The Bitcoin: Bubble or Bank — CBC The Current, April 11, 2013
If the Bitcoin becomes sometime in the near future the new “virtual?” currency as some think, will FATCA keep up? Will any of us keep up? Or, will it fail? I’m trying to understand it all.
Thanks for this, Just Me, and for Mark Twain, suggesting this work deserves its own post. James Jatras has highlighted this article as well as has commenter, Joseph Zernik.
Con’s and Some Pro’s (why’s and why not’s) are given — good work and read! Perhaps with its own post, more will see and read it.
Frederic Alain Behrens, University of Wisconsin
April 9, 2013
Wisconsin Law Review, Vol. 2013, No. 1, p. 205
Several methods, used along with lobbying Congress, can achieve
the repeal of FATCA. “These include hearings, ordering [a]
cost/benefit stud[y] (which never was done for FATCA), withholding
[IRS] enforcement funding, freezing Executive Branch nominations, and
. . . most importantly, blocking implementation of [more Model 1 and 2]
IGAs as the ‘weak link’ in the FATCA enforcement plan . . . .”178 A
significant public relations campaign is also needed to educate the public
about FATCA. The financial industry should consider funding a
substantial Congressional lobbying and media campaign to avoid the
substantial compliance costs it will face once FATCA goes into full
effect.
…
In considering whether the movement to repeal FATCA will be
successful, it is important to consider some roadblocks that groups
lobbying for its repeal must face. First, FATCA was voted into law under
the HIRE Act, which had broad bipartisan support.185 The main purpose
of this Act was to get Americans back into jobs and bolster the American
economy through a significant stimulus package.186 Besides the FATCA
provisions, other parts of the bill create new tax credits that encourages
businesses to hire new employees.187In the current environment, with voters not interested in raising
taxes, a repeal of FATCA, which is aimed at increasing tax revenue, will
not be looked upon favorably. Even the most vociferous proponents of
repeal concede that FATCA will be a tough nut to crack, but claim that
“if and when FATCA receives the kind of scrutiny in the United States it
should have received before enactment, it is unlikely to survive.” 188
Further, tax evasion is a contentious political issue. Voters will not like
seeing a bill repealed that is aimed to target tax evasion by wealthy
Americans taking advantage of loopholes in the current system.189 As
long as getting Americans back to work remains a top priority for
Congress, the bipartisan support that enacted FATCA will struggle to
repeal it.
In addition, Americans living outside the United States do not have
a big footprint in American politics and have no concentrated voting
strength in any particular state or district. Although groups such as
American Citizens Abroad and Republicans Abroad have organized
movements to repeal FATCA, American expatriates have trouble
speaking with a unified voice on the issue.190 A strong unified message is
needed to ensure the success of the repeal movement.
Lastly, FATCA is not mainly about revenue and is more about
information on foreign bank accounts held in foreign countries.191 This
may also be part of the reason why a proposed withholding regime would
not be implemented because it is not in line with Congress’s policy
purpose behind the bill when it was enacted. There could be other ways
to get information from banks, but in general there will be a similar
sentiment against this. However, efforts to repeal tax legislation enacted
by President Barack Obama have succeeded before.192
187.
…
CONCLUSION: FATCA, THE ROAD TO NOWHERE
It is critical for all participants, including government organizations
and the general public of consumers, to strike an acceptable balance of
burdens on each side, so that all participants can achieve their goals.
FATCA is not the way for the U.S. government to prevent income tax
evasion. Moreover, the current state of the U.S. economy is already
problematic, and legislation increasing the reluctance of foreigners to
invest in the United States is worrisome.203 The IRS should not force
taxpayers and banking consumers of foreign nations to pay the costs of
compliance with American tax laws from which these people derive no
benefit.
It is becoming increasingly apparent that the protests against the
implementation of FATCA, the burden on IRS regulation writers, and the
enormous cost of compliance for FFIs are not worth the tax revenue and
information that FATCA is projected to produce.204 The growing
opposition movement will continue to attract the opposition of foreign
banks, international governments, and American citizens abroad likely
culminating in the repeal of FATCA. In the end, if someone wants to
hide their assets abroad, they will figure out a way to do it. The goal of
FATCA is laudable, but using it as a means of achieving a reduction in
offshore tax evasion is destined to fail.
Slashdot had an interesting link to a post about the IRS and their rather disturbing insistence that reading people’s email doesn’t require a warrant.
It seems the ACLU has requested information via the FOIA because the IRS asserts that it can and will continue to make warrantless requests to ISPs to track down tax evasion.
Apparently the outdated Electronic Communication Protection Act allows federal agencies to request and read any email that is over 180 days old. Even more startling is the IRS assertion that the fourth amendment doesn’t apply to email at all.
In fact as recently as 2009, the IRS has claimed that there is no expectation of privacy for emails, and in 2010, asserted that email stored on a server is fair game.
