New Zealand will seek to negotiate tax information agreement with US over 'FATCA' law NZ banks had feared would cost them NZ$100 mln

NZ will seek to negotiate tax information agreement with US over 'FATCA' law NZ banks had feared would cost them NZ$100 mln, Revenue Minister Peter Dunne says

The New Zealand government is registering its interest in negotiating a Foreign Account Tax Compliance Act (FATCA) tax information agreement with the United States, Revenue Minister Peter Dunne says.

Enacted by the US in 2010, FATCA requires overseas financial institutions such as New Zealand banks, life insurers and managed funds, to enter into agreements with the US’s Internal Revenue Service (IRS) and US Treasury to provide details about the affairs of their US clients.

“New Zealand fully supports moves to clamp down on tax evasion through effective exchange of information between jurisdictions, but we want to ensure that the information goes through existing channels,” Dunne said.

He added that Cabinet had agreed this week to lodge an expression of interest in negotiating a FATCA tax information agreement.

“Without an intergovernmental agreement, financial institutions would have to enter into separate agreements with the IRS, withhold tax on certain accounts, and risk being in conflict with New Zealand’s privacy and human rights laws,” said Dunne.

"These separate agreements are optional, but not having one means the US imposes a 30% withholding tax on an institution’s American income."

Dunne's announcement was welcomed by bank lobby group the New Zealand Bankers' Association (NZBA), which last year said it believed FATCA could cost the local banking industry NZ$100 million to comply with.

NZBA chief executive Kirk Hope said the government’s engagement with its US counterpart on FATCA WOULD be welcomed across the financial sector.

“It’s a useful step towards sorting out a very thorny and expensive compliance issue for us. We understand US moves to clamp down on tax evasion by Americans living around the world. But without an inter-governmental agreement, the US law’s provisions are virtually unworkable,” said Hope.

"The agreement is expected to provide a practical way of meeting FATCA’s aims and allowing New Zealand financial institutions to comply. While our banks will still incur costs around designing and implementing customer identification and reporting systems, we see this as a positive step,” Hope added.

Meanwhile, Dunne added that having an intergovernmental agreement would "materially" reduce FATCA compliance. If New Zealand secures an intergovernmental agreement, this country's financial institutions won't have to provide information directly to the IRS.

“Rather, they would provide it to Inland Revenue which will submit the data on their behalf to the IRS," said Dunne.

“This agreement will mean we can help to support FATCA’s objectives and play our part in dealing with international tax evasion, while at the same time ensuring that the compliance costs for New Zealand institutions are manageable."

A joint working group including private sector representatives and government officials is being formed to work on FATCA issues. Dunne said organisations that might be affected by FATCA can participate in the working group, by emailing Policy.Webmaster@ird.govt.nz.

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64 Comments

Sweet, New Zealand to hand over all the dual NZ/US citizens soverienty to the United States along with their bank accounts and property as many don't file their U.S. tax return and disclose their foreign bank accounts as required of all U.S. citizens/persons no matter where they live, this include you U.S. green card holders.
Better renounce your U.S. citizenship, but remember you need to pay your U.S. expatration tax on your worldwide assets and be compliant with the last five years of taxes and FBARs.
 
http://www.irs.gov/Individuals/International-Taxpayers/Expatriation-Tax

Renouncing US citizenship and green card status requires a person (under US tax law) to continue reporting world-wide income and assets for 10 years after formal relinquishment of US citizenship and residency. No other country in the Western World requires this of their citizens and residents as far as I know. 

Isnt there a monetary limit though?
Interesting thing on a Green card.  I assume if you work in the US for a few years and leave and work elsewhere you in effect still have to pay federal tax on non-US earnings until the 10 year limit is reached?
NZ I think has something along the lines of if you move here you still have to pay tax on foreign investments left abroad...even if you are paying tax there....so a double whammy.
regards
 

Do you think then that New Zealand residents ought to be allowed to keep their money offshore in lower-tax accounts and so avoid paying New Zealand tax on it?

There is a big difference between having an account offshore and not paying taxes on the interest you earn.
 
Just because withholding isn't automatically taken out and sent to New Zealand doesn't mean the tax cant be paid.
 
Banks in New Zealand do not have a 100% guarnatee on deposits over certain amounts unlike certain banks in Switzerland that have a 100% guarnatee on cash deposits by the Canton like Zurcher Kantonal Bank.

Yes and no.
;]
or its a very hard Q to answer....for instance say someone has UK pensions that they took out 30 odd years ago and are locked in til 65. They will be attracting the UK tax rate, there is no option to not pay it and then pay NZ tax instead.
So in effect someone pays x2 tax?
Now if the NZ tax office said you paid 28% in the UK while 30% was due here so pay the 2% difference, fair enough.  Or if the person could claim UK tax back, OK.
If however someone pays 28% + 30% then no that isnt fair IMHO.
Now what the US seems to be saying is a US citizen is due US taxes and 300% penalties plus paying NZ tax.
Now I think paying no tax is wrong, but I think hammering so punitavely even worse.
regards
 
 

Your "fair enough" option is in fact the one that happens in most cases.  The US difference is because the US taxes its citizens where most countries tax their residents.

 
If you renounce your U.S. citizenship or give up your green card and you have a net worth of $2 million or more you pay a one time tax on your worldwide unrelazied gains, the law was changed on the 16th June 2008, prior to that date you had a 10 year window which you were required to pay ongoing taxes but not on your unrealized gains.
 
IRC 877A imposes a mark-to-market regime, which generally means that all property of a covered expatriate is deemed sold for its fair market value on the day before the expatriation date.  IRC 887A further provides that any gain arising from the deemed sale is taken into account for the taxable year of the deemed sale notwithstanding any other provisions of the Code.  Any loss from the deemed sale is taken into account for the taxable year of the deemed sale to the extent otherwise provided in the Code, except that the wash sale rules of IRC 1091 do not apply.
 

See:  http://www.irs.gov/Individuals/International-Taxpayers/Expatriation-Tax
 
IRS Information for U.S. Citizens or Dual Citizens Residing Outside the U.S.
 
http://www.irs.gov/uac/Information-for-U.S.-Citizens-or-Dual-Citizens-Residing-Outside-the-U.S.

FATCA is going to throw tens of thousands of Kiwis under the bus. NZers that have immigrated from the US, NZers that are living in the US, and NZers that are born in NZ to a US citizen parent. 90% of these people have no idea of their lifelong reporting obligations they have to the US govt regarding their NZ assets. And they don't understand the massive penalties that arise from not knowing; up to 300% of asset value even if there is no tax tue to the US govt.
 
For example; a person born in NZ to a US citizen parent automatically acquires US citizenship at birth. Even if that person never leaves NZ they are required (annually and for the rest of their life) to file tax returns with, and report their NZ assets to, the US govt.
 
