We’ve known all along reciprocity is not really reciprocity. Not only that, but FATCA IGAs Are A Bad Deal For Partner Countries.
While vendors are cheering themselves on and salivating at the opportunity to make big money off our nightmare, Jim Jatras says “it isn’t clear that FATCA itself is doing as well.”
Why? Because the U.S. Treasury Department’s ability to enforce FATCA directly, on each and every FFI on the planet is highly questionable.
Getting IGAs signed isn’t proceeding like U.S. Treasury thought it would. Plus, faux reciprocity in Model 1 is in trouble.
Even according to an IRS manager, ““clearly existing U.S. rules don’t require U.S. financial institutions to provide the exact same information that a foreign institution has to under FATCA.”
Mr. Jatras does an excellent assessment of that:
Some have been critical of Mr. Setzer for having the bad manners to speak something like the truth out where it could be reported to those not familiar with the imbalance codified in the IGAs. But putting aside questions of indiscretion and the vague characterization of a timeframe for “full reciprocity” – something that clearly isn’t going to happen anytime soon, and probably not ever – it’s nice to have confirmed officially what most people familiar with the details prefer to obscure.
In his article, Mr. Jatras also points out many ways US has to unilaterally change or escape from an IGA after it is signed.
Moreover, an IGA provides no protection at all for one additional, simple reason: they are written on sand.
American Bankers Association have also now joined the fray
“There is no indication or evidence suggesting that the Treasury conducted the required due diligence for entering into such an automatic exchange relationship” with Mexico.
Mr. Jatras further says:
As a bad deal for all concerned, the IGAs should also be seen as a “weak link” for undermining FATCA and working for its repeal before its worst features go into effect.
Foreign governments need to stop helping to save FATCA from its own fatal flaws by signing IGAs that cannot provide promised protection for cherished institutions. Instead, they should tell Treasury in clear and principled terms that they will not allow their domestic firms to comply with FATCA, and that they’re prepared to respond with WTO and other remedies if IRS tries to apply sanctions.
Finally, firms faced with wasting untold millions of dollars to comply with FATCA need to stop pressing their governments to sign IGAs and instead help get rid of it by supporting the repeal campaign in the United States.
We need to keep up the pressure on our own governments and financial institutions.
3 thoughts on “FATCA IGA A Bad Deal”
Also see these YouTube podcasts:
James G. Jatras: FATCA – Why foreign banks won’t take Americans
The IBS website is still down today. I was going to post this there too. I wrote to my (PC) MLA asking what the government is going to do to “protect us from FATCA”. Here is the response that I received from an “executive assistant”. It almost sounds like they are doing something other than the “model 1” or “model 2” IGA that the IRS has detailed. Am I reading to much into this statement?
— snip — snip —
Thank you for your recent email to the Hon. Diane Ablonczy.
In regards to the Foreign Accounts Tax Compliance Act (FATCA), our
government is aware of this law. Negotiations are being held between Canada and the United States on an agreement to improve cross-border tax compliance. Our Government has made important progress and is nearing a conclusion on this issue to address the concerns of Canadians who hold dual citizenship. These honest, hard-working Canadians are not the real target of FATCA.
The Government of Canada continues to work with the United States on finding a solution that treats Canadians fairly and appropriately.
The Government of Canada has received input from many individuals and groups in relation to the implications of FATCA.
If you would like to offer additional comments concerning the negotiations,
please send your views to:
Department of Finance
17th Floor, East Tower
140 O’Connor Street
For further information contact:
Business Income Tax Division
For more information regarding U.S. citizenship, please visit:
@WhatAmi: My own feeling is they are working on something other than Model 1 or Model 2. I have no idea what that might be, but I would love it if it turned out to be a complete exemption (wishful thinking!)
The fact none of the major Canadian players will be at the upcoming FATCA Conference seems to be sending a strong message that Canada is not prepared to play in the FATCA Sandbox.
That is, of course, only my personal opinion. Others think Canada’s recent silence means our government is preparing to sell out on FATCA.
The one distinction Canada has is our long-time reciprocity with US. Each country provides information exchange on income based on residence, not citizenship. Therefore, US already gives Canada the information other countries might get at some distant point in the future (if ever). Likewise, Canada gives US information on their residents. I am hoping that will be our saving grace, but who really knows?
I hate the fact most politicians insist on calling us “dual” citizens. Ms. Ablonzcy herself was born in US in 1950. She moved to Canada a year later. She is a Canadian citizen. Does anyone know if her parents were Canadian or how or when she became a Canadian citizen?
She does not consider herself a dual. I remember reading something just after all of this hit the media in 2011 that she said she had renounced her US citizenship. I don’t know if that was when the Canadian oath required renunciation or if she (like many of us) did so at a time when US insisted such action meant “permanent and irrevocable” relinquishment of US citizenship.