Here might be a ray of hope for us.
Nigel Green says FATCA, America’s New Toxic Tax Act, Is In Trouble.
Mr. Green gives two reasons for believing FATCA is “running out of steam.”
Firstly, the US Treasury Department has again failed to meet its own end-of-year deadline to publish the FATCA rules, one of the key steps in its implementation. This is the second time that the Treasury Department has missed such a deadline – the first one came and went in September 2012.
Secondly, to date, only the UK, Denmark, Ireland and Mexico, plus a handful of British Crown Dependencies, have signed FATCA’s required Intergovernmental Agreement (IGA). The Treasury Department had hoped to finalise IGAs with many others, including Canada, France, Germany, Italy, Japan, Spain, and Switzerland before the end of 2012. It failed on that too.
Mr. Green does expect IGAs to be signed and regulations to be released. Yet, he remains optimistic:
But there’s no getting away from the fact that the campaign to introduce FATCA appears to be floundering.
As most of you know, Mr. Green also had a thread last week, FATCA Good Or Bad: You Decide. Some familiar names and a few new ones are in the comments. All “decided” FATCA is bad. If only these were the real decision-makers!
Let’s keep up the pressure as FATCA flounders.
I so hope that it’s true that FATCA is in trouble. I just can’t see the US govt abandoning it, tho, after all the hoopla.
I think in all honesty that something like FATCA is desired by a lot of nation-states and I think it will come in one form or another. Other states may not like the US version but they may (pure speculation on my part) accept the base premise and a US lead on it as a starting point. Then they simply work to negotiate the very best deal they can for themselves within that framework. Reciprocity is a given. I wonder if there are other things that are on the table as they negotiate over those IGA’s?
I haven’t posted in a while so I have a couple of thoughts.
1. The recent surge in activity of the “Idle No More” movement in Canada shows the current Canadian government continues to remain vunerable to public pressure on just about any issue that can really spring up out of nowhere.
2. I don’t know how many submissions the Department of Finance has received but I suspect it was more than they were expecting. Is this slowing down the process. Maybe
3. The involvement of prominent Constitutional lawyer Peter Hogg advocating against FATCA is welcome news(Hogg is not Joseph Arvay another prominent Constitutional lawer involved with FATCA). Hogg is more of a rude awakening for the government because historically Hogg has served as Crown counsel on most big cases unlike Arvay who tends to be suing the government most of his time(except early on in his career when he worked for the BC attorney general).
http://en.wikipedia.org/wiki/Peter_Hogg
http://www.blakes.com/english/people/lawyers2.asp?las=PWH
4. Some other countries like France do clearly desire their own “FATCA” legislation but it is not as simple as that.
These are some additional comments I left on another website to give you an idea what more current thoughts are:
The other issue I will mention is FATCA doesn’t do anything implicitly for non EU nations like Japan, Canada, Australia, New Zealand etc(even in the context of all those countries being rich). Yes, I can see how the EU would view FATCA as an indirect way of putting pressure on their “own” tax haven like Austria like Switzerland in the context of the EU Savings Tax Directive. However, I don’t see the link between Switzerland signing an IGA with the US and Switzerland providing automatic exchange of information with Australia lets say whether or not Australia signs an IGA with the US. Along these lines the UK son of FATCA looks to just apply to UK territorries and crown dependencies not other third countries like Canada or Singapore that are not legally part of the UK.
My overall feeling is if you are someone who things we need more AIE and more multilateralism and international cooperation in tax administration but yet feel FATCA has been the ONLY mechanism to date to move these goals forward then I think you are really up the creek without a paddle because the closer you analyze FATCA in my opinion the more the flaws become. Increasingly I get the sense there are two groups of people who look at FATCA. Group One are US Expats, people with a civil liberties bent(i.e. Abby Deshman, Sylvie Goulard, Sophie In’t Veld), accidental Americans, and a certain segment of Canadian nationalists. This first group(which also includes myself in ful disclosure)wants FATCA gone damn the consequences. The second group I think actually has many of the same views on FATCA as the first but is made up of tax “professionals” and other more familar with tax law and tax administration. Group 2# increasingly realizes that FATCA is not particular well thought out either but feels to throw it out(repeal as Jim Jatras suggests) the window would basically be one of the worst defeats ever in “their” view for international cooperation in tax administration and would probably lead to the demise of the “income” tax as a method of “Tax.”(This view I think is a result of the fact that every effort to cut down on offshore evasion pre FATCA ended up basically being complete failures). As such group 2 is desperately trying to put as much lipstick as they can on the FATCA pig but avoiding at all costs actually re-opening the FATCA “legislation” as passed by Congress(Perhaps because they feel Congress would just assume repeal rather than modify FATCA at this point). Perhaps there is a way of reconciling the view of Group 1 and Group 2. I for one as a member of Group 1 am quite open to this but to date I have not found any way or suggestion as to how to cut a deal between the two groups.