Under FATCA, the NZ govt is going to start telling the US govt about these NZers, and those NZers are then facing financial ruin. The US IRS has been actively wrecking people's lives with these penalties since 2009 when they discovered such people had no clue about their obligations and were therefore a penalty gold-mine.  Also, under the proposed IGA, the government is going to have to circumvent the NZ Human Rights Act which makes discrimination based on citizenship or national origin unlawful. What a disgrace.
 
I sighed when I saw this article and this photo of the happy NZ American on the cover. She has no idea what is coming.

...... and she voted for the president under whose watch the IRS persecution of US citizens abroad began ....
 
American ex-pats are such silly duffers  when they're a broad ....

One more thing. If you want to see what NZers will be facing if the FATCA Model IGA comes into effect, just read this story of someone who has taken the journey (me). Of course it will be worse for these other people. My situation was one where I voluntarily fixed my paperwork after I found out it needed to be filed. Having their information handed to US govt (under the FATCA IGA, by the NZ govt) about their inadvertent failures to file paperwork will mean the penalties will double or triple whatever I had to face.
 
It makes me sick to think of the NZ govt inflicting this on NZers.

You're scaring me!
 
I cannot believe that my kids who are dual citizens but who have never lived/worked in the US and who don't have US social security numbers could ever be expected to owe the US anything (except perhaps part of any inheritance of my assets as a US citizen).  I just don't believe such could be the case under international law.
 
Would it be Peter Dunne that I should write to to ask this question?
 
Do you know whether Australia has/is contemplating a similar agreeement with the US?
 
I also wonder whether the NZ agreement would apply to a US citizen living in the Cook Islands?  Have often thought about retiring there!
 
 

Read my post below, and watch the video.  Sadly, what you are hearing is true, and FATCA is the lever the IRS is using to search out all US persons around the world. There are things your kids can do, if they are young enough to shed the US Citizenship without too much cost, but like very thing the US does, it is not easy or cheap. 
 
And Yes, the IRS is looking for US citizens living in the Cook Islands!  

Watched the video - thanks.  Unbelievable.  Nope, kids are adults (i.e. 18+) so shedding this noose around their necks might be a bit difficult.  And of course in trying it also alerts the US system as to their whereabouts and likely mine - I think the best thing is to lie low and hope the US changes the silly law.  Glad to see Canada so opposed to this - and certainly hope other administrations pile in behind.  If there is no tax to pay - no penalties should apply for non-filing.  That is just nuts. 
 
Was interested in the lady panelist who said that in the past the information filed to obtain an American passport did not get passed on to the IRS - but from now on it does.
 
I was about to renew - might apply for NZ citizenship and get an NZ one.
 
 
 
 

I understand the desire to try to ignore it and hope common sense will prevail. I have been saying that for 3 years now, and so far have little to show for it. I say this gently. Putting ones head in the sand and hope it goes away, while certainly a strategy, does come without risk. In this case, ignorance is not bliss.  That NZ IGA is the biggest threat on your horizon. 
 
-If you are just hearing about FATCA for the first time, and not following the evolution of this IRS offshore Jihad, it seems very unbelieveable. I hope for change, but there is nothing I have seen yet to indicate that this freight train will be de-railed.  Recent delays in timelines, which seem to be related to these IGAs that NZ thinks they want, is encouraging, but for those who have been on the Repeal FATCA band wagon for a long time, it has just been a bumpy ride to nowhere!
 
-I don't wish to scare you farther, but I have a suggestion for you, that you at least become as knowledgeable as you can about the renunciation or reliquinishing process.  I am not encouraging you to do it, but just consider it.  I say that even though I am NOT one of those.  I am in the Comply, Complian and Warn mode, and that is why I post comments here.
 
-Here is a link to a thread with a lot of Americans going through the discovery process and asking questions to figure out what to do.  It started with the Canadians, but there are people around the world now weighing in with answers and sharing experiences of the process. There are 57 pages, and over 1447 comments to date.  I have provided you the link to page one, and you can decide how much or how little you want to read.  You could ask a question too, as there are some very knowledgeable people there who have walked the discovery path before you. 
 
-Finally, if you ever think you want to try to become compliant with the US Citizenship tax laws, there might be a new program for you, but, and this is a BIG BUT, it comes with risk and complications.   I would NOT jump into it without a thorough self education process (a drudgery) or expert professional advice (costs money).  Here is a link which was a preliminary analysis of the process after it was first announced at the end of August. There are many other links at this Blog that precede and follow it about the risks and rewards it entails.  Read it or not.  Your choice. 
 
Best wishes and good luck with your journey. 
 

"I cannot believe that my kids who are dual citizens but who have never lived/worked in the US and who don't have US social security numbers could ever be expected to owe the US anything"
What they might owe in tax is one thing. The majority of US expats (as I understand it) have zero tax owing to the US govt. However, things like self-employment and capital gains are dynamite for creating tax liability to the US govt when living outside the US. Even if there is no tax liability, you are still required to file a tax return. But tax is the least of US expats' problems. It's the FBAR reporting relating to holding NZ bank accounts that cause the pain and the penalties, and that is independent of tax liability.
 
"I just don't believe such could be the case under international law"
Unfortunately there is no general international law that constrains what the US can do on this. The citizenship-based US tax regime is extraterratorial US law and FATCA is an enforcement mechanism. A FATCA IGA (if signed) becomes private international law between two countries (NZ and US) whereby the NZ govt would be enacting US policy domestically in NZ. The NZ govt will need to dismantle/circumvent parts of the NZ Human Rights Act to allow this to happen, as currently it would not be lawful to discriminate against US citizens (or people with US national origin) by specifically reporting their details to the US govt.
 
"Would it be Peter Dunne that I should write to to ask this question?"
Yes, absolutely. I will also be making a stink about this to him and anyone else who will listen. Feel free to do the same. I live in NZ, have a US citizen wife and a baby on the way that will (through no choice of mine) be lumped with US citizenship upon taking his/her first breath.
 
"Do you know whether Australia has/is contemplating a similar agreeement with the US?"
Yes, they are. Here is the link to the recent consultation they ran on the IGA. I wrote a submission to this consultation. I'm not sure what the Cook Islands are planning on doing.

Why Katherine, that sounds just too awful for words. Given the way that property prices have gone up in New Zealand over this last decade, and on all those trees you’ve got too, well this just couldn’t have come at a worse time could it? Even the exchange rate is against you. Still I know that as a staunch supporter of the social justice of capital gains taxes, as an American you will be happy to pay the United States tax on the very large capital gains that you have made while living in New Zealand. I do hope for your sake that you have been keeping up with the filling of your annual tax returns to the IRS, and paying, when you’ve needed to, as you go? If nothing else it will keep you in good practice for when you need to do the same here for the IRD. Although it must be very frustrating to face the prospect of being doubled taxed on your capital gains? Of course, if you haven’t been filing your US taxes it sounds like you and your family will be up for thousands. You certainly will be when you sell your stuff. What a pity.

