Introduction – Introducing FATCA – “I’d like to build the world a home, And furnish it with love”
FATCA and Citizenship Based Taxation
“I’d like to teach the world to sing” was a sing created by Coke (a large US company) to implement the Globalization of Coke for the benefit of the U.S.
FATCA is legislation created by Congress (the legislative body of the US) to implement Global tax compliance for the benefit of the U.S.
Both FATCA and Coke depend on the U.S. spreading ideas and compliance to the rest of the world. The U.S. is attempting to market FATCA to the rest of the world. Perhaps it could take a page from the successful marketing campaign of Coke.
And furnish it with love
Grow apple trees and honey bees
And snow white turtle doves
I’d like to teach the world to sing
In perfect harmony
I’d like to hold it in my arms
And keep it companyI’d like to see the world for once
All standing hand in hand
And hear them echo through the hills
For peace throughout the land
That’s the song I hear
Let the world sing today
A song of peace that echoes on
And never goes awayI’d like to teach the world to sing
In perfect harmony
I’d like to hold it in my arms
And keep it company
I’d like to see the world for once
All standing hand in hand
And hear them echo through the hills
For peace throughout the land
That’s the song I hear
Let the world sing today
A song of peace that echoes on
And never goes away
A song of peace that echoes on
And n-e-v-e-r g-o-e-s a-w-a-y
Group 1: Countries where an IGA has been concluded
Only the UK and Denmark have concluded agreements with Treasury – The UK is the great ally of the US. The UK can take pride in being:
First partner in the invasion of Iraq; and
First Partner in the FATCA invasion of the world.
Group 2: Countries that the US is actively negotiating with and hopes to conclude an agreement by December 31, 2012.
The countries in Group 2 include: France, Germany, Italy, Spain, Japan, Switzerland, Canada (what?), Denmark, Finland, Guernsey, Ireland, Isle of Man, Jersey, Mexico, the Netherlands, and Norway. (Canada you say!) That’s interesting. On November 8, 2012 – the same day of the Treasury Press Release (coincidence?) – Canada confirmed that it was involved in FATCA negotiations with the US. I recommend reading the active discussion at the Isaac Brock Society. The message from the Government of Canada was:
NEGOTIATION OF AN INFORMATION EXCHANGE AGREEMENT WITH THE UNITED STATES
November 8, 2012
Negotiations are being held between Canada and the United States on an agreement to improve cross-border tax compliance through enhanced information exchange under the Canada-United States Tax Convention, including information exchange in support of the provisions enacted by the United States commonly known as the Foreign Account Tax Compliance Act (FATCA).
The purpose of this bulletin is to inform persons whose interests are affected by the provisions of FATCA that the Government is actively seeking a solution to issues raised by such provisions. The Government of Canada has received input from many individuals and groups in relation to the implications of FATCA.
Persons wishing to offer additional comments concerning the negotiations may send their views to:
Department of Finance
17th Floor, East Tower
140 O’Connor Street
Ottawa, Canada
K1A 0G5For further information contact:
Kevin Shoom
Business Income Tax Division
613-992-2980
Let’s hope that this is a sincere request for public input.
Group 3: Countries that the US would like to engage in discussions
These countries include: Argentina, Australia, Belgium, the Cayman Islands, Cyprus, Estonia, Hungary, Israel, Korea, Liechtenstein, Malaysia, Malta, New Zealand, the Slovak Republic, Singapore, and Sweden.
Group 4: Countries that are not mentioned including China – Note: To US – China is a big country that owns your debt and matters!
One commentator suggests that China will NOT be co-operating with the US under FATCA and that no country should enter into a FATCA IGA over FATCA.
Is there a significance to group membership?
Note that the countries in the first group are suffering the most economically. China is (at least comparatively) has its fiscal house in order.
What is the purpose of FATCA and how is this purpose to be implemented?
An interesting attempt to explain FATCA from the “Homelander Perspective” may be found in a Financial Task Force blog post by Ann Hollinghead. At the risk of overgeneralization:
FATCA is an attempt by the U.S. government to force banks, acting in and under the laws of other sovereign countries, to help the US enforce the immorality of citizenship-based taxation. Foreign banks and governments are asked to report directly to the IRS, any accounts held by U.S. persons. The foreign banks are required to take active steps to identify U.S. persons (the great FATCA hunt) notwithstanding any local laws which would prohibit this conduct. When I described this to a “Homelander” (one who was not a member of the Financial Task Force) he asked:
“Why would foreign banks comply?”
Most banks find it difficult to do so. For that reason the U.S. has now moved to a Model where it is trying to enter into the IGAs with foreign governments. However, we are back to the same question:
Why would any country enter into a FATCA IGA with the U.S. Treasury?
