FATCA Refocusing On Country Partnerships (Reuters)

Reuters is reporting Overseas Tax Dragnet (FATCA) Is Refocusing On Country Partnerships.
According to this,US Department of Treasury is now negotiating with 40 countries.  It sounds like each could have it’s own specific agreement. What a bureaucratic nightmare for IRS, which can’t even deal with its own bureaucracy now.
Bilateral agreements to implement FATCA are “a workaround,” said Mark Matthews, a lawyer at Caplin & Drysdale and former head of the criminal investigation division at the Internal Revenue Service.
“It is clearly less airtight and bulletproof. But the (FATCA) statute as written was wholly unachievable,” he said.
I would say “unachievable” is a bit of an understatement.
I personally don’t care whether it’s direct reporting to IRS or an IGA.  My private financial information is not going to be reported to a foreign government by either my bank or my government.  They are not even going to be given information on my place of birth.

22 thoughts on “FATCA Refocusing On Country Partnerships (Reuters)

  1. Unfortunately, even given Flaherty’s earlier statement, it appears more and more likely that without a CLN your information will be going south. I really do suspect that the government cares more about the bank’s opinion than ours and they will find some way to make it happen. Perhaps a massive lawsuit might work to stop it but it would be hellish expensive (unless we could find a dual lawyer or six to take it on out of self interest.)
    I sure hope I’m wrong on this but the more I read recently the more it seems like an emerging trend towards that conclusion.

  2. Now a publication called Market Leader is predicting United States of Arrogance is poised to become World Tax Center.
    Well that will certainly stimulate the economy–with lots of jobs for highly paid IRS agents, lawyers and accountants. All of this, of course, will be at the expense of honest, responsible law-abiding people paying taxes in the countries where we live and where many of us are citizens.
    Then, of course, USA can continue with its own distinction as one of the greatest tax havens in the world.
    @Johnnb: FATCA draft regulations provide for an alternative to CLN: A non-US passport or other proof of non-US citizenship along with a “reasonable explanation” of renunciation of US citizenship. I don’t intend to get that far in my discussions with my bank. I don’t intend to answer any questions about where I was born.
    Yes, lawyers would be very expensive. That is why it will need to be a class action.

  3. There is a 21 Parliamentary Sitting Day “cooling off” period before any international treaty signed by Canada(or for that matter in the UK) can be ratified. In fact the UK US IGA cannot before ratified before November 12th at least by my count. So if you are going to ratify anything this year it needs to be signed before November 9th based on the current parliamentary calendar. So where it gets really neat is before a treaty can be signed the text must approved by the Treasury Board(Tony Clement) and the Privy Council Office(Marjory LeBreton) which takes six weeks. So there would have to be an agreed upon text by roughly October 1st. That is tough to see happening.
    As an aside someone in the banking industry pro going along with FATCA told me the government should use the “notwithstanding clause” because complying with FATCA was that “important”. And you know what if the government goes along with this in a weird way I hope they do use the notwithstanding clause for the first time ever which will show to sucessive generations how much of an outrage this is.
    My personal opinion is any use of the notwithstanding clause is absolute political poision on the level of Meech and Charlottetown

  4. Seems to me it would be political suicide for the Conservatives if the federal government were to invoke the notwithstanding clause — for the first time in history — in order to acquiesce to the wishes of the United States government. The NDP would have a field day with that!

  5. In addition to FATCA’s Charter violation of substantive equality and discrimination by nationality, there is also the issue of “harm”. Joe Arvay’s successful Charter challenge to the Federal closure of the Insite safe injection facility was based on a concept of “exposure to harm”.
    According to professor Bruce Ryder at Osgoode Hall Law School, “The Insite ruling is a warning to the government that any of its laws or policies which restrict liberty or threaten lives or health are vulnerable to Charter challenge, if compelling evidence calls into question their effectiveness in achieving their stated goals”.
    Allowing Canadian banks to identify US-born Canadians to a foreign state, and thus expose them to unusual or severe penalties administered by that foreign state (for having a legal Canadian bank account filled with legally earned Canadian earnings) – could meet the definition of “harm”.
    Especially because:
    – the US system of ‘citizenship-based taxation” is unusual, and the potential penalties for US-born Canadians caught up in this are disproportionate by any reasonable measure
    – under US law, becoming a citizen of another state is an expatriating act, if performed with intent. Are Canadian banks qualified to be arbitrators of US citizenship?
    – the effect on the thousands of US-born Canadians who are have no US economic tie or presence – especially those simply born in the US under cross-border maternity ward arrangements – is uniquely egregious

  6. @all
    I agree with what johnnb said ‘the government cares more about the banks’ opinion than ours and they will find some way to make it happen’.
    I also believe there will be an uproar – one that will cost megabucks to sort out and possibly do a lot of damage in the process to the Conservative party, never mind the damage to human lives.
    One of the things that adds to the ridiculousness of any bank using “place of birth’ as proof of U.S. citizenship is that there are so many more “accidental americans” (my own sons included), who would stand a huge chance of not getting swept up in all of this. If even half of the ‘U.S. born’ persons living in Canada, had even one child, how many more ‘U.S. citizens’ there are here.
    All of this so that countries can continue to do business with the United States!

  7. I suggest we all email Hoang Mai of the NDP who brought up the issues we are concerned about in the last session of Parliament. His email address is hoang.mai@parl.gc.ca
    I’m sure most of us have sent off numerous letters and emails after first learning about this mess, but perhaps the correspondence has faded off lately.
    I’m sending my email right now.

  8. @Hazy2: I have continued to send e-mails–including one last week to Flaherty with copies to Hoang Mai, Don Davies, Bob Rae and Elizabeth May.
    Since receiving replies to my initial letters last winter, I have heard nothing further from any of them.
    You may be right. It may be time to pump up the pressure again.

