Here is FATCA: A “Simple Premise” Gone Terribly Wrong
This was coauthored by Lynne Swanson (aka Blaze) in London, Canada and Victoria Ferauge (aka Victoria) in Versailles France and was published today in The Hill Congress blog.
In the article, we ask
President Obama and members of Congress, how did the “simple premise” of “cracking down on illegal tax evasion and closing loopholes” become an attack on financial lives and personal integrity of millions of people living outside United States, their banks and laws and constitutions of their countries of residence?
Is this how “common sense measures” will “restore fairness and balance in the tax code?”
In reporting on how complex, costly and convoluted FATCA has become Victoria and I also ask:
Mr. President and Members of Congress, is this what you intended?
We have to love James Jatras, the former US diplomat and Washington lawyer and lobbyist who is spearheading the battle on the US front to Repeal FATCA.
In an interview with iExpats, Rolled Back FATCA Gives Critcs Hope, Mr. Jatras says:
There’s no way anyone can put enough lipstick on this pig to make it kissable.
He also says:
“The fact is, FATCA is an ill thought-out law that is just begging to be undermined and set up for repeal.”
About the “absurdity” of the British IGA:
“While (US) Treasury is balking at moving forward with regulations on foreign firms theoretically to “recover” US taxes owed, HMRC would be hammering domestic UK firms to the tune of billions of pounds — with absolutely nothing to show for it.
“At the very least, Parliament should hold off on final action (or if they don’t, HMRC should refrain from issuing regulations) until it’s clear whether the ‘Yanks’ will reciprocate – which they won’t.”
On the topic of which countries are likely to sign:
It’s hard to tell. An IGA with Canada was ‘imminent’ – eight months ago.
It’s likely a few more countries will sign in the next few months, but it’s hard to predict which ones. Most recent signals from places as diverse as Switzerland and Hong Kong point in the opposite direction, that the IGA process is getting more difficult for Treasury, not easier.
We have a long way to go, but:
The only way to deal with FATCA is to repeal it. To do that, first we need to bog down its implementation, starting with undermining reciprocity – a task that is largely accomplished.
With adequate resources, I have no doubt we could first render FATCA unenforceable and then set it up for repeal, probably as part of a tax reform package in 2014 or 2015. But right now it could tip either way.
Don’t be seduced by the FATCA pig with lipstick. She is simply trying to seduce governments and banks around the world into her pen.
I certainly won’t ever kiss the FATCA pig, but I sure would like to give Mr. Jatras a big smooch right now!
Thanks to Badger for posting in What’s New Part 2 of the Interview with Bill Yates, former Associate Chief Counsel (International) with IRS
The interview relates to residence-based taxation, but also deals with OVDI and FATCA.
My favorite comment from the story is this:
“I’ll tell you one thing. I’ll never forget what someone said after one of our many, endless Form 8938 drafting sessions.”
“Boy, I sure wouldn’t want to have to fill out this form.”
That sums it all up, doesn’t it?
On FATCA, Mr. Yates says
I thought it was bad policy. We shouldn’t be pushing U.S. citizens towards expatriation.
He recognizes FATCA is hitting U.S. taxpayers living overseas with unforeseen consequences, such as having their foreign bank account(s) closed.
When asked if he thinks FATCA was a mistake, he replies:
It doesn’t matter what I think, now. FATCA is inevitable.
On OVDI, he gives an example of an Accidental American born in a US hospital to Canadian parents. He insists this was not and should not be the target of OVDI. But,
Believe me no one at the IRS Field level is going to speak up about the inconsistencies inherent in OVDI as far as “accidental citizens”
One more confirmation to stay away from OVDI!
Here is the Part 1 of the Interview with Bill Yates, which was earlier posted under What’s New.
Victoria has an excellent post on her blog today: FATCA: A Project Audit.
Victoria looks at FATCA through the lens of her professional experience managing large information systems for multi-nationals.
She gives great insight into what might be said about FATCA in an audit. Here are key points she thinks would be found.
Failure to identify the stakeholders.
Failure to do proper assessment of the impact and risks.
Lack of success criteria.
An out of control core model.
After her superb analysis, Victoria concludes:
Stepping back and looking at it very coldly, FATCA may represent one of the riskiest projects the U.S. has ever tried to push on the international stage.
Or, as Victoria describes in simpler terms:
FATCA is rapidly becoming a bowl of spaghetti the kids are trying to eat on a white couch.
I have no idea why Congress, IRS and US Treasury ever thought it was a good idea to have a white couch.
Let’s be kids with spaghetti. Let’s spaghetti FATCA until it looks like this!
As WhiteKat posted under What’s New, there has been a FATCA delay of six months. Hopefully, this will be the beginning of the end of FATCA.
However, Kevn Nightingale, the expatriate tax lead for MNP, is predicting Americans in Canada could be the “first victims.”