Exactly :-)  I am officially looking for a FATCA non-compliant island sanctuary somewhere! lol.
 
PS - I'm not supportive of a capital gains tax - but rather Gareth M's comprehensive capital tax.  Would prefer not to pay it in two jurisdictions however! :-)

None are left, Kate. Most went to HK or Singapore, where compliance is supposed to be enforced, but itsn't really.
All the old fun Islands are toast, i.e, Jersey, Isle of Man ,Cooks, Vanuatu etc.
Had the option of Asia myself, but decided against it.
You want to stay the course, then Asia is your best bet.  But I would stay away from any Australian banks operating there. Stick with the locals.
 

This looks like a weak attempt at sarcasm. We need a smiley for this.

:-)

Moby you are so right, and so few in NZ realize what this is all about.  I feel for those that will come to this unfortunate discovery, and then wonder what the hell to do.   As you know, the Canadians have been the most vocal in their opposition to FATCA, but the Commonwealth in the South Pacific has been laid back and unconcerned, until now.  I hope this stirs some action.  Thanks for your comments. 

Harsh to blame the NZ Government for this.  Given the reality of FATCA, the choice is either that NZ financial institutions help the IRS to find people in New Zealand who are liable for US tax, thus potentially exposing those particular individuals to a tax liability, or that the US imposes financial penalties on NZ financial institutions' US assets, thus potentially exposing all New Zealanders to an additional cost (reduced profits, reduced tax take, reduced investment returns etc). 
 
It's a repulsive piece of bullying on the part of the US and it sticks in the throat, but the sad fact is that NZ and other jurisdictions round the world have no choice but to cooperate with it. 

If the New Zealand government doesn't negotiate an amnesty program allowing their dual NZ/US citizens to renounce their U.S. citizenship without penalty they will have no one but their self to blame when the U.S. confiscates all of these peoples assets for non compliance in reporting their local bank accounts, worldwide income and capital gains to the U.S. IRS as required by U.S. law for any U.S. citizen.
 
I renounced my U.S. citizenship this year after I realized I could never keep track of my phantom capital gains because of the currency changes between the USD and NZD as the U.S. tax authority requires you to track your life in USD for every transaction.
 
I was fully compliant and even paid my expatriation tax to loss my U.S. citizenship, not fun but I could not be on the hook for whatever changes the U.S. decides to make in the future or to continue to track these phantom gains as the USD sinks in value against the NZD.
 
Every dual NZ/US citizen should contact Peter Dunne ( p.dunne@ministers.govt.nz ) and demand amnesty in order to get this deal done.

Why is it anything to do with the NZ Govn?  Surely its up to the individual US citizen to write that they want to give that up?
Do you really want to set a precedent of a Govn where you live can cancel your other(s) citizenship because it decides its "best for you"?
I wouldnt want that myself, no way, that should be my choice.
I would think the US Govn cant confiscate a US citizen's assets in another country? That would take a US presence in NZ via the NZ courts I would hope and unless its legislated in NZ parliment I cant see it. What it can do is say to ASB bank (say) you hold that person's bank account and they owe $500kUSD, we'll keep $500KUSD that you have in the USA  from other business as compensation, you can try and get it off your account holder, have a nice day.
regards
 
 

I wasn't saying that they should be forced to renounce, what I was saying is they should be allowed to renounce without penalty (right now you have to confirm you are compliant with your last 5 years of U.S. tax compliance before you're allowed to renounce),
 
If they want to stay on the hook with the U.S. so be it, they will have to figure out what they owe the IRS.
 
I would suspect this IGA will allow the US to confiscate what they believe is owed them to some degree at least.
 
It's not my war anymore, I purchased my freedom for the U.S. already, but many don't understand what's in store for them.

Yes, because the NZ government is in such a strong negotiating position that the US is bound to agree with whatever the NZ government asks for, even where the US is likely to lose out on revenue collection opportunities by doing so.

I can understand it if that US citizen is living in the USA and is in effect tax dodging using foreign holdings.  In effect nothing else would shut down the swiss or cayman islands banking system(s) to wholesale evasion.
Of course say Greece (I believe I saw they want to) or NZ couldnt do the same thing, we are not likely to have assets we can put a hold on.
regards
 

U.S. citizens are taxed on citizenship which causes so many problems for U.S. citizens living outside the U.S. or people that happen to be dual citizens like the many NZ/US citizens living here in New Zealand who owe U.S. taxes and reporting obligations to the U.S. they are likely not aware of.
 
New Zealand and most other countries tax on residence, where you live governs how you pay tax.
 
 

The NZ govt can indeed be blamed if they sign an IGA. They do not need to sign an IGA for banks to comply with FATCA. The banks just need to sign individual FI FATCA agreements with the IRS. The banks would have to collect information on US citizens, and US residents and report those people to the IRS. Because the Human Rights Act prohibts discrimination on citizenship or national origin the banks actually need to report the details of ALL their customers to the IRS (not just US citizens) to ensure that all their customers are treated equally. This is not a bad thing because it means that the people who want to deal with a FATCA-compliant bank can wear the privacy cost of their information being reported to the IRS. Banks wanting to appeal to privacy-conscious customers (at least half of the banks I'd guess) would not sign an FI agreement and would essentially be forced to divest themselves of US assets to prevent the withholding on their assets. Non-FATCA banks would have cheaper fees as the expensive FATCA identification/reporting systems would not be needed by those banks. Everyone is happy because you have multiple options of privacy, bank fees and access to the US financial system provided by the mix of FATCA/non-FATCA banks.
 
The most important thing to recognise about FATCA is that it is not about tax liability. It is about informational return penalties (FBAR, 3520, 5471 etc). If you screw up your US paperwork you actually can be due a tax refund when it is corrected, but incur $100,000+ in fines very easily. This is where the money is for the US govt. The US penalties system is bonkers from a NZer perspective (nothing equivalent in NZ) and NZ govt has no business being complicit in it by signing an IGA.

I am wondering where you are getting your information from.  I do not see how you can possibly state that "everybody is happy" under FATCA while the IGA will make things worse.  FATCA is a monstrous, burdensome piece of bullying, bordering on blackmail, with no benefits for any non-US interest but NZ financial institutions and their customers are stuck with it whether the Government likes it or not.
The IGA would make the reporting obligation easier, and it would relieve compliant financial institutions from withholding obligations.  It also enables some institutions to be exempted altogether.  If banks don't want to take on even the somewhat lighter obligations under the IGA, and are prepared to divest all of their US assets to avoid them, the IGA will not prevent that. 

