Category Archives: IRS

FATCA Fact Finding Forum Report – Part II

Part II
We then started with this video:
http://www.youtube.com/watch?v=3Q9QoHXt6I4
The emphasis on how bizarrely the indicia rules could be interpreted began to be a framework of the discussion.
We then heard from Professor Allison Christians. She studied tax law in the US and has an LLM from New York City University. Point was made that this university has some sort of monopoly on producing international tax lawyers.
*At first, FATCA seemed like a reasonable proposal to deal with tax evasion as the US, along with other major European countries, were experiencing a disappearing tax base with the upper tier of taxpapers escaping their obligations.
*10 years ago, OECD began to promote state-to-state cooperation, which again, seemed a “reasonable” reaction to this situation
**Govts don’t want to hit the middle class “coming and going;” i.e., taxing them on their income and then taxing them again on what they spend on consumption. VAT-GST-HST, etc. The upper tier evades and the lower tier has nothing to pay.
* Law pulls everything into it’s lane – i.e., not just the top tier/tax evaders but also everything “foreign”
*PFFI has two choices:
1) seek waivers which results in giving whatever info the bank asks with consent to disclose to the IRS OR
2) close the accounts
*Important to note – this is NOT a CLOSED agreement; the IRS/US has carte blanche to ask WHATEVER  they want WHENEVER they want (later)
*A recalcitrant PFFI will have 30% withholding on it’s US source cash flow; interest, dividends and property; property worth $1000 sold for a loss at $800; however, FATCA will withhold 30% of that $800.
*at all levels/pass-through-pmts i.e., not just the PFFI of the US Person but the FFI that sends to the PFFI, etc.  Building in a withholding succession.
*The “get out of jail free card” is the IGA
*packaged as information exchange, the current Treaty already covers this; we have low financial privacy with regard to CRA who also has restrictions with what it can and cannot do with our information; we should have a HIGHER right with respect to a 3rd party
*with US and Mexico already having IGA, 2/3 NAFTA is already signed on and danger of Canada being swept in
*We MUST recognize/emphasize that FATCA is INCONSISTENT with our domestic law
*It violates Canadian Autonomy (as opposed to sovereignty); sovereignty is a problematic, binary concept, law of contestation.   Use AUTONOMY instead
*it violates a USC’s mobility
*Canadian citizens are not given a choice since the FFI’s have already chosen for us
*THIS IS EXTREMELY IMPORTANT-just like in litigation, the goal is not necessarily to win; we must do what we need to do to ‘WIN THE PUBLIC RHETORIC”  i.e., get attention in the PUBLIC COURT
*Revenue Code – can elect to be treated as a US company (or taxpayer); parity
*there is no parity between a dual in Canada and a dual in the US
*Case studies where a statute may look facially neutral but challenged by “intl” law
*?  USC violated via Constitution with restriction on leaving?
*who is already over-reacting to IRC-US conservatives
*4 things we can do
1) FATCA = a US treaty override
     similar to 1986 Branch Profits Tax
“later in time law”  concessions where legislation will trump Treaty
2) doing it now with FATCA statute; PFFI has to waive any rights under ANY Treaty;  ex subsidy claim under WTO or NAFTA or FTAA; not just the double-tax treaty
*an attempt to get USC’s abroad to relocate
*an IGA acknowledges the need to waive rights under all treaties; no competent govt would agree to such; FATCA does override the double-tax treaty
*YOU DON’T HAVE TO WIN YOU JUST HAVE TO MAKE IT EXPENSIVE AND GET PUBLIC AWARENESS  (ex the reciprocity issue)
2) Possible violation via NAFTA (but trumped by IGA?)
3)   NB  US has at least 20 FTA’s which amount to defacto subsidies for US institutions
4) International law – customary laws being violated; a sovereign nation has the right to regulate in it’s territory and the power to protect the privacy of it’s own people
*Avoid use of the term citizenship-based taxation; all countries do this with tie-breakers in their treaties; point out US is doing something OTHER than citizenship taxation
*re-think the charade of cooperation; Canada gets nothing, the PFFI gets nothing; pure extraction, no quid pro quo
*under no circumstances should Canada sign an IGA; PFFI challenge any bank signing away their rights who then, sign away yours
*there will be an ongoing cost to saying “NO”
*problem with arguing FATCA  violates NAFTA is treaty override-SAY IT IS and DEMAND the government (Canada) to say IT’S NOT
IT IS a tax treaty override and it IS a privacy override-which are we to give up?
*discussion of 6 indicia and truly bizarre ways in which can be interpreted (too long to go into here but Allison did a superb job of showing these, which will be on the video)
 