Leaving aside the technicalities of U.S. threats, there is one simple answer.
The answer is: No country should enter into a FATCA IGA with the U.S. Not now, not in the future. Not ever. The time has come to imagine a world without the U.S and to start behaving accordingly. The time has come to gradually build a world financial system that is not “U.S. centric”. There are many reasons why Canada (and other countries) should say “NO to FATCA”. They include:
Reason 1: The Importance of Canada As A Sovereign Country
Any country that enters into an IGA with the U.S. is surrendering its fiscal sovereignty – control over its fiances – to the U.S. Furthermore, to agree to an IGA is to become a division of the IRS in Canada.
Therefore, when Canada considers whether to sign a FATCA IGA, it must ask herself one simple question:
Do we want Canada to continue to exist as a sovereign country?
If the answer is NO, then sign the agreement. History will remember Prime Minister Harper as the man who, on the 200th anniversary of the War of 1812, surrendered Canada to the U.S. What then, would the War of 1812 have been for?
If the answer is YES, then simply tell the U.S. that there will no FATCA agreement. Not now. Not ever!
Now, it is true that many Canadians don’t care. Few of them know about this. Of the few who do know, fewer still understand it. That said, if you don’t want Canada to the “Administrative Region of the IRS north of the 49th parallel” you don’t sign!
Reason 2: The IGA Proposed By The IGA Is Unfair Because it Gives Everything To The U.S. and Nothing To Canada – Furthermore, the US Treasury is attempting to offer what it has no authority to offer
Most discussions about FATCA are complicated by detail, technicalities and the sheer complexity of the regulations. Let’s look at the part of the agreement that defines what Canada gets. It’s found in Article 7.
Article 7
Reciprocal Information Exchange
Consistent with its obligations under the Convention, the United States shall continue to cooperate with [FATCA Partner] to respond to requests pursuant to the Convention to collect and exchange information on accounts held in U.S. financial institutions by residents of [FATCA Partner]. In addition, when and to the extent [FATCA Partner] seeks to collaborate with the United States to implement FATCA based on direct reporting by [FATCA Partner] Financial Institutions to the [FATCA Partner] Government followed by the transmission of such information to the United States, the United States is willing to negotiate such an agreement [on a reciprocal basis] on the same terms and conditions as similar agreements concluded with other Partner Jurisdictions, subject to the Parties having determined that the standards of confidentiality and other prerequisites for such cooperation are fulfilled.]
A. The most that Canada can POSSIBLY get out of the deal is information on bank accounts held in the U.S. by Canadian Residents. Canada (like the rest of the world) imposes taxes based on Canadian residence and NOT BASED ON CITIZENSHIP. Hence, although Canada may have an interest in accounts held by Canadian residents in the U.S., I suspect the interest is “Not Much”.
B. Note that I use the word “possibly”. The proposed agreement does not guarantee that Canada will even get this information. Look carefully at the wording. The agreement dose NOT say that Canada will get the information. Rather the agreement states that:
“the United States shall continue to cooperate with [FATCA Partner] to respond to requests pursuant to the Convention to collect and exchange information on accounts held in U.S. financial institutions by residents of [FATCA Partner]”
Unless there is a specific law requiring U.S. banks to provide the information, you can bet that they won’t. Why would they? If it becomes known that U.S. banks are providing information about bank accounts to foreign governments, customers will cease to use those banks.
Will Congress be able to pass a law requiring U.S. banks to report to foreign governments? I doubt it. The banks have a strong lobby. There is currently no existing law. Hence, any country that enters into an IGA has no assurance that it will receive any information from the U.S. about U.S. accounts held by their residents. On the other hand, they are still required to turn over the banking information of U.S. Residents AND U.S. PERSONS!
Reason 3: “U.S. Persons”, the injustice of Citizenship-Based Taxation and fact that Canadian citizens are included as US Persons
The law which requires U.S. Persons to submit worldwide income to US taxation must be changed. It is unfair, it makes no sense, and it has a chilling effect on commerce, jobs creation, and free trade. Perhaps more importantly, our world image has suffered enough over the last few decades. People over the world who have been on the fence about whether America has lost its mind can only be convinced with this new compliance initiative which removes all doubt.
Former IRS lawyer Steven J. Mopsick
… it is the citizenship-based taxation that is the root of all this evil, and he sees very little chance of that ever changing.