Yes, FATCA in general is every bit as bad as you say it is (and unavoidable), but the IGA is worse. Me saying "everyone is happy" is true in relative terms in that (under individual FI agreements) everyone who wants access to the US financial system can have it, but they must also choose to bear the cost of dealing with a FATCA compliant bank and the increased charges and privacy cost that goes with it.  People who want none of that can go with a non-FATCA bank.
 
Under the IGA there is no choice. All kiwi banks will be "reporting FFIs" that will be required to incur FATCA costs. Even carved out "local FFIs" (probably a couple of building societies and credit unions) that would be designated "non reporting FIs" will still need to identify and exclude NZers with US connections to stay designated as a local FFI. This assessment is called out by the latest post by Gareth re: KPMG (30 Oct 12, 1:45pm), excerpted:"Under the original regulations many considered financial institutions without a direct investment in the US to be outside the scope of FATCA whereas the IGA will apply to all New Zealand financial institutions regardless of exposure to US investments or US investors."
 
There is no ability for banks to "opt-out" under the IGA to limit their costs, as you have suggested. The NZ govt will be required to enforce compliance with identification/reporting using domestic legislation (as per IGA Article 5, 2a). So big costs are imposed on all banks and all customers, regardless of whether they want them.
 

The substantive costs are in the systems and processes required to identify and gather information on US-connected NZers.  Under the IGA the report information is handed to the IRD who then reports to the IRS. Under individual FI agreements the reporting is direct to the IRS from the banks. So reporting costs are still being incurred either way. The big cost differentiator of the two models (IGA vs FI agreements) is that under individual FI agreements there might be 2 or 3 FATCA-compliant banks to cater for individuals that might want US financial system access, don't mind high bank fees, and don't care that their information is reported annually to the IRS. The aggregate cost to NZ is reduced by having fewer affected FIs, and the cost is met by only the people that want access to the US financial system. 

 
The withholding obligation is a red herring. Any entity (e.g. non-FATCA compliant FI) that would be withheld against will never deal with a FATCA-compliant FI due to the corresponding loss. The FATCA compliant FIs will easily identify such entities and refuse to do business with them because of the hassle. Withholding will simply not occur because neither party on either end of the withholding relationship would ever allow the situation to arise.
 
I think you may be putting too much faith in what the banker/financial associations have been saying about why they want the IGA. It is not about reducing costs (as the IGA does not actually reduce costs). It is about banks avoiding the unpleasant decision of whether to go FATCA- compliant or not, and the corresponding uncertainty in what their customer base will choose to do in response. And if they go FATCA-compliant, the banks don't want to have to tell their entire customer base that their details must be provided to the IRS or else they must go to a different non-FATCA compliant bank. That is all there is to it.

No doubt, this is not where N.Z. tax dollars should be spent, those banks that still want to deal with the US and not deal with the 30% withholding on incoming wires should put up and pay the costs to be compliant and deal with the ramifications of having to contact each customer to get them to sign an agreement they are not a U.S. person.
 
The U.S. treats it's citizens like free range chickens, they can leave the U.S. but no matter where they live they will eventually be slaughtered for the state.
 
 
 

Who are they then, these NZ financial institutions who don't have any investments in the US, or for whom it would be easier to divest themselves of US investments, and only do business with others who also have no investments in the US, than to comply with reporting requirements? 

I think your question oversimplifies what the choice is and how it is made, so I will answer the question twice.
The short answer
First obvious candidate would be TSB bank, second would be Kiwibank
 
The long answer
The first choice is to be made by the NZ govt; sign an IGA or let banks choose whether they want an FI agreement with the IRS. The NZ govt should choose based on which option has the lowest aggregate costs to NZers and distributes those costs most equitably amongst NZers. My previous posts outline why individual FI agreements is the best (read: least bad) option for this. 
 
Assuming that the govt makes the choice not to sign an IGA, then the banks need to choose to be FATCA compliant or not. This is a commercial decision. They get to choose between serving one of two customer groups:
Group 1: Wants to have access to the US financial system (e.g. US based shares), doesn't mind high bank fees, doesn't mind all their personal/financial details reported to the IRS annually
Group 2: Doesn't need  access to the US financial system, doesn't like high bank fees, like their personal and financial details to remain private.
 
I'm going to make a guesstimate that at least 50% of NZ banking customers fit into group 2. Let's say all banks other than TSB choose to sign an FI agreement with the IRS. The FATCA banks are going to progressively have to ask all their customers to sign consents to allow reporting of their details to the IRS. The Human Rights Act disallows any discrimination that would allow banks to report only US citizens, hence ALL their customers must be reported to the IRS. I suggest that in the face of this behaviour (and higher fees) group 2 customers would defect to TSB. TSB would be laughing all the way to the bank with their new-found customer base. And TSB are so locally focused that they didn't have much use for the US market anyway. Of course commercial pressures would draw more than one bank into the non-FATCA market due to the large demand. I imagine there will be some people who would do most of their banking with non-FATCA banks, but might hold some additional specifically-US investments through FATCA banks and hence limit the reporting of their information and exposure to higher fees. But ultimately it is this kind of consumer choice that should drive what the banks do.
 
Incidentally, I am actually in favour of automatic and reciprocal exchange of information between countries on their respective residents to reduce tax evasion. Unfortunately FATCA is a parody of this goal that is discriminatory, expensive, and counter to NZ policy. I'm also in favour of the police apprehending bank robbers, but I'd rather the bank robber got away than the cops start shooting into a crowd in the hope of hitting the bad guy.

Much thanks, Moby for the time you are spending explaining this.
 
I wish it was getting wider coverage as like you, I believe at least 50% of NZers would fit into the non-FATCA market you describe and anything that gives our homegrown banks an advantage has to be good for NZ.

Ms  de Meaqnour
Here is how Kiwis can stand up to the US and push back on this FATCA Fiasco.
See this press release out tonight in Canada.  The issues for NZ are exactly the same as in Canada, and the impacts on Kiwis and loss of soveignty are identical.  NZ has nothing to gain from this IGA, and Kiwis have a lot to lose.  Don't let your government be steamrolled into this agreement.  The US is bullying you.  
Read more here...
http://www.newswire.ca/en/story/1071319/stop-an-impending-massive-handov...
 
Thank you.

Sorry, but no, that article does not tell us how we can stand up to the US and push back.  It explains how FATCA is an outrageous, disgusting piece of US bullying, and I agree with all of that.  But it does not explain how Canada or New Zealand can stop it. 
 
The article itself points out a
very real fear that Washington otherwise would unilaterally impose FATCA on Canada at ruinous cost, especially a 30% withholding penalty on Canadian firms' U.S.-derived revenue. Simply put, this is a threat of U.S. economic sanctions against Canada.
 
but it does not explain how "just tell them NO" will prevent the US from doing that.
 