FATCA Potentially Hazardous

We have discussed here and at Brock much of what is in Now Lebanon’s article FATCA’s Security Problem.  I think this is the first article I have seen with it all in one piece.
The author Michael Young is the opinion editor for The Daily Star in Lebanon. He certainly “gets” FATCA.  I wonder if he is a “US person” there.
He writes of the privacy issues for American citizens and spouses, “abusive”  burden on financial institutions and difficulties in accessing banking in some countries.
Mr. Young says FATCA is “a case of America throwing its global weight around.”  Plus:

The civil liberties implications are profoundly disturbing.

Mr. Young calls one area of FATCA “potentially hazardous.”  FATCA is demanding FFIs become “vast repositories” of personal information on American citizens with no guidelines for security of this information.
For a country obsessed with the security of its citizens in the aftermath of the 9/11 attacks, such behavior is paradoxical, indeed astonishing.
Mr. Young is as perplexed as we are on Department of State silence on FATCA.
At a time when American embassies regularly issue advisories to citizens to guarantee their safety, we are seeing the IRS asking institutions abroad to gather the most sensitive facts on Americans, with no oversight. The irresponsibility is breathtaking.
Mr. Young says it is “no wonder Americans across the globe are outraged.

IRS would not dare replicate FATCA in the United States.

 

 

Twenty Ways IRS Can Find Yankees (That May Include Us!)

Yikes! This is scary stuff!   Twenty Ways IRS Can Find Yankees.  That could include those of us who have not thought for decades we were “Yankees.”
This somehow reminds me of Simon and Garfunkel’s Fifty Ways to Leave Your Lover.(I’m showing my age again.)

Just slip out the back, Jack
Make a new plan, Stan
Don’t need to be coy, Roy
Just get yourself free
Hop on the bus, Gus
Don’t need to discuss much
Just drop off the key, Lee
And get yourself free.

We thought we did all those things ages ago.  We hopped on the bus (or plane), slipped out honestly, made a plan for our lives in our new countries and had no need to be coy.  We didn’t discuss much because US Consulate was clear and firm. We were no longer “Yankees.”
Now, we need to find new ways to drop off the key and get ourselves free. Can we come up with 50 ways or even 20 to do that?

US Treasury Engaging With More Than 50 Countries on FATCA

US Treasury has announced it is Engaged with More Than 50 Countries To Combat Tax Evasion through FATCA.
The announcement says:

The Treasury Department has already concluded a bilateral agreement with the United Kingdom. Additional jurisdictions with which Treasury is in the process of finalizing an intergovernmental agreement and with which Treasury hopes to conclude negotiations by year end include: France, Germany, Italy, Spain, Japan, Switzerland, Canada, Denmark, Finland, Guernsey, Ireland, Isle of Man, Jersey, Mexico, the Netherlands, and Norway.

Interesting that Canada is included.  I received a letter from Flaherty last week.  His tone has softened slightly, but I don’t sense he has he has budged a lot from his original position.  I will post the letter in the next day or two.  My own best speculation is that an agreement with Canada will be far from what International Robbery Society actually wants.  What do others think?  Tim?
The announcement goes on to give other countries at other stages.
The announcement also says:

“By working cooperatively with foreign governments and financial institutions, we are intensifying our ability to combat tax evasion while minimizing burdens on financial institutions.”

How about minimizing burdens on citizens of other countries who have had no financial ties with US for decades–or in some cases, never?
 
 

 
 

IRS Delays Key FATCA Dates

Breaking News!  Reuters is reporting IRS Is Delaying Key FATCA Dates.
According to this, FIs now have until January 1, 2014 to have procedures in place for reporting.
I’m a bit confused. I thought it was already that FIs did not have to report until January 2014, but they must advice IRS by January 1, 2013 if they will comply. Can anyone clarify that for me?  Tim?
Also, FIs now are not required to withhold until 2017.  The longer this is pushed back the greater chance we have of fighting this.  As Flaherty said recently, delay is not enough.
 

FATCA: The Death of the American Economy

I’ve never heard of Adam Bilzerian or The Bilzerian Report, but this guy understands FATCA:  The Death of the American Economy.

Mr. Bilzerian predicts

On January 1, 2013, the Foreign Account Tax Compliance Act (FATCA) will go into effect, thereby causing the greatest exodus of capital from the American economy in history.