As is the case in all countries, U.S. residents are subject to U.S. tax laws. But, the U.S. goes further. It is not just U.S. residents who are subject to U.S. tax laws. The U.S. requires all “U.S. Persons” to be be subject to U.S. tax laws. This is true regardless of where they live. So, what’s a “U.S. Person”?
U.S. Persons include:
– residents
– citizens (regardless of where they live in the world)
– Green Card Holders (whether they live in the U.S. or not)
– those who spend too many days in the U.S.
It is understood that there are approximately one million U.S. citizens who are residents of Canada. Therefore, for Canada to sign an IGA is to agree to turn over the banking information of NOT ONLY U.S. residents who have bank accounts in Canada, but Canada/U.S. dual citizens who reside in Canada (and therefore have bank accounts in Canada). If you are not following this means that under the agreement that:
– The U.S. would receive the banking information of both U.S. residents and Canadian residents; and
– Canada would only get the information of Canadian residents (if they even will get that).
Hence, it is clear that the proposed IGA is grossly unfair and one sided and should not be entered into.
Reason 4: Effects of U.S. Citizenship-based taxation on Canadian Sovereignty
When great powers begin their decline into eventual irrelevancy, it is rarely just one thing that historians finger as a root cause. But for the US, this may well be it.*
Although not the main topic of this particular post, it is clear that the U.S. use of citizenship-based taxation is in effect a convenient way to steal from the Treasury of other countries. The horrible details have been amply documented in previous posts.
The bottom line is that:
Through double taxation in some circumstances (example capital dividends), deeming income never received to have been taxable (Subpart F and PFICSs), and treating retirement vehicles as “Foreign Trusts”, citizenship-based taxation has disabled approximately one million Canadian citizens from investing and retirement planning. Should this have an effect on Canadian immigration policy? Does Canada want to allow immigrants who are disabled by U.S. tax laws from retirement planning? It is becoming increasingly clear that US citizenship should be viewed as a disability.
There is no other major country in the world that uses a system of citizenship-based taxation. Citizenship-based taxation presupposes that the citizen is the property of the government. This notion is contrary to modern human rights laws which clearly assumes that citizenship is a voluntary arrangement entered into with a country. Furthermore, the taint of U.S. citizenship is transferred to unsuspecting children, who are born outside the United States to U.S. citizen parents. It is repugnant to the ideals of justice that a person should be born as the property of any country.
Reason 5: Citizenship-based Taxation As A Violation of Human Rights
The U.S. takes the position that citizenship-based taxation is allowed by the U.S. constitution. That however does NOT mean that all aspects of citizenship-based taxation are constitutional. For example, to arrest someone is constitutional. But to arrest someone without probable cause may be unconstitutional. To put it simply: the time has come to seriously question whether citizenship-based taxation as practiced by the U.S. is:
1. Constitutional under the constitution of the United States;
2. If so, what aspects of it may be unconstitutional under U.S. law;
3. If constitutional under U.S. law, does it nevertheless violate international law by either:
A. Violating the rights of U.S. citizens abroad? After all, if one can’t:
– plan for retirement;
– have access to normal financial services
– be discriminated against because of U.S. tax laws
there may be a problem.
B. Violating International Human Rights Treaties:
– which seem to imply that citizenship does not imply that the government does NOT have a property right in the person;
– violate specific international human rights treaties
C. Violate International Law by invading the sovereignty of other nations:
– Citizenship-based taxation steals from the Treasuries of other nations.
Reason 6: To Sign A FATCA IGA Is To Endorse Immoral U.S. Conduct – If Not For Eritrea then Not For The U.S.
The true purpose of FATCA is to enforce U.S. citizenship-based taxation. Citizenship-based taxation may violate certain laws and/or conventions. That said, it’s impact, application and enforcement (think of the outrageous behavior of the IRS in OVDI and OVDP)) mean that is absolutely immoral. The Government of Canada took a hard line on the African nation of Eritrea when it tried to enforce citizenship-based taxation inside Canada. The time has come for Canada to take a hard line against citizenship-based taxation form the U.S. Furthermore, the time has come to seriously consider whether citizenship-based taxation in either intent or application is legal.
If Canada signs a FATCA IGA with the U.S., Canada is endorsing the immorality of citizenship-based taxation!
This is part of the message that needs to be understood by the Government of Canada.
Reason 7: Canada Is The Most Important Outpost In the U.S. Attempt to FATCAize The world!
In 2003, President Bush was trying to get world support for his invasion of Iraq. Prime Minister Chretien announced in the House of Commons that Canada would not be part of the “coalition of the willing”. Canada’s refusal was hugely significant in the battle for world opinion. The same is true in relation to FATCA.
If Canada refuses to allow the U.S. to use FATCA to enforce the immorality of citizenship-based taxation, then other countries are sure to take notice.