Is the IRS reading my email or yours? Probably not. But it’s disturbing to know that they can and think it’s within their rights to do it if they want to.
French professor of Latin American studies Salim Lamrani proposes that his country should adopt that uniquely American system of taxing based on what passport you hold rather than what society you actually live in, the way the rest of the civilised world does things. His facile idea about “how to end tax exile”, originally floated in French last October at Canadian website Mondialisation.ca and in Portuguese at Opera Mundi, has recently reared its ugly head again in English over at the Huffington Post, thanks to a translation by Larry R. Oberg.
Like most other Canadians, I was outraged to learn that the Royal Bank of Canada has been laying off IT workers and replacing them with temporary foreign workers, with the intention of outsourcing their IT functions overseas. I was ever more outraged to learn in today’s news that RBC is not unique among Canadian chartered banks in doing this; several other members of the Canadian Bankers Association also stand accused in the media of the same practice, by some laid-off and even current IT workers from several banks other than RBC (specifically, CIBC, TD, Scotiabank and BMO).
Am I the only person who is wondering whether there is a connection between the outsourcing of the banks’ IT functions to less-expensive overseas contract workers, and the indications we hear of the banks’ preparations to comply with FATCA (which will entail some extensive and expensive IT systems work in these banks)? Outsourcing all that IT work could help reduce the costs to the banks of rolling over and complying with IRS invasion of our citizens’ financial accounts.
Is it the case that not only are the banks preparing to throw Section 15 of Canada’s Charter of Rights and Freedoms under the bus, as well as the account information on thousands upon thousands of Canadian citizens’ financial information to the tax agency of a foreign country, but they also are laying off highly-educated and highly-trained Canadian IT workers to boot in order to achieve this, even requiring those workers to train their under- or un-trained replacements in Canada before those workers go back to where they came from (and where Canadian privacy, banking and Charter rights don’t apply as those workers will be on foreign soil)?
And what will the outsourcing of IT functions overseas do to what remains of privacy, secrecy and security of Canadians’ financial information – of ALL Canadians, not only those of US origin?
I am writing today to my MP to ask these questions. I urge you all to do likewise. I would like some clear and believable answers. (No, I am not writing to CBA. I want an answer I can believe, and I think that Question Period in the House of Commons, followed as appropriate by a federal government investigation to get answers, is the only way that’s going to happen. CBA is not going to have any credibility with me on this one. I believe what fellow Canadian workers are telling CBC, not the insipid denial by that RBC official.)
Over past months, some of us have wondered how to get our fellow (non-US-origin) Canadians interested and upset about FATCA. If my suspicions about the answers to the above questions are correct, I think this could be a real doozy of a way to raise public awareness and concern about FATCA, US violation of our sovereignty, and possible complicity in same by our financial institutions.
Harper government’s fraudulent attempt to look tough on tax havens: McQuaig
If the Harper government had any genuine interest in tackling tax havens, it would get behind growing global efforts to shut them down. Even the U.S. Congress passed a sweeping law, to take effect next year, requiring foreign banks to report all assets held by their U.S. clients to U.S. tax authorities.
A plan to develop an international system along these lines, long championed by the U.K.-based Tax Justice Network, has fresh momentum in the wake of last week’s revelations.
Tax Lobby Builds Ties to Chairman of Finance Panel and http://t.co/Fq1PyV6Din – #americansabroad need a lobbyist too! #FATCA #FBAR
— U.S. Citizen Abroad (@USCitizenAbroad) April 8, 2013
As this article in the New York Times demonstrates, U.S. democracy has become a “marketplace” where votes are bought and sold. In other words, the legislative agenda is driven by special interests and money.
The last major U.S. tax reform was in 1986. That was the year that the PFIC was introduced. It is likely that the PFIC legislation was largely driven by mutual fund lobbyists who wanted to keep “Homelanders” investing in the United States. Nobody could have seen (at least I hope) the severe, punitive consequences of the PFIC rules on U.S. citizens abroad and on their countries of residence.
The PFIC rules may well have been originally intended to prevent “Homelanders” from investing in foreign mutual funds. Their primary effect is now to punish U.S. citizens abroad and extract wealth (in the form of penalties) from their counties of residence.
During this era, the Chair of the Senate Finance Committee was Senator Bob Packwood of Oregon. What was the original intent of PFICs? Were they intended to apply to the mutual fund holdings of U.S. citizens abroad? I am sure the answer is NO they were not originally intended to punish U.S. citizens abroad. To this day there are no IRS regulations that specifically state that Canadian mutual funds are PFICs.
“However, you need to look further. In 1991, twenty-one years ago, the I.R.S. published proposed regulations on PFICs which have never been finalized. The proposed regulationsare not binding on taxpayers. They are considered a body of informed judgment but accorded no more weight than the I.R.S.’s litigation position. The proposed regulations are where the bulk of the rules related to PFICs are located.”