Ms de Meanour
 
Sorry for a tardy reply.  I was traveling, and just arrived in Sydney.
 
As to your comment, the point is this.
 
The press release was designed to educate a largely ignorant electorate, that have no idea what FATCA is, let alone its implications.  It is just a meager start at raising the profile on what is likely to be a back room deal with only perfunctory due process.  This was not designed to give you a point by point path on how to oppose.  That requires some individual action on a country by country basis.
 
Bottom-line is this:
 
Unless there is an opposition group of concerned Kiwis that forms in New Zealand (like Isaac Brock Society in Canada), and unless there is some noise made with press releases and media coverage, FATCA IGA  negotiations and capitulation will happen in media silence.  All Kiwis, not just "~60,000 U.S. Persons" will suffer the consequences of what is a gathering world wide GATCA storm.  
 
There is a Bigger narrative here, that I have commented on here:  http://onforb.es/Q9XiGN   FATCA is not a story in isolation, and there is a progession happening which will lead to a Global GATCA.
 
Also, others are beginning to see the larger story too.  http://bit.ly/UtjQ0s
 
Yes, as you say "  FATCA is an outrageous, disgusting piece of US bullying,"  but it is just the 'tip of the spear' and has other co-enablers:
 
Like, ....
1.  revenue strapped governments looking for what seems to be 'easy picking' tax revenues;
 
2.  FCC, (Fatca Compliance Complex) looking to make money with professional consulting services and new software solutions;
 
3.  The UN's OECD who loves anything that would eliminate tax competition between nations and are just estastic about FATCA;
 
4.  and the FATCANATICs and appologists in the accidemic community and Treasury who are on an ideological mission and are ursurping the power of largely ill informed Congress in this regulatory push.  There views are expressed here:   http://bit.ly/PYdEAJ
 
Yes, FATCA is just steam rolling ahead, and New Zealand, Australia and Australia are set to fall into line next.   The media in New Zealand and Australia are helping this effort with their silence.  However, unless someone is going to point it out, what can you expect?  If not journalist, then it is left to you and me, I guess.  :) 
 
Got any ideas on who to reach out too?  Interest.co.nz and Garth are pretty good, but it is not widely read by those watching Dancing with the Stars on NZTV1. :)
 
 

Geeeeez ... somebody has to pay US tax
have a look at this survey on http://finance.yahoo.com/blogs/the-exchange/chance-fix-economy-part-ii-154649856.html;_ylt=ArHxcLyfZHw1FK073FGdVyWiuYdG;_ylu=X3oDMTN1cHI5dTFjBG1pdANGaW5hbmNlIEZQIE1lZ2F0cm9uIDIEcGtnAzFhYTk5MmEyLWYwMjUtMzE1Yy1iZGFiLWY0ODljYjdlYzMyNQRwb3MDMQRzZWMDbWVnYXRyb24EdmVyA2Y5NGJlYjJhLTFmYjUtMTFlMi1iZjllLWQyODkyY2NiZWFjMQ--;_ylg=X3oDMTFpNzk0NjhtBGludGwDdXMEbGFuZwNlbi11cwRwc3RhaWQDBHBzdGNhdANob21lBHB0A3NlY3Rpb25z;_ylv=3
 
read the comments .. do the survey .. and read this comment
The answers are too simplistic. For example, the loopholes need to be closed that prevent hundreds of billions per year to be collected like GE to having $9 billion in profits and not only paying NO income tax, but taking a $2.3B credit against future years. Reagan did that in 1986 and it brought in ...
 
General Electric not only pays NO TAX .. it gets a massive Tax Credit from the poor sods further down the totem pole ..

..... in the 12 months to December 31'st 2011 General Electric ( NYSE : GE ) paid $US 5.732 billion in company tax to the IRS , a rate of 28.5 % on their pre-tax profit ...

Fair enough , that's one to me then ...... whats the tally for 2012 , so far  ? .......
 
...... ummmm , your 100 to Gummy's 1 ...... you're still ahead , apparently .....
 
But I'm catching !

-This is an interesting development, but this agreement will not be the salvation that the Kiwi Financial Industry thinks it will be.  These IGAs are problematic for many reasons, but not the least of which is that  they are putting a BIG onus back on US banks, and the IRS is promising reciporcity it really can not deliver.  They won't be worth the paper they are written on. 
 
-Congress did not figure on this blowback, when they passed FATCA.  As long as the cost was only bourne by you poor foreigners, as they call you, then what did they care?  Your banks and their customers (you) could bear the cost, and the US treasury would get all the revenue!
 
-But now, that these costs are being repratirated back to the US with these IGAs, I bet opposition will grow.
 
-Some of this is shown by Congressman Reichert in Washington State, who is now questioning the IRS about what is going on!
 
-And make no mistake about it, the IRS alone can not deliver this IGA reciprocity that is a false one anyway.  
 
-NZ taxes based upon residency, and the US taxes based upon Citizenship, or more broadly stated on the basis of  the"US person" category that includes about 1/2 of the world!   It might include you, and you don't know it yet.  I half joke here, but it is problematic for a lot of unsuspecting Americans, Green card holders, dual citizens, accidental Americans by birth living in the land of the long white cloud. 
 
-Under this IGA, your financial institutions are going to have to search out EVERY one of you US persons, and turn you into the International Revenue Service either directly or via the IRD.  Same effort, same effect.
 
-For more on the IGAs, you might be interested in this story out tonight by the Financial Times about a recently announced delay.  It spells out pretty well what is happening.
 
-FATCA has turned into a US domestic DATCA and is evolving into a global GATCA. 
 
-That is one of the many unintended consequences of the 2010 Hire Act that created this FATCA monster, and Congress will have the final word if this collateral damage spreads back onto the US Homeland.
 
-One good intention to stop homeland offshore tax evasion has led to FATCA hell for you Kiwis, and Americans living around the world.
 
-Call it FATCA Fallout if you wish.
cheers

I see a lot of comments and questions about what the tax requirements are for US Persons who must file and pay no matter where they live in the universe.
 
-XRAY has provided some good IRS links, but heaven knows they are dull and your eyes glaze over.  You might need a competent international tax practitioner to interpret what you are reading. Penalties for failure to file information forms, like the FBAR and FATCA, are draconian, and can be assessed for even non willful failures.... and even if you Do NOT owe any tax. Pay very close attention to these requirements. 
 
-Here is little video, with an attempt at some humor, to show what it means to be a good little tax compliant Yank living in Wellington.  It is not long, and might educate a few of you unsuspecting Americans down there, that are unaware of the obligations that comes with that little Blue passport.
 
-You are a member of a unique and exceptional "Tax, Form and Penalty Club", called a US citizen. It is like no other club in the world! 
 
