Ever since Risk.net published its initial raft of wild speculation back in 2011, financial commentators around the world have been trying to predict how China will respond to FATCA. Never are these predictions based on any inside information from within the Chinese government; instead they’re careful Kremlinology at best, ridiculous guesses and self-aggrandising propaganda at worst. Today Reuters publishes an article falling firmly into the latter category, in which people closely involved with the development of FATCA get a public platform to proclaim that FATCA would be a great idea for China and that China is very keen on the idea of reciprocity — in the hopes that their comments will put pressure on all the smaller countries to fall into line on FATCA too:
One obstacle in the Chinese talks is likely that China wants, in return, more tax information than U.S. officials are willing to share about Chinese citizens who have assets in the United States, accountants and tax lawyers said … Treasury negotiators “will have to look at whether they can go further than they have” to meet Chinese demands, said Philip West, who served as Treasury’s international tax counsel and is now a partner at law firm Steptoe & Johnson LLP. Like the United States, China taxes citizens on worldwide income. So China should be interested in getting tax information about its citizens’ U.S. investments, tax experts said.
Our good old friend J. Richard Harvey is quoted elsewhere in the article as well; he is identified merely as a tax professor, not as the architect of FATCA whose is staking quite a bit of his professional reputation on its success. This is not the first time that Reuters has omitted this crucial little bit of information about a potential conflict of interest when quoting Harvey as an “expert source” about FATCA.
Aside from the blatantly incorrect statement about how China’s tax system works — like every other country in the world besides the US and Eritrea, China taxes based on residence and not on citizenship — it’s worth asking: where exactly did the idea originate that the Chinese government wants information about wealthy Chinese people’s asset holdings outside of China, and that the best place from which to get that information is the U.S. government? The answer: a marginal exile television station run by a racist cult, reporting on rumours spread by Chinese internet users.