Welcome back Tim. We’ve missed you. I was planning on putting out a call for you if we hadn’t heard from you in the next couple of days.
You and I seem to be the only voices here who don’t think Canada will completely capitulate on FATCA. I, like you, don’t see how they can–legally, politically or practically.
I sent Kevin Shoom a link to the FACTA Forum videos. I also sent him Nina Olson’s report, drawing his particular attention to the section on identity theft and pointing out the risks to this for Canadians if our financial information was submitted to US.
I also asked Mr. Shoom when we would know if Canada will capitulate on FATCA. He replied: “If you are referring to our discussions with the U.S., these are continuing, with a view to concluding an agreement in the near future.”
I don’t know if an agreement refers to an IGA or not. I asked if he could advise what is meant by “near future,” but I have not heard back (but I just asked that yesterday afternoon).
I just stumbled across this old article in my files from October, 2011, which is definitely old news.
http://www.reuters.com/article/2011/10/05/canada-usa-taxes-idUSN1E7940X520111005
At the time, Flaherty said he had spoken to Geithner and other US officials. In a speech to banking and securities officials in New York, Flaherty said Canada was seeking an exemption from FATCA. He felt “we’re getting some progress – we’re not there yet.”
This, combined with other strong statements from Flaherty, helps me to continue to believe Canada will not do a total capitulation. As Alison Christens said at the Forum, Flaherty “has expressed…outrage. For Canada to turn around and sign an IGA is about as about face as you can get…It could not be more submissive.”
I was out of commission for several days last week with the wicked flu bug that’s around. I had not heard of Peter Hogg until you mentioned him. So, doing some catch up by reading Arrow’s article in Globe and Mail, I learned “Peter Hogg, one of Canada’s leading Constitutional experts, sent a letter to the Finance Department last November, outlining a number of Charter concerns with any tax agreement signed with the U.S. – but he declined to make the letter public because he was attempting to arrange a meeting to discuss the issues.”
http://www.theglobeandmail.com/commentary/irs-wants-canada-to-nab-us-tax-cheats-why-we-should-care/article6994760/
Does anyone know if Mr. Hogg has been able to arrange such a meeting? Is the government taking that information into account (along with everything we have submitted) as a “near future” date for an “agreement” approaches?
My guess is the Department of Finance and Mr. Shoom are concerned whatever they tell you is going to end up on the internet and as such possibly find its way back to the US(Which they are right) so they are being highly circumspect in what they say. My guess is Peter Hogg will get a meeting before they sign anything and if he doesn’t Hogg will be someone to cause trouble publically for the government. Hogg just last year represented the Department of Finance before the Supreme Court of Canada regarding the creation of a National Securities Regulator. He is well known at O’Connor St.
For whatever reasons we have pushed the two governments off of their previous end of 2012 completion date. I would tend to view that as a small success. The biggest challenge continues to be to get political traction in Ottawa on this issue among the opposition parties.
@Tim: I also sent links to the FATCA Forum videos the TAS Report (highlighting the identify theft issue) to Flaherty, Mulcair, Rae, May, Hoang Mai, Don Davies and my own Conservative MP Ed Holder. No response from any of them yet.
I also tweeted both to Flaherty, Mulcair, Rae and May. Again, no response.
Perhaps Flaherty is quiet because of discussions, but why isn’t the Opposition all over this?!? Why have they been so silent for so long after initially voicing opposition? I am unaware of any statement whatsoever from Mulcair. I am also unaware of any stated opposition from Liberal leadership contenders. If someone else knows differently, I would be delighted to hear about it.