-For those of you think you would like to move to America, get a Green Card, become a Citizen, or even marry that cute American backpacker, you will definetly want to give this some consideration before the amorous desires block out all rational consideration. There is something to be said about that old Bibical admonition of not being unequally yoked together.  Know the tax complications before saying "I Do"
 
The Life of an American Abroad
 
I want to say "enjoy", but not sure that is the right word for the video experience!  :)
 
 

Some other cost questions related to FATCA that Congress never considered when they passed the Hire Act.
 
-In addition to the tens of billions of dollars that  foreign banks (like NZ) have to burn up to establish systems to determine which of their account holders are 'US persons', there also comes the financial risks if they miss even one of them! Then they have to prepare massive detailed reports in a “foreign” language (English) and convert foreign currency values to their equivalent US dollar values!  This is to be reported to the IRS directly, or via this proposed IGA.
 
-Also, think of the massive avalanche of 6 or 7 million of duplicative FATCA 8938 forms and FBAR forms that the IRS has to receive, process, and scan, from Americans overseas, plus those from US residents (green card holders) with accounts in New Zealand?
 
-How many thousands more employees will the IRS have to hire just to process, store these, and then compare them with each person's tax returns to try to discover if any foreign income has been omitted from their tax returns.  
 
-What will be the impact on the IRD for this new IGA, if all this information now has to flow through them?  How many new employees will they have to hire to process it it accurately and confidentially? 
 
-Then think of all the additional time sapping audits, and penalties the IRS will try to assess for benign failures and the litagation in tax court that will occur when they go over-the-top in asserting Draconian penalties. 
 
-Then for the US Domestic DATCA system to be implemented, the US banks have to go through  the same non-productive massive expenditures to produce substantially the same information on financial assets in the US of 'non-resident' foreigners for ~194 countries around the world, of which New Zealand is but one.
 
-Now multiply that process across 194 countries in the world all trying to match bank records to income tax filings, and what do you think the cost of that will be to the world's economy as a whole?  
 
-Remember, we live in a copy cat world, and I am pretty sure that others will think, if that FATCA program is good for the US, let's create one ourselves and get the world's finanical institutions to report back to us too.  If it is good enough for America, it is good enough for us.  
 
-That is the global GATCA scenario playing out.  Already the UK is contemplating that.  
 
http://www.iexpats.com/2012/08/uk-fatca-may-be-on-the-way/
 
-Also some countries think that Citizenship taxation model looks pretty darn good.   Think of poor ole Greece looking at that rich diaspora of Greeks in Australia.  Why not reach out and impose a tax on them, like America does on its Expats?  Seems like a great idea!
 
-So, I think you can see, that the potential costs imposed by FATCA are massive as to be beyond imagination, and systemic issues in the Revenue Department's gold rush to find offshore revenue is not one to be ignored.
 
-For the US, adopting a pure territorial system, where it taxes earnings on residents within its own borders, like New Zealand has today, but pays no attention to foreign earnings of either its residents or citizens living abroad probably produces more net tax revenue even than a citizen-based system which provides for offsetting tax obligations through foreign tax credits.   Foreign tax credits generate low tax liability, with little new tax revenues for the US treasury, but come at a high administrative cost. 
 
-I would rather have the US copy NZ, then the other way around. Sadly, since America thinks it is the "Exceptional and Indispensible nation", I fear it is imposing its internal taxation system on the world, and the rest of the world might start following it.  Let's hope they are smarter than that, but the lure of new revenues in deficit bound countries makes that FATCA/DATCA/GATCA seem attractive.  
 
It is an illusion.

 

 

 

"we live in a copy cat world" indeed.  As the desperation for more tax income becomes ever pressing more and more countries will do this....its bound to happen sooner or later, I suspect we'll see it inside this decade for the EU at least.....someone has to pay back the borrowings and support the un-washed....
Which of course open's out a huge problem for ppl who have moved in their lifetime....say at 65 someone finds that despite moving 30 odds years ago all their UK pensions are confiscated as no tax was paid for 30 years, despite paying NZ tax!
Lets face it they can hammer an individual for high tax / penalty amounts but at best only lose 1 vote, if the person even votes, whats not to like?
regards

I hate to be so cynical, but there is a lot of truth in what you say. I hope NZ doesn't think Citizenship taxation has merits and go down that rabbit hole.  

I've been following this and the way I see it the old FATCA deal had the participating financial institutions witholding recalcitrant US citizens income. However under the new deal the IRD reports to the IRS, but dooes not withold on behalf of the IRS...yet. So the IRS is informed, but looses its stick so to speak. Is this correct?

 
You are right. Rather than receiving withholding $, the IRS has more information on which it can act. How it can act differs based on circumstances of the person.
 
1) US citizen living in NZ: IRS can assess penalties and make threats to the person but can't collect the money unless the person has are assets in US. Threats are less menacing if the person is a NZ citizen (i.e. not dependent on US passport) and has no interest in ever returning to the US. Right now the NZ govt will not assist the US with penalties collection. As uncollectible penalty liabilities grow (based on FATCA info) there will be more pressure from US for NZ to agree to collect the money and forward it to the US govt. If the NZ govt is prepared to sign up to the FATCA IGA then it's odds-on they'll be a push-over for eventually agreeing to collection assistance. Peter Dunne has also alluded to signing up to multi-lateral collection assistance via an OECD protocol.
 
2) NZer living in the US: IRS can royally smash this person as they (and likely at least some of their assets) are in the US jurisdiction. It will suck to be a Kiwi living or working in the US.

"Right now the NZ govt will not assist the US with penalties collection"
 
I guess they just freeze funds when the US requests it (see Kim Dotcom), not filing your US tax returns and FBAR can be determined a criminal matter in the US governments sole discretion.

.

Here's a press release issued today on FATCA by KPMG:
FATCA compliance talks
Michael Wright. Senior Manager, Financial Risk Management, KPMG.
The recent announcement by the Minister of Revenue that New Zealand will negotiate an Intergovernmental Agreement (IGA) with the US to facilitate the implementation of the Foreign Account Tax Compliance Act (known as FATCA) has been welcomed by many in the financial services industry.
The announcement offers some comfort for financial institutions as they can now plan for the introduction of FATCA with a little more certainty.FATCA was enacted by the US Congress in 2010 to prevent tax abuses by US persons.
The FATCA rules are wide-ranging and will require non-US financial institutions, investment entities and insurance companies to report details on their US customers and owners. 
The IGA will mean that all financial institutions in New Zealand will be required to follow detailed procedures to identify any US account holders, be they customers or owners of the financial institution. 
Once this process has been completed, the financial institution will be required to provide information on any US persons to Inland Revenue who will exchange it with the US for similar information on New Zealand persons with accounts at US financial institutions.Under the original regulations many considered financial institutions without a direct investment in the US to be outside the scope of FATCA whereas the IGA will apply to all New Zealand financial institutions regardless of exposure to US investments or US investors.
One significant benefit of the IGA compared with the original US FATCA regulations is that the IGA mostly eliminates the punitive 30% FATCA withholding on US sourced income and sale proceeds.  In addition, subject to meeting their reporting requirements under the IGA, New Zealand financial institutions should not be required to close accounts of customers which do not provide confirmation of whether they are US persons or not. 
The IGA will eliminate FATCA requirements for some New Zealand financial institutions and modify the requirements for others such as ‘local’ financial institutions whose account holders are largely New Zealand residents. 
These local financial institutions will still be required to monitor their customer base and report on or close the accounts of any US persons so they will see need to implement monitoring processes and systems and ensure ongoing compliance.
As the expected start date for gathering information on new customers is 1 January 2014, it is important that the New Zealand Government concludes the Agreement in a timely manner to provide certainty to New Zealand financial institutions and as much time as possible for FATCA to be implemented. 
Management of financial institutions should be considering the application of FATCA to their business operations and determining what systems and processes are impacted by the customer identification and reporting requirements. 
 

