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.