@USCitizenAbroad (whom we also know as Renounce Citizenship) asked on twitter what Trudeau Sr. would say to the Americans on FATCA. I have no doubt what Trudeau Sr. would have said.
Pierre would have waved the Charter at the Americans. Then he would have firmly and clearly said “Fuddle Duddle…You’re not going to FATCA Canada!”
If anyone dared to ask him how far he would go to protect Canadians, Trudeau would have replied “Just watch me!”
(BTW, I was in Montreal in October, 1970.)
Love him or hate him, you knew where you stood with Pierre. If only Justin had a fraction of his father’s chutzpah!
Are our current sorry excuses for leaders just waiting this out until it is too late? Will they really let US FATCA Canada?
At least as of a few weeks ago the NDP claims to know as little as we do. In terms why they have not been more vocal I don’t know. I do know that the NDP has had its own conversations with the US government both at the Embassy in Ottawa and with the Treasury/IRS in Washington. Several NDP MPs flew down to Washington over the summer to meet witht the Treasury and IRS. Again the contents of these meetings have never been disclosed.
I do think a lot of Liberals, NDPers, and Greens “like” Obama far more than W Bush and don’t want to throw sand in his face.
That doesn’t exactly instill confidence that they will stand up for us, does it?
So, instead, Obama throws mud (I would like to use another word, but I won’t) at Canadians while both the government and Opposition remain silent. Great.
As if FATCA, FBAR, TAS comments on identity theft wasn’t enough to give us all nightmares, here’s a letter from an EA (I had to look it up–that’s an IRS enrolled agent or tax professional) in Alaska.
He claims it’s not Ineptitude or Incompetence that is the problem with the IRS. He claims they are “stealing” from US taxpayers.
http://www.sitnews.us/0113Viewpoints/011213_david_hanger.html
David G Hanger, EA MBA says “They make mistakes, assess penalties on their own mistakes, then make it virtually impossible to get to someone to fix the mistake…IRS has intentionally created a system so dense, so obtuse, and so based on multiple levels of extended call-waiting and confused and confusing messages, frequently ending with a disconnection or unintended reconnection to another IRS office in another part of the country, that even I as a professional with 37 years experience cannot wade through it with any reasonable prospect of success.
“The purpose of this crap is to exhaust you and make you go away; to steal your money.”
And, that’s just for taxpayers in US. How the heck are they going to cope with massive amounts of financial information from around the world? Talk about toxic!
At one time, Steven Mopsick said all that FATCA information would “blow a fuse” in IRS offices. One more way for IRS agents to make mistakes on which to assess penalties.
Speaking of Steven, why is he so quiet? I miss a good debate with him. He hasn’t even had a new post on his own blog for about a month.
Steven, aren’t you going to pop in and tell us how all those intelligent, highly educated, moral folks in Washington will fix all these problems? More importantly, tell us why they haven’t done it yet.
I had a response (actually a non-response response) from Kevin Shoom about what was meant by “near future.” Here is his reply:
“I do not have any more information for you at this time.”
In the meantime, Bloomberg is reporting that final FATCA regulations may be released this week.
http://www.bna.com/final-fatca-regulations-n17179871838/
Blaze,
We may be hearing something from Elizabeth May and the Green Party shortly(I know that is vague perhaps this week or next). Hopefully once this comes out it will light a fire under both the Liberals and the NDP.
Focus Taiwan: “Talk of the Day — Rich Taiwanese give up U.S. passports over FATCA”
http://focustaiwan.tw/ShowNews/WebNews_Detail.aspx?ID=201301140036&Type=aTOD
From the article:
“Ruling Kuomintang Legislator Lai Shyh-bao was quoted as saying that scores of owners of small- and medium-sized enterprises and management executives have begun proceedings to relinquish their U.S. citizenship.”
“Some senior bankers estimated that about 20,000 to 30,000 residents in Taiwan may be affected by FATCA.”
As always, they consistently manage to screw up the title.
Not only would all that FATCA information blow fuses in the IRS (don’t get me started on what might happen if Greek banks started submitting information to them …), the tsunami of CLN applications world-wide isn’t going to do wonders for operations in the State Department either. One way to stop a runaway train is to dump lots of sand in the engine. I wonder how much longer the US government and media can continue to suppress or ignore the fuses that are blowing (please pardon my mixed metaphors, I’m an addict).
