tax policy. However, Lord Mansfield’s rule has limited scope in a world of
increasing regulatory supervision and information exchange between countries on money
laundering and terrorism financing.

The traditional rule that a country will not enforce the revenue laws of another country
and that no country is under an obligation to disclose financial information to foreign governments is very much on its way to extinction.

What do you think? Will all these actions eventually result in a system where there are no privacy laws concerning one’s finances, every bloody dime one earns will be owed to someone as tax?

*****

*removed the intent issue of renouncing for tax purposes by establishing 3 tests (income, asset, certification of tax compliance for 5 years on form 8854) to determine

43 thoughts on “U.S., U.K., Canada, Australia and Netherlands form international tax enforcement group”

  1. “Oh ultimately you and I everyone here will end up in prison camps, but I will at least enjoy what freedom remains by not worrying about something I can’t change.”

    Nah, costs too much and has bad optics. Instead, they are just prodding us to enslave ourselves with our conviences and imprison ourselves with our devices.

    Better cost performances and better PR.

    If everyone had the attitude that we must change it, it would change. We can not change many things, but ink on paper is changable, if only enough have the will to change it.

  4. Yes, in many ways we are already there. I was reminded of this just a couple of days ago. We took my in-laws out to dinner as a way of saying thanks for looking after our kids on evenings we both work late. My wife used the family credit card to pay. I used to have my own card for this account but no longer. Can’t, unless I want our family purchases reported to the US. Same with our family bank accounts. Given our schedules, it made sense for me to have access to these to pay bills and make purchases. Now that I cannot, my wife has to take time off workto do so. We are no longer free to choose how we run our household. A government many thousands of miles away, foreign to all but one family member makes such decisions.

  6. Oh goodie! The more information is shared and disseminated, the more likely that there will be a data breach. Already I am sending a tax return with my account numbers, Social Security number, signature and bank balances but now this is no longer kept just by the bank where the account is located and the IRS and whoever handles my tax return as it travels through the mail, but now the UK, Australia, Netherlands, and soon others will have all the info.

  9. “Not likely”

    You are correct. Very F’n likely.

    “Transparency” has a meaning. It’s not a one way window.

  10. It is when psychologists or state spies install the glass.

    I don’t think expat USCs need to worry about the J5. All five now have ample access to their resident USCs’ information, they don’t need any more. They’re trying to figure out what the hell they’re going to do about blockchain, and no doubt hoping they get there before the Chinese.

  11. Barring some other reason for investigation, I suspect that the Dutch government is about as interested in a Canadian-resident US citizen’s tax returns as the US government is interested in a Japanese-American family’s individual credit card transactions.

    But hey, that’s just me and my crazy denial!

  12. “I don’t think expat USCs need to worry about the J5. All five now have ample access to their resident USCs’ information, they don’t need any more. They’re trying to figure out what the hell they’re going to do about blockchain, and no doubt hoping they get there before the Chinese.”

    I might be inclined to agree were it not for similiar assurances for FATCA. ‘Only going after the fat cats’, they said. ‘If you have less than $50,000 in your account, it won’t be reported.’ they said.

  13. Those two statements aren’t really related. Sure, foreign banks may be dumping all US-person account data rather than apply the limit. But that doesn’t mean the US is going after non-fat cats, or can even do anything useful with the information, depending on the situation.

    Always best to avoid reporting, of course, but I don’t see what the IRS could hope to achieve if it obtained my bank balances.

  14. Those two statements aren’t really related. Sure, foreign banks may be dumping all US-person account data rather than apply the limit. But that doesn’t mean the US is going after non-fat cats, or can even do anything useful with the information, depending on the situation.
    Always best to avoid reporting, of course, but I don’t see what the IRS could hope to achieve if it obtained my bank balances.
    What use do they have with the following information asked of at least Japanese returning from the US to Japan? (I posted this earlier on another thread and just cut and pasted it here.)

    Under the heading of “Tell us about your family” they asked about spouse’s SSN, employment, income, filing status and many more.
    They asked for the actual time assigned in the US and out.
    They asked, “Do you own any real property?”, and “Do you own your primary residence?”.
    I wonder what use the IRS has for such information from a Japanese National living in Japan who happened to spend 90 days one year in the US.
    There were many more similar questions but these were the only ones I could write down looking over her shoulder as she hurried to get it done before the deadline.

    Of course how the IRS might or might not use the data they receive is of concern, but so too is just the fact that they are asking for it and getting it. Just them having it is of great concern.

  15. @JapanT

    I have no idea but it doesn’t have anything to do with FATCA, I would assume.

  16. I have no idea if itdoes or does not have anything to do with FATCA. Regardless, they are asking for information that we have no idea how the IRS could make use of. Clearly, they are asking for more infrmation than we can guess their need for.

  17. “I don’t think expat USCs need to worry about the J5. All five now have ample access to their resident USCs’ information, they don’t need any more. They’re trying to figure out what the hell they’re going to do about blockchain, and no doubt hoping they get there before the Chinese.”

    I might be inclined to agree were it not for similiar assurances for FATCA.

    What you read in forums isn’t “assurances”, it’s just strangers expressing opinions.

    The IGA wording makes it clear that the $50,000 threshold is optional. (Not that it would have made any difference to me, as bank access was my concern.)

  18. Interestingly, the EU Parliament has recently published two blockchain studies:

    one on “Virtual Currencies and Terrorist Financing,” commissioned by TERR (http://www.europarl.europa.eu/RegData/etudes/STUD/2018/604970/IPOL_STU(2018)604970_EN.pdf),

    and one on “Virtual Currencies and Central Banks Monetary Policy: Challenges Ahead,” commissioned by ECON (http://www.europarl.europa.eu/cmsdata/149900/CASE_FINAL%20publication.pdf)

    The second is an interesting read. The first appears from the title to be more in line with the J5 concerns; haven’t read it.

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