As a result of the 2010 IRS policy review, the IRS issued Chief Counsel Advice 201003013, stating Canadian mutual funds should be classified as corporations for U.S. tax purposes. Therefore, if an American citizen receives income from a PFIC or sells a Canadian mutualfund that is a PFIC, U.S. tax and interest penalties could apply.
http://www.advisor.ca/tax/tax-news/tax-planning-and-dual-citizenship-46794
Imagine that! The IRC does NOT specifically include Canadian mutual funds in the definition of PFICs. The IRS has NOT published regulations including Canadian mutual funds as PFICs. Yet because of a 2010 ruling by an IRS counsel, Canadian mutual funds have been retrospectively defined as PFICs.
(Those willing to invest the time, should read what shows up when “Bob Packwood PFICs” is searched. At at minimum you will see how Tax Reform hearings work.)
Another very sad case of “unintended consequences” from 1986
Suicide Note of Joseph A. Stack III Cited 1986 Tax Law: http://t.co/qBO77gPNp1 – Remember this while tax reform is going on!
— U.S. Citizen Abroad (@USCitizenAbroad) April 11, 2013
NobleDreamer posted the story of Joe Stack. Eventually the frustration of dealing with U.S. tax laws drove him to suicide. He flew a plane into an IRS building in 2010. This was the result of a law passed for the benefit of a special interest group at the expense of the average American.
The New York Times reported that:
The law, known as Section 1706 of the 1986 Tax Reform Act, made it extremely difficult for information technology professionals to work as self-employed individuals, forcing most to become company employees.
Many software engineers and other such professionals say that the law denies them the opportunity to become wealthy entrepreneurs and that it makes it harder to increase and refine their skills, eventually diminishing their income.
Harvey J. Shulman, a Washington lawyer who represented companies that supported the desires of software engineers to be independent contractors, estimated that the law currently affects at least 100,000 such people.
“This law has ruined many people’s lives, hurt the technology industry, and discouraged the creation of small, independent businesses critical to a thriving domestic economy,” Mr. Shulman said in an interview Thursday. “That the law still exists — even after its original sponsors called for its repeal and unbiased studies proved it unfairly targeted a tax-compliant industry — shows just how dysfunctional and unresponsive Democratic and Republican Congresses and our political system have been, even on relatively simple issues.”
The law was sponsored by Senator Daniel Patrick Moynihan, Democrat of New York, as a favor to I.B.M., which wanted a $60 million tax break on its overseas business.
Under budget rules in effect at the time, any tax breaks had to be paid for with new revenues. By requiring software engineers to be employees, a Congressional report estimated, income and payroll taxes would rise by $60 million a year because employees had few opportunities to cheat on their taxes.
This reminds me very much of the PFIC rules!
Have a look Commissioner Shulman’s comments on Joe Stack and offshore tax evasion beginning a the 3 minute mark.
Americans in Canada face complex situation
Just Me suggested a separate post of this Star Phoenix (Saskatoon) article that badger highlighted.
I was happy to see the acknowledgement of the problem with account and asset reporting:
…”The problem is not in-come tax. The problems are the punitive IRS penalties and criminal prosecution threats for failure to complete the many required annual information returns.”…
Starring Douglas Shulman as Police Chief Tolliver and MEP Sven Giegold as Police Lieutenant “Donny” Donaldson
I thought it might be nice to post about something other than FATCA and tax for a change. I don’t know if everyone will like this movie it has some good reviews and bad ones too. I do think it has a certain symbolism for out present predicament even though the movie is over the top on occasions. I would try to take note to societal references to pot, the Chicago Seven, third marriages etc. I am not sure it is explicitly mentioned but the movie is most definitely supposed to take place on either Martha’s Vineyard or Nantucket the two ultra rich, ultra elite, and ultra Liberal islands off the coast of Cape Cod(All of the cars have Massachusetts license plates and the cars of the BMW and Mercedes Benz variety). Both Martha’s Vineyard and Nantucket are also the playground of the Hollywood “elite” so for this reason the movie was not heavily distributed back in 1993. Nor are all cultural references that emphasized in the trailer.
You can rent it for $3.00 US on Amazon.
http://www.amazon.com/Amos-and-Andrew/dp/B001PSOQ2E/ref=cm_cr_pr_product_top
Starring Nicholas Cage and Samuel L Jackson
The theatrical trailer isn’t that good but I will post it anyways.
A tale of two Green Parties
The Green Party is not a monolith. Different Green Parties take different positions on different issues. There is no such thing as a United Green Party. This is good news. It allows for different Green Parties to take positions that are appropriate to local needs and local constituents. It also allows for and a open and transparent debates on the issues of the day.
The principle of “open debate” is surely welcome (open debate is not permitted within the ranks of Canada’s Harper Government). Only through open debate will understanding be encouraged. Interestingly the Green Party of Europe’s hasty response to the the recent discovery of numerous offshore financial accounts is at odds with the Green Party of Canada’s carefully considered position on FATCA.