 
 
 
 

 
Garth,
 
Thanks for this.  I have seen it, and most of the press releases that comes out of the Big Accounting firms.  One has to remember, that they form the back bone of the FATCA Compliance Complex (FCC) that stand to make a lot of money consulting on the implementation of these complex 388 pages of draft extra territorial regulations.  They are the co-enablers with the IRS in rooting for IGAs which are an attempt to reduce their withholding risks, while throwing a lot of dual Citizen Kiwis and Kiwi US Persons who hold green cards under the bus without regard to the impact these rules have on them.
 
 
FATCA was envisioned by Congress as something to shut down Offshore Evasion by Homelanders, (they never considered it impacting US Persons abroad) but due to Citizenship taxation, it is not a precision guided missile. The carpet bombing that this does in NZ to its citizens, and its economy is just sad.  As collateral damage, Kiwis should be outraged.  Not only does the IGA totally ignore your own Constitutional privacy laws, it reaches into your treasury and taxes away funds that should remain in your economy.
 
 
I would listen very carefully to what Moby and Xray have written here, as they are very knowledge about the details of FATCA and US citizenship taxation.  The Kiwi Government is listening too much to the FCC and rushing too fast into this IGA. Frankly any agreement you reach with the International Revenue Service will not be worth the paper it is written on.  Maybe your banks will escape some of the 30% withholding regime, but there are business answers to that question that doesn't need protection by the Kiwi taxpayer. Let compliant and non compliant FFIs compete for Kiwis and American's business and see who wins, without the government picking a winner.  
 
 
In the end, you will find, that the IRS will not be able to delivery on reciprocity, and you will get nothing for the loss of sovereignty and abrogation of your own Constitution and laws.  Political opposition will grow in the US Congress with the IRS just unilaterally instituting the Domestic version of FATCA on US banks so it has the information to trade.  They won't be able to give you that carrot they are dangling for your IGA cooperation.
 
 
Unintentionally,  IGA just expatriates the FATCA cost back to American Banks, and that was never the intention of the law.  This DATCA won't happen, and you will have a worthless agreement and you will have nothing to show for it.  I can't imagine that Congress will approve a requirement that its banks report and exchange tax data with 194 countries in the world. That is a nightmare for them, worse than your requirement to search out every last US person living or banking in NZ.  You are going to be turning over a lot of data to the IRS and way more people than you think now.  I would consider the implications of that very very carefully before running head long into an IGA.
 
 
If the IRD wants information on New Zealand residents you think have funds in US Banks, then just pass your own FATCA and impose it unilaterally on all US banks, and see what cooperation you get out of America. LOL  You know the answer to that. 
 
 
If New Zealand could stand up to America and keep their nuclear powered navy out of Kiwi waters, why can't you resist this FATCA toxic weapon too?  I hope this government hasn't lost its nerve which I once much admired. 

NZ consumers at large could do 'the standing up to' by moving accounts to TSB and Kiwibank.  Granted if an IGA is put in place their privacy is also impacted upon anyway - but it would send a signal about our thoughts on sovereignty.
 
 

Kate
You might be interested in this on the Canadian Newswire tonight...
The issues discussed in this release apply equally to New Zealand, and some how Kiwis need to understand that the US is unilaterally imposing this agreement on you, and it will affect EVERYONE, not just those designated US persons, which by the way, is more than you think!  
 

STOP an Impending Massive Handover of Canadian Sovereignty to the United States!, says Isaac Brock Society

 
-- Tell the Government: Canada Must Say NO to the United States on 'FATCA' --
Call or email Stephen HarperJim Flaherty, and Your MP Today!
 

 

These two statements seem contradictory in nature:
 
 In addition, subject to meeting their reporting requirements under the IGA, New Zealand financial institutions should not be required to close accounts of customers which do not provide confirmation of whether they are US persons or not. 
 
 
These local financial institutions will still be required to monitor their customer base and report on or close the accounts of any US persons so they will see need to implement monitoring processes and systems and ensure ongoing compliance.
 

 
Gareth, you should really do some reporting about how this will effect the many dual NZ/US citizen that live here in New Zealand that never had an idea they must be reporting their bank accounts with FBAR and filing tax returns and paying capital gains to the U.S.
 
I've met many of them when I tell them about their obligations they don't believe me or just want to stick their head in the sand.
 
Information for U.S. Citizens or Dual Citizens Residing Outside the U.S.
http://www.irs.gov/uac/Information-for-U.S.-Citizens-or-Dual-Citizens-Residing-Outside-the-U.S.

Any idea how many dual NZ/US citizens there are?

This isn't only a problem for dual NZ/US citizens, this is also a problem for the many U.S. citizens with permanent residency paying tax in NZ that don't understand they are also required to;

 

 - Report their local NZ bank accounts to the U.S. treasury every year.

 - Pay worldwide income tax to the U.S. treasury every year.

 - Report and pay capital gains on any property they have sold.

 - Track all gains in currency appreciation in NZD against the USD on all transactions.

 

I could not guess at the numbers but was able to find this.

 

American New Zealanders are people who have migrated from the United States to New Zealand, and their descendants, if they choose to identify as such. AmericanNew Zealanders constitute a small minority of New Zealand's population. 

 

In the 2006 census in New Zealand, when asked to indicate their ethnic identity, 10,806 New Zealanders described themselves as "American", and 17,751 stated they were born in the United States.[1] This marks a sizeable increase, in proportional terms, from the 8,451 US-born New Zealanders in 1991

 

http://en.wikipedia.org/wiki/American_New_Zealander

 

It's important to remember that anyone born in the United States is a U.S. citizen regardless of their parents citizenship and anyone born anywhere in the world to one or more U.S. citizen parents is a U.S. citizen (and their children and so on) even if they have never visited the United States.

