Monthly Archives: September 2013

The elephant In the room

A recent information session was held for members of the Canadian investment industry to discuss the impact and implications of a Canadian IGA on the industry. Most of the session was technical in nature, being devoted to what may be described as “back office operations” and the relationships between Introducing and carrying brokers. However there was a general update on the status of the Canada IGA and what to expect. In the notes below, the Canadian investment industry is referred to as “industry” and individual firms are referred to as CFI.
Please note that this posting may be updated if and when new information is received.
Industry does not know when the IGA will be signed. Expectations are for signing by the end of 2013 and definitely no later than mid-March, 2014.
After signing, the IGA will be presented to cabinet for approval. 
CRA has suggested to industry that, in the meantime, the Model 1 IGA and UK guidance may be used as a template. However, there will be differences due to different Canadian laws, regulations, procedures and structures. 
Industry expects the guidance issued by CRA to be “slimmer’ than the UK guidance. Many details will have to be worked out after the first guidance is released. 
The 30% withholding on recalcitrant accounts is being eliminated. Instead, information on those accounts will be forwarded to CRA along with accounts with confirmed U.S. indicia. 
Self certification is left to each CFI and likely will not differ greatly from existing KYC/AML procedures. However self certification must address U.S. citizenship and tax residency. 
Most registered accounts will be excluded. It is not known for sure, just yet, which ones they will be. Expectations are strong that RRSPs, RESPs and TFSAs will be among the excluded accounts. 
No accounts will be closed. 
Issues with customers with U.S. indicia was described as “the elephant in the room” 
I have a few comments—
Industry expressed frustration over the lack of details they have been given so far. I would guess that actual implementation of the IGA may be delayed for some time as the kinks are worked out.
I found it interesting that there was no mention of Parliamentary approval, just cabinet approval.
This session took place just a few days after the Ottawa press conference and the 2 person protest. Mention was made of Flaherty’s remarks and the G&M article. I had the impression (my opinion only) that the comments to the G&M article were noticed, as well as comments posted elsewhere.
While our focus has been primarily on government, the entire Canadian financial industry should be made aware of our concerns. So, keep those cards and letters (comments and emails) coming.

Barack Obama Unites World With Stupidest Regulation: FATCA

With FATCA, U.S. President Barack Obama has finally demonstrated why he won the Nobel Peace Prize before he actually did anything. world flags

“He has unified the world.”

With FATCA as Option One for Pick The Stupidest Regulation, Obama accomplished what no one thought was possible.

“The world is now united against this horrible piece of legislation.”

This article was written two months ago, but I missed it. I don’t know the results of the poll, but Dan Mitchell does say:

Maybe the crowd in Washington will even learn the right lesson and support  Senator Rand Paul’s legislation to undo some of the worst parts of FATCA, but don’t hold your breath.


Who is a U. S. person ( or has U.S. indicia) according to the IRS

For U. S. tax filing purposes the following are consider U. S. persons 

A citizen of the U.S., including someone born in the U.S. but living in another country, who has not renounced or otherwise relinquished their U. S. citizenship.

A lawful resident of the U.S., including a U.S. green card holder

A person residing in the U. S.

Someone spending a specified amount of time in the U.S., potentially including “snowbirds” who spend winters in the Florida or other warm climes.

A green card holder who never formally handed in their green card upon leaving the U.S. (even though the green card in no longer valid for U. S. immigration purposes).

The child of a U. S. citizen provided a parent lived in the U. S. period for a specified time period (with some exceptions, see T Dott comment)

All of the above would be affected by FATCA. Financial Institutions will also look for indicia including:

A U. S. place of birth

A current U.S. residence or mailing address ( including a U.S. PO Box)

A current U.S. telephone number

Standing instructions to pay amounts from a foreign (meaning non U.S.) account to an account maintained in the United States

A current power of attorney or signatory authority granted to a person with a U.S. address
A U.S. “in-care-of” or “hold mail” address that is the sole address with respect to the account holder
Special note

Others affected by FATCA include any non U.S. person who shares a joint account with a U.S. person or otherwise allows a U.S. person to have signatory authority on the account.

