Ever since we were told by Steven Mopsick and others that the FATCA train has left the station, we have been insisting it will derail and become a huge train wreck.
Now, one expert is agreeing with us. In Get Ready For The Train Wreck, a former IRS Deputy Commissioner and Department of Justice Prosecutor says:
It’s going to be a train wreck.
He also says:
We’re going to see some bad results this summer.
He points out there are about 20 million tax cheats in the U.S. He says small businesses are the biggest violators, pocketing about 52% of profits without reporting them.
Treasury is going to lose money on this legislation.
I don’t feel vindicated. It just makes me angrier that the train is proceeding full steam ahead with no regard for the consequences.
19 thoughts on “FATCA "Is Going To Be A Train Wreck"”
Yep. My step-mom in the US will likely get away with her untaxed earnings that she said she is hiding in an offshore Swiss bank account, while FATCA forced me to renounce US citizenshp since I had a few pennies in a local account that I needed to pay my mortgage with. FATCA focuses on the wrong people for the wrong reasons, while letting the criminals get away with their crimes.
This is going to be fun to watch. Not so much fun to live, however.
So, the question I have is are they going to start applying that 30% witholding right and left? Or are they going to finesse this by coming up with reasons why they can’t or shouldn’t – let’s just deem all those banks in all those countries “compliant” because they INTEND to become so. Something like that…..
@Victoria: Unfortunately, we are all in the direct path of the train wreck.
I can only think of the horrific train derailment and explosion in Lac Megantic in Quebec last year.
An American owned railway was given permission by the Canadian government to override Canadian federal, provincial and municipal safety standards. That same railway had purchased the tracks and did not maintain them to Canadian standards.
A train intended to carry potatoes was instead carrying crude oil. After it was parked for the night, it became a “runaway” train, sped down a hill and exploded.
Over 40 people were killed, over half of the businesses in the downtown were destroyed along with a large number of homes. Many of the businesses and homes that weren’t destroyed had to be demolished or became inaccessible because of contamination.
The water and soil was severely contaminated. The railway has declared bankruptcy.
Residents have filed lawsuits.
This disaster should never have happened. Neither should FATCA.
Former engineers warned what could happen. Likewise, a former IRS and DOJ prosecutor is warning what will happen with FATCA. Just like in Lac Megantic, no one on other side of the border is listening.
They have already said that they’d rather not delay FATCA, but just withholding.
“There is room within the law to spare financial institutions the FATCA withholding after July 1, former Treasury Department officials said.”
The comment in that link about small business owners being the biggest tax cheats is probably true. I think it’s probably true in most jurisdictions.
So let’s do a little quick math. He reckons there are 20 million small business cheats in the United States who presumably are mostly not taxed in any non-American jurisdiction. Then you have about one third of that number who are American ex-pats who presumably are taxed in foreign jurisdictions, meaning that after foreign tax credits, etc. there is little or nothing for the IRS to gain from them.
Just imagine how much further ahead they would be if all the time and manpower used to draft and implement FATCA were focused in a segment where they actually stood to gain something.
Obviously, both American policy makers and their bureaucratic functionaries are not too bright. They can’t do basic math.
Interesting. So the world’s financial institutions are getting p****d off at the IRS over the shambles this is turning into. I wonder how the bureaucrats at CRA and other IGA countries’ tax departments are feeling about this.
I also wonder how diligently and seriously employees of FFIs and foreign governments are really going to take this. I’m already hearing stories (which I won’t repeat on a public website) of bank clerks and investment brokers turning blind eyes to people they know have US indicia but who are local citizens as well and are simply not ratting on them. The potential for widespread “civil disobedience” against the IRS, the tax agency of not exactly the world’s most popular country in many places these days, will be significant IMO.
The IRS can’t audit FFIs and foreign governments. They don’t have the staff, never mind the budget, never mind the legal jurisdiction.
Off the rails is too mild a metaphor what I think and devoutly hope will happen to this. The huge f-up this is turning into will make Obamacare look like a model of efficient and effective government planning. The political repercussions in the coming US election, and in the next US presidential election, against the Democrats and any remote claim to competence they ever had, once this becomes widespread knowledge, will be most interesting indeed.
Not to mention what will happen to the Tories in the next Canadian federal election, I deeply hope and pray. Flaherty took a very good time to jump ship/bail out of the flaming plane. Joe Oliver as a replacement for him is nothing but a sick joke; no wonder Harper did the swearing-in behind closed doors and no media. Wow are they in trouble. Alberta has ditched their Tory premier; I wonder if the Tory caucus in Ottawa has the balls to ditch Harper, yet?