 

See: U.S. Citizens Who Don't Know It -- http://www.abil.com/articles/TAX%20-%20U.S.%20Citizens%20(Trow).pdf

 

I've met several people who had children in the U.S. while working or going to college who are N.Z. citizens and their children are U.S. citizens as being born in the U.S., some believed at the time it was a great thing now they have are very worried about their childrens financial future.

 

So over several generations you could have a large amount of U.S. persons subject to being outed by this IGA.

 

Just the fines and penalties for not reporting your non-US bank accounts are $10k USD per year per account that has a balance over $10k USD equivalent.

 

Check out the Isaac Brock Society and see what is going on -- http://isaacbrocksociety.ca

 

Would New Zealand sign an IGA with North Korea? They believe in citizenship based taxation as well, or do the people of New Zealand believe that North Korea doesn't have any right to control its citizens that have escaped its borders.

"Along with citizens of North Korea and a few other countries, Americans are taxed based on their citizenship, rather than where they live." -- http://www.economist.com/node/11554721

 

I'm going to rephrase the question. "How many NZers might be directly and adversely impacted by FATCA?"
1) NZ-residents born in US: 20,000 (assuming xray's 2006 figure rounded up for growth in last 6 years)
2) Other NZ residents with US citizenship: 20,000 (speculative but reasonable; assumes that 1 NZ-born child per US-born citizen. Such children inherit US citizenship and tax obligations automatically at birth)
3) NZers living in the US: 23,000 (as per Statistics NZ). These people are at risk due to holding accounts back home in NZ.
 
That means around 60,000 NZers who are in the firing line of FATCA, and in particular the IGA. Thanks to the negligence of the IRS in informing at-risk people, most folks who need comply with FBAR (and similar obligations) have no clue they are required to do so. Compliance with FBAR obligations runs about 10% due to the lack of knowledge of the obligations. And the penalties for non-compliance are draconian. The $10K per year per account penalty is if you are lucky enough to be deemed "non-wilful" by the whimsical determinations of a randomly assigned IRS employee.  300% of account balance is the upper penalty limit if you're unlucky.
 
This is where the money is for the IRS in FATCA; knowing the details of ordinary people with ordinary financial affairs that owe little or no US tax, but can be hit with 10's or 100's of thousands of dollars in fines for not doing something they had no idea about. Having the NZ govt facilitate this with an IGA would be outrageous.

That seems like a very reasonable number to me, considering I've met people here who tell me my grandmother is a U.S. citizen and had no idea their mother and they were U.S. citizens as well.
 

For those who are still following this issue, or concerned about it, or SHOULD BE concerned about it, I would encourage you to read this Press Release which is out on the Canadian News Wire tonight.   The issues discussed there, are exactly the same for New Zealand.  This type of release should be spread far and wide to get more publica awareness of what the US is trying to impose on New Zealand.  You once stood up to US Nuclear hegemeny, and you still can stand up to this extra-territorial imposition of US law on New Zealand.
I would encourage you to read the release.   Below is the text.  Here is the link. 
 
 

STOP an Impending Massive Handover of Canadian Sovereignty to the United States!, says Isaac Brock Society

 
-- Tell the Government: Canada Must Say NO to the United States on 'FATCA' --
Call or email Stephen HarperJim Flaherty, and Your MP Today!
OTTAWA, Ontario, Nov. 14, 2012 /CNW/ - The following is released by the Isaac Brock Society:
Recently the Department of Finance invited comments on what was characterized as "an agreement to improve cross-border tax compliance through . . . the provisions enacted by the United States commonly known as the Foreign Account Tax Compliance Act (FATCA)." This eleventh-hour invitation came as sources in both Ottawa and Washington announced that they were close to finalizing an intergovernmental agreement (IGA) that would, in effect,deputize the Canadian government to enforce this American law in Canada.
The Department's invitation is to "persons whose interests are affected by the provisions of FATCA" but does not spell out that each and every Canadian would suffer from FATCA and from an IGA to implement it:
Canadian citizens have an interest in preserving Canada's sovereignty against U.S. encroachment. However it is disguised, FATCA is a unilateral U.S. initiative. The U.S. didn't negotiate a global tax scheme with Canada and other countries but instead enacted an unprecedented extraterritorial law and demands that Canada comply and bear the costs. An IGA simply puts a Canadian glove on the hand enforcing American law.
Canadian taxpayers have an interest in a tax policy that benefits Canada's needs, not America's. Sold under the guise of "reciprocity" and "partnership," an IGA in reality would be a costly one-way street imposed by the U.S. Given the differences between the two countries' tax systems, FATCA would accelerate a zero-sum game that siphons wealth from Canada and robs the Canadian treasury.
Canadian consumers have an interest in avoiding foreign schemes that impose costly non-economic regulations on Canadian firms (banks, insurance companies, pension funds, stock and investment companies) – who will then pass those costs on to consumers. With or without an IGA, FATCA's costs will be in the billions of dollars (for example, one major bank alone would pay an estimated $100 million in FATCA compliance!) These costs would be non-productive as regards the Canadian economy and a waste of human and material resources. Imposing these costs on Canadians supposedly is justified by the unproven hope that FATCA may trip up American "tax cheats," even though FATCA does little specifically to catch such people.
Canadians as human beings have an interest in ensuring their rights are protected under sovereign Canadian law. FATCA demands extraordinary disclosure of private information from Canadian residents deemed U.S. taxpayers by the IRS. Such disclosure would violate Canadian laws such as the Personal Information Protection and Electronic Documents Act, whose application Canada would be forced to alter under an IGA. Many of the people who rights would be abrogated are Canadian dual citizens who would be denied protection of Canada's laws to appease the U.S. Once it's established a foreign government can demand abridgment of such rights, even of Canadian citizens, where's the limit?
So why is the Government considering an IGA with the United States? Because of the very real fear that Washington otherwise would unilaterally impose FATCA on Canada at ruinous cost, especially a 30% withholding penalty on Canadian firms' U.S.-derived revenue. Simply put, this is a threat of U.S. economic sanctions against Canada.
Finance Minister Flaherty and industry leaders publicly have talked a good fight on FATCA while in privatenegotiating Canada's capitulation under an IGA. Canadians must not let that happen! Instead:
Contact Prime Minister Harper and tell him No on FATCA, and No on an IGA with Washington!
Contact Minister Flaherty and tell him No on FATCA, and No on an IGA with Washington!
Contact your Senators and MPs and tell them No on FATCA, and No on an IGA with Washington!
Get the facts at the Isaac Brock Society and Repeal FATCA!
The preceding may be published or posted without restriction.
CONTACT: Global Strategic Communications Group
Darren Spinck
202-669-4418
darren@gscgrouppr.com or repealfatca@gmail.com
SOURCE: Isaac Brock Society