  9. Robert Woods at Forbes thinks Kate Middleton Topless Is Nothing Compared To Bank Secrecy Laid Bare.
    I think we can only imagine the incredible violation a young woman must feel at having a private intimate moment with her husband splashed around the world.
    Mr. Woods makes the point that, likewise, some people are going to get a nasty sunburn from FATCA. Unfortunately, those burned may be honest, responsible taxpayers who had every reason until recently to consider their relationships with their banks to be one of trust and respect. Peeping Toms (and Tammys) are everywhere now.

  10. I personally don’t think much of Robert Wood. He is basically an appologist and cheerleader for the US Government.
    I do think the notwithstanding clause has to be on the table if you believe the US is as serious about going ahead with this as the likes of Robert Wood seem to indicate. I don’t now what the aftermath of that what be on Canadian politics. One question I suppose to ask the NDP is what is their position is on the use of notwithstanding clause in any circumstances(which I suspect is highly negative).

  11. @Tim: Wasn’t the nothwithstanding clause used in Quebec on the issue of Bill 101 (French language act). I think this may have been withdrawn after criticism from UN.
    I believe the notwithstanding clause was also introduced in Alberta to oppose same sex marriage, but was later dropped because the Marriage Act is federal jurisdiction.
    However, it is my understanding notwithstanding has never been used federally. I agree using it to appease the US would be political suicide. If governments didn’t use it to resist same sex marriage, (very controversial at the time), I can’t see them doing it now to make IRS happy.
    You and I seem to be among the few who believe FATCA cannot proceed in Canada as demanded by the US. Others seem convinced the government and banks will find a way to sell us out.
    I take my hope from both the Charter and from the old Supreme Court decisions you posted which said: a.) Under no circumstances will revenue laws of another country be enforced either directly or indirectly in Canada and b.) If a bank chooses to do business in the US, that is their choice, but they are still bound by Canadian laws in dealing with Canadian citizens and residents in Canada.
    I’m still very concerned Flaherty will not say 1. Canadian banks must adhere to Canadian law and 2. Canadian law will not be changed to accommodate a foreign government.
    Those seem like simple statements to me. The fact they have not been said publicly, firmly, clearly and strongly make me nervous.

  12. One thing you have to understand is in the past when Canada has opposed a particular US policy they do go about announcing their opposition in a certain diplomatic way. Given past history I don’t think you will see full blown opposition to FATCA until after the final rules are published which keeps on getting pushed back further and further. Now sometime before January.
    Interesting Video below which shows the diplomatic footwork that has to be undertaken.

  13. For those hoping for a more benign Canada -US IGA please note Article 7
    of the UK-US Agreement. In a request for consultations on the agreement by UK Treasury paragraph 3.59 states:
    Article 7 contains what is generally referred to as “most favoured nation provision” This means that if another FATCA Partner jurisdiction obtains more favorable terms in their bilateral agreement than those included in the UK-US Agreement then the UK can also obtain these benefits”.
    So essentially, if Canada or another country gets a better deal, then the UK gets it also.

  14. @Hazy2
    Good that you picked up on that. I really doubt the U.S. would put that in an agreement if they thought there was any chance they would have to honour it, down the road. Doesn’t look very promising that Canada would end up with a better agreement.

  15. The complaints regarding loss of sovereignty because Canada has agreed to share a few embassies with the UK should give some hope that the much more serious issue of FATCA implementation and its implications will create a much much greater hullabaloo.

  16. @Hazy2 Scary stuff. I hope Tim will comment on what that UK provision could mean for Canada.
    Asian FFIs are now upset about FATCA. http://www.risk.net/asia-risk/feature/2207706/asia-financial-institutions-unhappy-about-scope-of-fatca
    According to this, FATCA regs require FFIs to determine why customers abandoned US citizenship. I don`t know where that information came from. My understanding is the regs allow for a CLN or proof of non-US citizenship and a reasonable explanation of renunciation of US citizenship. I haven`t seen anything that says the customer must provide a reason why to their bank.
    This also says it is illegal in Hong Kong to close an account.

  17. Blaze
    You should take a look a my post on Brock regarding the famous Canadian writer Linda McQuaig coming out in favor of FATCA. In fact its going to get worse I am hot on the trail of whether Canadian unions such as OPSEU and PSAC(along with charities such as the Salvation Army of Canada) are giving their members union dues to lobby in favor of FATCA down in DC and against the Canadian Government.
    McQuaig actually crictized the Canadian Bankers Association and Flaherty saying they were on the side of the “rich” and the “powerful” while saying those in favor of FATCA where trying to help the poor and hungry.

  18. This is how McQuaig co-author defended their support of FATCA.
    Not entirely satisfactory…
    Thanks for passing this along.
    I appreciate all the difficulties that recent changes in US tax law and enforcement practices have caused US citizens living abroad. We obviously were not dealing with any of those issues in the book.
    Our broad point was quite simple – in order for modern income taxes to be enforceable, particularly against the wealthy, every financial institution in the world should have to report the income earned by depositors to the country in which those depositors might be liable to pay tax. There is no question that we are very very slowly moving in that direction and FACTA turned out to be an incredibly important initiative in achieving that objective. A number of countries are now entering into reciprocal arrangements with the US to exchange this financial information.
    It is the case that US taxes on the basis of citizenship, but that is an entirely different issue. It would be odd to argue (I think) that if one is opposed to that basis of tax jurisdiction that therefore you should be opposed to all efforts to prevent the evasion of the rule – including efforts that might go some way to reducing the evasion of taxes on the more than $21 trillion of assets held in tax havens around the world.
    Be well,

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