Prime Minister Harper is in a position where he will surely impact the future of world freedom!
Epilogue: Some Concluding Thoughts: From Just Me To The Government of Canada
Gentlemen,
I do think the IRS is trying to recreate an aura of inevitability on FATCA with this release of model 2, and the recent treasury announcement that they are in negotiations with 50 countries for IGAs.
Frankly, they only have one in place, the UK, and that still has to be approved by Parliament. Are they going to want reconsideration or get excited about a 2nd ‘take it or leave it” model? What if they want something more on their terms, and not just rubber stamp what the HMRC and IRS technocrats have worked out in IGA 1?
Also, you must consider, that a lot of other countries privacy laws and constitutions will have to be modified to give US Treasury what it wants. Are they all going to meekly surrender their sovereignty just for that tantalizing IGA 2 morsel? Will they all rollover to the demands of International Revenue Service? Maybe, maybe not. China? Canada? Russia? Brazil? You think? So, one down and ~193 yet to go!
Of course in a struggle for broader FATCA literacy in an unsuspecting populace, and for thorough consideration of unintended consequences, before everything is cemented into place, we have to contend with the globalist, the OECD or FATCANATICS. These are co-enabling a massive FATCA marketing effort. Theirs is a goal of GATCA or a global automatic tax data exchange with total transparency of financial assets.
Some others besides me observe it happening.
That is an Orwellian world that shouldn’t happen on the sly, without serious public and legislative debate, do you think?
Sadly it is largely ignored by the mass media, with the exception of a recent Huff Post story,
The FATCA marketing effort is driven by the technocrats that remain below the media radar. International tax policy is not as sexy as Generals’ liaisons with Florida socialites. Not to be hyperbolic here, but there is almost a coup d’état of tax policy bureaucratic functionaries over legislative pejorative that is happening before our eyes.
They do know it is better to do this quickly, in “Shock Doctrine’ fashion, during this time of deficits and fiscal crisis. Get it in place as Time is their enemy. If things are slowed up enough for real knowledge of what is happening then opposition will grow. The more you begin to think about it, silly little things crop up, like EFTS, and what does this mean for that massive market just to site one example?
No, they need to move quickly like how the Patriot Act was put into place after 9/11, and taking those lessons on board, look how FATCA quickly followed the successful DOJ UBS tax evasion prosecution in the US.
These moments of opportunity are not lost on those of ideological global taxation fervor. FATCA got no debate in Congress, and was just a quiet little funding amendment, that has turned into this world wide juggernaut or FATCA fiasco. Who would have known? The FATCANATICs did! 🙂 It is their mission.
So they are pushing hard with the FCC ( the FATCA Compliance Complex) of tax professionals, accounting firms and consultants, to make the case, “Don’t delay, You Must Comply”
FATCA is the ‘tip of the spear’ in their co-enabled marketing mission. Compliance is required so don’t question it, just figure out how to do it. Besides, it is good for business as there is money to be made in software solutions and professional consulting assistance! Nothing like a regulatory teat for continual nourishment of a balance sheet over the long term. Don’t mean to be cynical, but it is what it is.
Now maybe this urgency of implementation effort will work on the 50 IGA countries. They and all rest of the world’s FFIs will just meekly go along. There is that carrot being dangled now, in the allure of faux US reciprocity. The US is the largest tax haven in the world after all. What they give up in tax data information to the IRS, is not the same as what they will get back. A stealth raid is happening on their treasury, because of the broad classification of ‘U.S. Persons’, and they are blithely unaware.
There is no equal or level playing ground when it comes to so called IRS reciprocity, due differences between US Citizenship taxation and their residency based systems. Also, reciprocity requires US banks to have a domestic FATCA in place, and it was definitely NOT the intention of Congress to impose a DATCA on U.S. banks when FATCA was first passed into law.
I do think that as time passes, more and more members of Congress will begin to question FATCA implementation and DATCA reciprocity that the Treasury bureaucrats are trying hard to cement into place. More like Congressman Reichart and Boustany will begin to question what the hell is going on.
Reichart
http://1.usa.gov/R8fVZvBoustany
http://1.usa.gov/UvhQEYIn the intervening time, there might be opportunities for push back with general populace awareness and resistance to par this FATCA fiasco down into something more manageable and not so destructive to the worlds economy and U.S. interests in particular.
As now constructed with these IGAs, the cost of implementation is being repatriated onto US shores, and wipes out any of the merger offshore tax revenue gain they thought they would get when they passed FATCA in 2010 Hire Act. That cost to the US economy is showing up in Capital flight as represented by this story in the Miami Herald.