Any business or not for profit organization that allows a U.S. person to have signatory authority on a financial account.

FATCA: Losing Its Way

FATCA: Losing Its Way by Victoria Ferauge (aka Victoria) and Lynne Swanson (aka Blaze) is in Accounting Today.
We say:

This extraterritorial law has sparked global fear, confusion, anger and controversy.

We also report:

Now that controversy has come home.

We assess how FATCA strayed so far from its original intent to combat offshore tax invasion. We find FATCA became lost by: Failure to do a realistic assessment; Failure to consult and involve all stakeholders; Changing directions; Complexity; and Unintended consequences.
Because of this:

FATCA has traveled far off the map from its original destination. Now no one—not the proponents or opponents of this law or the lawmakers and bureaucrats around the world making policy or even the average citizen cheering on the fight against tax evasion—can predict what the FATCA landscape will be down the road.
FATCA appears headed for a catastrophic collision.

We Recommend:

The President, Congress, the Treasury Department and the IRS need to refocus on the original modest, laudable intent of FATCA to track down Americans removing their assets from the U.S. in order to illegally evade paying U.S. taxes.
Then they need to find improved ways to achieve that end.
“To restore fairness and balance” in the U.S. tax code must include “fairness and balance” for Americans living outside United States.
International cooperation in combating tax evasion should include developing true partnerships around the world that respect the laws, constitutions, sovereignty and interests of other nations.

Finally, we conclude:

If leaders fail to act quickly to restore global cooperation and respect, FATCA could represent one of the riskiest projects the U.S. has ever tried to push both at home and internationally.


FATCA IGA and Application Law Approved by Swiss Parliament

L’accord fiscal avec les Etats-Unis passe le cap du National

The taxation agreement on FATCA between Switzerland and the US that would prevent American taxpayers from avoiding the [IRS] was accepted Monday by the National Council [lower house of Parliament] by 112 to 51.
Accounts held in Switzerland by American taxpayers should no longer escape the IRS. By 112 votes to 51 and 21 abstentions, the National Council passed the FATCA agreement Monday. The bill returns to the Council of States [Senate] for a minor divergence regarding the [date?] of entry into force.
The American law called FATCA was to be in effect from next January. The agreement [IGA] and its [Swiss] enforcement law… was prepared in view of this [date]. In the meantime, Washington made it known that the new rules would be applicable only from July 2014.
Past not yet dealt with.
With this treaty, Switzerland should be able to put an end to the taxation conflict with the United States. But only for future taxation of American accounts.
In order to draw a line through the past, certain banks must await the verdict of the American court system, and others must resort to a program concocted by [Washington] which would essentially put them at risk for significant fines and [require] transmission of data to [the IRS].

My assumption here is that the Swiss enforcement law is being returned to the Senate in order to change the effective date to July 2014, but I am not certain. Please see text of the enforcement law and previous discussions here at IBS: Discussions on Swiss Senate Approval of FATCA and SIF page
Here are some direct links cited on aforesaid IBS post, dating back to the June approval of FATCA and Swiss enforcement law by the Senate:
Proposed Federal Law (French): Proposed Enforcement Law
Text of the IGA (English): IGA
Text of the IGA (French): IGA-French
Report (French): Report
What really upsets me is that we had heard in the news that the debate on FATCA would go to the lower house in November. Also, I am wondering if anyone in either house of the Swiss Parliament knows that a drive for repeal is under way. The RTS article does not mention bone fide residents of Switzerland or neighboring countries. Again, our plight is ignored by the press.
Please everyone, write to RTS and other Swiss news agencies to remind them of who this will affect.

The Amygdala or Common Sense?

Have you ever:

  • Stayed in a place where you found cockroaches in the cupboards and that night you were afraid to get into bed, convinced there were cockroaches in the sheets?
  • Had a shower after a walk in the woods to find ticks embedded in your skin, and even after inspecting every square inch of your body still felt bugs crawling all over you?
  • Walked out of your house in the morning straight into a thick spider web, and spent the next several hours brushing away imaginary spiders?
  • Gone swimming in deep water, felt something brush against your leg and practically walked on water to get out of there?

Continue reading The Amygdala or Common Sense?