He first spoke about what a “nightmare” FATCA is to administer and what a challenge developing a a FATCA data base is.
After he says all of that, he raises some alarm bells with this statement;
And since Canada’s easy for the IRS to reach, “it wouldn’t surprise me if Americans who live in Canada are the first victims. Some of those people are going to be made examples of. It will take until 2016 or 2017 for real penalties to show up, but it will happen.
I made the comments below in the What’s New thread, but because of the very serious consequences of such a statement, I’ve decide to give this it’s own thread.
I don’t know if this is simply speculative fear mongering or if he has inside information.
However, he did not mention CRA will not collect penalties for IRS on Canadian citizens of residents. I don’t know if this was not mentioned because Mr. Nightingale does not know (which makes me question his professional knowledge) or if it is because he does not want to (which makes me question his professional integrity).
In any case, it is clear we need to continue to be vigilant.
Many Canadians are familiar with the 1962 animation of Stephen Leacock’s early 20th century humorous tale of a young man’s attempt to open his first bank account. It’s worth a view, even if you’ve seen it many times before. Here’s the link:
Now, instead of a young man rattled by a bank, think of a U.S. person having to deal with a financial institution under a Canada-U.S. FATCA IGA.
Although an IGA has yet to be announced, some FIs are already collecting information.
Similar to the Border Crossings thread, perhaps we can relate our own experiences, either in person or through online account opening. Any other information on account opening, from any source, would also be useful. It would be helpful to distinguish between banking, investment and other types of accounts.
If you have already posted your ‘story’ elsewhere, please post it again here.
And, input from our friends in other countries is most welcome.
Just in time for US Independence Day, there is a a major blow for IGAs and perhaps for FATCA itself.
James Jatras at repealfatca.com is reporting It’s Official: There Will Be No American Reciprocity
In a letter to U.S. Treasury Secretary Jack Lew, Congressman Bill Posey (R-Florida 8th), a key member of the House Financial Services Committee, has turned thumbs down on Treasury’s public claims that the U.S. will impose on American domestic financial institutions the “equivalent” of FATCA’s ruinous reporting requirements on foreign financial institutions (FFIs). It’s now clear that is not going to happen.
We’ve known for ages Americans would never agree to real reciprocity. Congressman Posey now seems to confirm that. Given the anger in Europe over NSA, this is just going to add fuel to the fire. It could also give Canada every reason to walk away from whatever is happening with those IGA negotiations.
Congressman Posey says:
“Given the evidence above, it is difficult to conceive of any circumstance that would justify imposing such an expensive and counterproductive domestic mandate.”
James Jatras says:
It needs to be understood that this is a denial that will stick…Thus, by sounding the death knell for reciprocal authority, Congressman Posey is sinking the IGAs, and in turn FATCA itself.
Here’s what Posey himself wrote:
“Further delay in FATCA enforcement and a moratorium on negotiating and signing additional IGAs is in order,” pending “substantial modification or, more likely, outright repeal.”
Congressman Posey further suggests Treasury does not have the authority to negotiate IGA and suggests
A cooperative scheme to penalizing tax evasion without harming the innocent.
We’re not free yet, but I hope this will be a great step on the road to freedom.
Happy Independence Day everyone!
Globe and Mail is reporting Canada’s Information Sharing Deal With US Is Under Fire
The article covers many points we already know. It also misses some really important points.
The lead on the article says:
A debate over fighting tax evasion versus protecting personal privacy looms large for Canada as it prepares to announce a deal with the United States to share banking information.
As we know, this is NOT about tax evasion. Canadian citizens and residents pay tax on their income from bank accounts and other assets in Canada. Many of us have not had a connection to US in decades. Others have never had a connection to US other than being born there when parents were working in US or because their mother was sent to an American hospital to give birth.
The author reports on what Canadian banks want:
Canadian banks have urged Ottawa to take on the reporting duties through the Canada Revenue Agency, which could ensure that privacy laws are respected when information is sent south of the border.
He is not getting the point that does not resolve the problem. Why should Canadians with some obscure tie to US have to report all details about their finances to CRA when other Canadians do not.
More importantly, our information should never be submitted to a foreign government–and especially not to a foreign government which has significant problems with identity theft and protection of personal information.
He does get one point right:
There has been little debate on the issue so far, partly because no details on the talks between Canada and the U.S. have been released. However, Ottawa is promising to make the deal public once it is signed.
Queen’s law professor Art Cockfield sums it up well:
“No foreign government should be able to come into our country and demand personal information about our own citizens and residents.”
However, that statement is followed by:
The negotiations are aimed at smoothing over this problem by ensuring exchanges are mutual and at the government-to-government level.ad
No, that does not resolve or smooth over the problem. We should have the same rights as all other Canadians to manage our finances in confidence and privacy with our banks without involvement of either the Canadian or any foreign government.