There is some resistance that is starting to show up in Canada whose FM Flahetry, has in the past, been an outspoken against FATCA. However, there is concern that he might be ready to rollover and sign up for an IGA before Canadians know what hit them. He probably would probably throw his residents under the bus and trade FATCA for Keystone pipeline approval, say.
http://www.digitaljournal.com/pr/928803
Time will tell if the deficit problems in so many countries will lead us further down the road of GATCA, but unless some real opposition begins to develop to FATCA, that is where we will end up. We are two years in now on this Journey. I can say with much certainty, few in America know it is underway. Probably true in Europe too. I don’t want to find ourselves reading books about “how it happened’ after the fact, like we have been doing on derivatives and the financial melt down in 2008.
The BIG question to be asked: Is this FATCA/GATCA regime good for an already shaky global financial industry?
Do the FFIs need 388 pages of FATCA regulations plus 2 models of IGAs to add on top of the 2000 pages of Frank Dodd and Basil III?
Does FATCA help create or hinder capital formation and flows? Do we want to be disrupting capital flows right now, and is erecting FATCA barriers good for a global economy?
The FATCANATICS think it is a wonderful thing, and poo poo opposition as “opprobrium”
Shouldn’t that dismissive attitude alone give you pause in your FATCA surrender?
This FATCA Freight train and the accompanying DATCA / GATCA is combining to create some serious systemic issues that will haunt the world’s economy for a long time, IMHO, if the world’s media just silently let it happen without wide public examination.
Maybe you side with the FATCANATICS and not the Opprobrium, but setting aside bias, is it appropriate for something of this scale to be happening without vigorous public debate?
I argue NO!
If the likes of the OECD and their FATCANATIC apologist want global financial tax and transactional transparency, I think we should have equal debate transparency within legislative bodies, and not in the back halls of the technocrats.
More debate like this, I would say.
Thank you.
Just a concerned 99% erPosted by: marvin Van Horn 16 Nov 2012
A Concluding Song:
Here is a new version (hat tip to EM a commentator at the Isaac Brock Society):
Instructions: Sing to the “I’d like to teach the world to sing”
They’d like to make the world their zone
And weigh it down with forms
Tax our savings, fines galore
And snatch our dear first bornsThey’d like to make the world comply
Yet sow disharmony
They’d like to keep us in their claws
And never let us freeWe’d like to see the world for once
All standing head to head
And hear an echo through the hills
We want the FATCA deadThat’s the song we need
Let the world sing today
A song so loud it echoes on
‘Til FATCA goes awayThey’d like to teach us to obey
But we want none of thatThey’d like to teach us to obey
But we want none of thatThey’d like to make the world their zone
And weigh it down with forms
Tax our savings, fines galore
And snatch our dear first bornsWe’d like to see the world for once
All standing head to head
And hear an echo through the hills
We want the FATCA dead
U.S. Persons Abroad - Members of a Unique Tax, Form and Penalty Club 
While your posts are lengthy, they are always very well thought out, thorough and readable. Thanks for laying this out so well, and thanks for including my comments from Investment Europe.
http://www.investmenteurope.net/investment-europe/news/2225412/us-treasury-releases-second-model-fatca-iga
Regarding your comment….”Will Congress be able to pass a law requiring U.S. banks [report?] to foreign governments? I doubt it. The banks have a strong lobby. There is currently no existing law. Hence, any country that enters into an IGA has no assurance that they will receive any information from the U.S. about U.S. accounts held by their residents. On the other hand, they are still required to turn over the banking information of U.S. Residents AND U.S. PERSONS!”
As I understand it, Treasury has already imposed upon the US banks via regulatory fiat without any Congressional input, the requirement to report interest on non resident account holders to the IRS for trading in these reciprocity deals. The question is, will anyone in Congress really object to this and pass legislation to bring this practice, which is key to the IGAs, to a halt? Haven’t seen it yet, since the protests started way back last year from Congressman Boustany and the entire Florida delegation.
http://www.tampabay.com/blogs/the-buzz-florida-politics/content/florida-delegation-implores-obama-hands-foreign-deposits-us-banks
http://www.accountingtoday.com/news/Congressman-Tells-IRS-Back-off-Bank-Disclosures-60322-1.html
From the looks of it, Congress is rolling over to the will of the technocrats (FACTCANATICs)
Thanks for your comment.
Assuming you are correct, this means that the US is run by Treasury. This fact underscores why it is essential that all countries say no to FATCA. As I say: If Canada does not say no to FATCA, it will become the administrative region of the IRS north of the 49th parallel.