He gives numbers from Washington Post to support his position:

Richard Rahn of the Washington Post writes that FATCA will risk causing the exodus of up to $14 trillion dollars of capital from the American market and could cost well over 10,000,000 jobs.

Mr. Bilzerian also understands problems faced by countries such as Canada where #FATCA violates laws:

This puts the banks in these jurisdictions in the precarious position of deciding whether to abandon the US jurisdiction altogether or break the law in their home country.

So, Mr. Bilzerian asks what is the benefit:

Surely the benefits of this legislation must be significant to warrant such tremendous risk, right? The answer of course is no, because as with most things coming out of Washington these days, logic and rationality have no bearing on the decision-making process. So while the government officials responsible for FATCA estimate that the legislation will bring in about $800 million in additional revenue per year, almost all relevant experts estimate that FATCA stands to cost American taxpayers billions. The implementation alone will require hundreds, if not thousands, of new IRS agents, with the administrative capacity to match. Then there is the private sector, which will have to spend hundreds of millions of dollars re-organizing their entire operations just to comply with the legislation.

Finally, Mr. Bilzerian concludes:

With lunacy like this becoming commonplace in Washington, is it any wonder why wealthy Americans are renouncing their citizenships in record-breaking numbers?

He doesn’t mention it is not only wealthy Americans. It is middle class Americans just trying to live a normal life outside of US.
Unfortunately, Mr. Bilzerian does not seem to write for the mainstream media and no one in Washington is interested in listening.
 
 

Spreading the Fear

Maybe we’ll get a lot more people joining our cause. If this article I ran across is any indication, some of these consultants must be scaring the pants off of the US mainlanders. “Failing to file the right documents could have dire consequences.” I’m not sure if it’s the writer of the article or if it’s the tax attorney who set out to scare them, but I bet it’s working. Continue reading Spreading the Fear

The Economic Impact of FATCA and FBAR Terrorization

Why aren’t our governments more concerned about what the US is doing? Ignoring, for the moment, the legality, or lack thereof, why don’t the governments of our countries recognize that the terrorization of their citizens by the US has a far greater effect than just the immediate financial impact on an individual? Continue reading The Economic Impact of FATCA and FBAR Terrorization

Canada, Australia and Switzerland–Who Will Hold Out?

Here are some interesting pieces from the news and from personal perspectives.
First is a CTV interview with Queen’s University law professor, Art Cockfield, who has spoken out before against FATCA.   He makes the point that the Canadian government needs to be doing more “sabre rattling” over FATCA.
He also makes a point I don’t think I have heard before that he thinks FATCA is illegal under NAFTA (North American Free Trade Agreement.).  So, we already know FATCA violates Canada’s banking, privacy and human rights laws and Charter of Rights and Freedoms.  Now a law professor says it also is illegal under NAFTA.  Why are we still having this conversation?  Why doesn’t the Canadian government Just Say No?
Cockfield stresses, like others, that IRS is not going to find much revenue going after Americans in Canada and points to our 70 year effective tax treaty.  Our friends is Switzerland will not like the comment he makes about Americans living in a tax haven like Switzerland.
Thanks Saddened for sending me the link to the CTV interview with Professor Cockfield.
Investment Europe is reporting FATCA Rules Could Cause Banks To Cut Back On External Asset Managers.  Asset management is the main focus of the article.  But, there is an interesting comment at the very end about the situation in Switzerland.

FATCA is already law in the US but negotiations are under way to enshrine it in national law of countries around the world. Jaeger was hopeful that some ‘carve-outs’, or exemptions, could be negotiated for pension funds and custodial banks in Switzerland. However, he thought the possibility of getting a foreign law accepted in a Swiss referendum was ‘unlikely’

I think getting a foreign law accepted in a referendum in any country would be unlikely.  However, is a referendum planned for Switzerland?
iExpats is reporting Australia Is Ready to Join FATCA Tax Alliance.  This seems to be a model similar to the Europe Five.  However, the Europe Five model is dependent on “reciprocity,” which is still far from a done deal because US Bankers Are Fighting The IRS on “reciprocity.”
On a personal level, Victoria tells How I Really Feel About Citizenship Based Taxation. Actually, I suspect Victoria is being quite tactful and holding back from how she “really” feels.
And, here is an Israeli-American Couple’s Letter To IRS TAS.  It continues to boggle my mind how people whose lives have been turned upside down continue to be so reserved and polite in their comments.