@Schubert: As I said to Steven several months ago, US is notorious for blowing fuses. Unfortunately, when they do, it is the rest of the world which gets shocked and burned.
@Tim: Are you aware of the case of Edgar Schmidt, a lawyer now suspended from Department of Justice?
According to this Globe and Mail article, Mr. Schmidt claims Ottawa is crafting legislation that runs afoul of the Charter without informing Parliament.
http://www.theglobeandmail.com/news/politics/judge-raps-justice-officials-for-treatment-of-whistle-blower/article7394559/
It seems some of the Conservative legislation agenda is likely to run into Charter challenges.
You had posted earlier DOJ advises government on Charter implications. Mr. Schmidt says Parliament originally expected the test for this would be whether, on balance, a measure is likely not in compliance.
However, he claims that since 1993 (20 years ago!), government lawyers have been directed to approve all measures as long as they can imagine an argument in favour of compliance that would have a 5 per cent chance of success. (5%?!?)
Mr. Schmidt considers himself a whistleblower acting in the public interest. The government claims he has violated solicitor-client privilege.
There is no decision yet, but the judge doesn’t seem to like the government’s stance: “The day after the filing of this statement [by Mr. Schmidt], bang: ‘You’re suspended,’ ” said Justice Noël, pointing out to federal lawyer Alain Préfontaine that the government has taken away Mr. Schmidt’s income and reputation.
“It’s unbelievable … Your client has done everything it can to kill this thing. The court doesn’t like that … We see that in different countries and we don’t like it … Canada is still a democracy.”
If the government isn’t prepared to listen to their own general counsel and special adviser, what hope is there they will listen to Peter Hogg or Joe Arvay? Or us?
Nigel Green article in American Banker today: “Foreign Banks Rejoice: Overreaching U.S. Tax Law in Trouble”
http://www.americanbanker.com/bankthink/rejoice-fatca-overreaching-us-tax-law-in-trouble-1055877-1.html?zkPrintable=1&nopagination=1
@ Blaze Is that 5% rule outrageous and sleazy? Yes. Is it surprising from this government? Nope, it’s bred in their bones. Everyone remember this in the next federal election or by-election. That’s the only way to stop these outrages.
@ Jefferson. Interesting article, but unfortunately at the end the author admits FATCA may still go ahead anyway, or at least the regulations may still come out soon. Let’s hope he’s wrong. But some parts of the US government seem hell-bent on behaving like drunken teenagers on a dark country road driving head-on toward each other with their steering wheels welded in place.
@Schubert: It’s easy to place the blame on the current Conservative government. Many of the comments at G and M agree with you.
However, Mr. Schmidt claims the 5% criteria goes all the way back to 1993. Jean Cretien and the Liberals were elected with a majority then and Mr. Cretien remained as PM for 10 years, followed by Paul Martin’s Liberal minority.
Stephen Harper’s Conservatives have only been in office since 2006, first with two minorities, followed by the current majority.
So, if Mr. Schmidt is correct, we can’t blame this 5% rule only on the Cons. The Libs may have done it as well.
I’m stunned that they would use a 5% standard. Seems to me any legislation passed on that threshold would be likely to succeed.
I really wonder what that will mean for FATCA. I think it will be very interesting to follow this case and see what happens to Mr. Schmidt. Based on what the judge said, it does not look promising for the government.
@Schubert: Here is more on the Schmidt case from Toronto Star.
http://www.thestar.com/news/canada/article/1316062–federal-lawyer-suspended-after-suing-his-own-department
Mr. Schmidt says this approach is a shortcut that puts the onus on Canadians to argue Charter infringements, rather than the government doing its due diligence.
I hope Tim returns soon with comments about what the 5% standard may mean for FATCA.
@Blaze. The Star article very fairly points out that the Liberals are as up to their armpits in this as are the Tories.
All the more reason for the NDP and Ms. May to jump all over this issue with hob-nailed boots in Question Period. I’ve emailed Dewar (my MP) and Mulcair to this effect this afternoon.
I know which parties I’ll not be voting for in the next election …
FATCA Final regs have been “released” although can’t as of right now find an actual copy on the internet. No IGA’s signing other than Norway “initialing” an agreement.
Thanks Tim. Just found them through Twitter. I will try to post in a new thread.