Interesting times, as in ancient Chinese curse.
To parody the children’s song, “the wheels on the bus fall off, off off; off off off; off off off …”
I agree with you Blaze. FATCA is going to be a train wreck. I just read a post on Isaac Brock about Credit Unions and FATCA. Apparently there are two exemptions:
Credit unions with less than 2% of their deposits from non-residents of Canada will identify and report only accounts of US persons who are non-residents of Canada (no reporting for members who live in Canada).
Credit unions with total assets below 175 million US (186 million CDN) most likely will have no reporting obligation.
How do we know if a credit union meets these criteria for sure?
The Charter Challenge still seems like the best way to defeat FATCA. In the meantime, I will be out of the big banks and into credit unions. Also looking at relinquishment and obtaining a CLN.
Interestingly if you look at the Treasury Board estimates released in February there is actually no budgetary authority for the CRA to implement FATCA or the IGA. That is not to say specific funding might not be made available in a future supplemental estimate but as yet that authority does not exist. Additionally this is NOT to mean that CRA cannot work on FATCA but the resources to do so or quite limited, essentially they have to take money out of other budget accounts to do so. If I had a hunch I suspect within CRA very little knowledge or resources about FATCA has filtered down out of Ottawa to the regional Tax Services offices where most of Canada’s tax laws are actually administered.
Well the old saying that a chain is only as strong as it’s weakest link certainly applies. The FATCA chain is comprised of nothing BUT weak links!
It will give me great satisfaction to watch this disaster unfold. I’m feeling warm and fuzzy already (and I’ve FATCA-proofed my personal finances).
Hoping you are willing to share how one “FACTA proofs” their personal finances. (Our local credit union has assets of 250 million, so opening accounts there won’t help.)
Actually, Victoria’s conjecture about banks being deemed compliant fits in with something I heard last summer. Countries that have an IGA, but have not yet implemented it, and countries that are in serious IGA negotiations with the US as at June 30, 2014 will be deemed to have a fully functional IGA. Therefore, no withholding will be required.
If what I heard last summer is still true, then there’s no rush for Canada to pass implementing legislation. The Harper gov’t would like us to believe that they were under the gun and that the sky would fall if an agreement was not in place by June 30. Likely not true at all.
@Sasha, read this post about credit unions: http://isaacbrocksociety.ca/2014/03/20/most-canadian-credit-unions-a-safe-place/
I hope that this turns out to be the case – ie, that credit unions over $175 million asset limit with less than 2% of non-resident ‘US persons” are exempt from FATCA.
Thanks for posting such promising / uplifting info. 🙂
I sent an email to Elizabeth May MP(Green Party) to thank her for bringing attention to FATCA during Question Period earlier this month. I received an email back from her with the following link to her article in a BC newspaper.
As a former US citizen and an MP representing many constituents with US connections, Elizabeth May seems to be in our corner. It’s great to have support in this battle with IRS and US government.
Thanks Pat Canadian. I think we were posting at the same time. I just started a new thread with my letter from Elizabeth May and the link to her article.
It boggles my mind that a party with one seat in Parliament can do so much on FATCA while the Libs and NDP have ben virtually silent since the IGA.
As Elizabeth says “What’s Up?
Thank you Blaze. Yes, the silence from the other parties is frightening. Perhaps more of us should email the Liberals and NDP, myself included. People without US connections are fortunate but they may be unaware of the implications of FATCA as well.
The IRS apparently cannot even rein in 20 million small business tax cheats inside their own country?
And we are supposed to be scared of those feral clowns in Canada?
A paper tiger.
My conversations with brokers and bankers I know suggest that they will be turning a blind eye to the whole thing. It will be willful blindness from what I can see.
Believe it or not, I know people who know people who are affected by FATCA and who are still unaware they are affected. There are a lot of people who skip past anything they don’t think affects them. I used to be one of them. Frankly, it’s only since I became embroiled in this mess that I started paying more attention to what our govt is doing, and digging in to what potential implications might be.
I’ve not only lost faith in my government, I’ve also lost a lot of my naivete. Really. I used to actually think that people went into politics because they wanted to help properly govern our provinces and country. As opposed to lining their pockets and using our tax money for their personal purposes. Silly me.
Oh, and to protect their buddies, of course, so that they have a cushy job when they’re ready to go back to private sector.
I feel exactly the same way. This has been quite an eye opening experience for me.