The
WSJ blog reports that the U.K. is the first country to agree to implement the tax-reporting requirements under FATCA:
Treasury said it expects to sign agreements with other countries in the near future, noting the U.K. deal is based on a model agreement developed in consultation not just with London but the governments of France, Germany, Italy and Spain.
“We are pleased that the United Kingdom, one of our closest allies, is the first jurisdiction to sign a bilateral agreement with us and we look forward to quickly concluding agreements based on this model with other jurisdictions,” said Mark Mazur, assistant Treasury secretary for tax policy, in a statement.
...While the U.K. agreement is reciprocal, allowing for the sharing of information on U.K. residents held in U.S. financial institutions, other deals may not allow for such exchanges.
It's not clear what's in it for the other country if an agreement does not provide for reciprocity; indeed, at least a superficial reciprocity is in general fundamental in the whole history of international tax agreements and I would like to know on what grounds a nonreciprocal agreement would even be contemplated. Why would another country agree to share info with the U.S., to benefit the U.S. alone? This is hardly a model for global tax cooperation, OECD praise notwithstanding. Also each time I see another article about agreements on FATCA, regardless of the substantive content or likely efficacy thereof, the silence between the U.S. and Canada on this issue looms larger.
There was a good comment on Linkedin about this agreement.
ReplyDeletehttp://www.linkedin.com/groups/UKUS-agreement-strengthens-UK-ability-3731046.S.163810460?qid=c22ad4a5-a220-4094-8042-7b9874211749&trk=group_most_popular-0-b-cmr&goback=%2Egmp_3731046
Mattress sales will rise dramatically in the UK.
interesting indeed:
Delete"It will:
1. For the first time put the interpretation of the United States Internal Code into UK domestic law to be enforced by UK courts
2. Be enforced by a tough penalty regime to be included in the UKs 2013 Finance Act
3. Lack true reciprocity so that while the UK will send millions of bits of data to America every year, the US will send very little data back to the UK
4. Require every American citizen or green card holder living in the UK to think much, much more seriously about whether all of the complicated forms that the IRS already require every year are being filed.
5. Make UK financial institutions much more scared of having any US persons as account holders at all because of both their extra compliance costs as well as the risk of recommending banking and investment products that are not “US tax friendly”.
David Treitel predicts that the most likely outcome is that mattress sales in the UK will increase dramatically - as the half million or so Americans in the UK quickly lose the ability to bank anywhere. David’s company American Tax Returns Ltd specialises in this complex area and is available immediately either to test mattresses or instead advise on US tax, FATCA and the consequences."
Additionally if you read the UK US Agreement there is a MFN clause which basically says that if the US gives "better" terms to another country then the UK is entitled to those same terms too. However if you really read it closely there might still be a way lets for the US to give Canada better terms than the UK. This is as they say very "new" area of international tax law.
ReplyDeletethat's interesting, there haven't traditionally been a lot of MFNs in US tax treaties (though there are some in U.S. social security totalization agreements--odd, that). How would the US give better terms to Canada, do you reckon.
DeleteThe very unofficial idea I have heard is that Canada would guarantee the top marginal rate of income tax would never fall below 70% of that in the US and in turn the US would eliminate FATCA and the tax filing requirements for US citizens living in Canada. In some ways that would be an even greater loss of soveriegnty for Canada but in reality the the top marginal rate of tax in Canada is NEVER going below 70% of that of the US(In Alberta though it might get closer than many people on either side of the border expect over the next few years). It would be akin to the Auto Pact where Canada essentially gave up its own auto industry(which was never really going to be all that internationally significant) in return for getting a guaranteed share of the combined continental industry and from a tax perspective the policy of the US having its citizens even those born in the fifty states who live in the insular posessions/territories such as Puerto Rico and USVI pay income tax only and directly to those territories. This idea is pretty radical though and goes beyond just about any existing form of international tax cooperation between soveriegn nations. My guess is if such an agreement was attempted it would ONLY be between the US and Canada(Notwithstanding the fact that quite a few nations have a top marginal rate higher than the US). You also really acknowledge that the eventually endgame of international tax cooperation is some form of cooridination of rates.
DeleteAfter reading the interpetation of the aggreement last night given by HMRC and HM Treasury it quite clearly indicates that the UK would be entitled to "better" terms given to any other "FATCA" Partner. In the scenario you would be taking about a pretty radical and pretty unrealistic change in US tax policy. I only bring up this scenario in that I think some of the lack of communication coming out of Ottawa has to with the fact that Canada does not want to be seen as hurting efforts by the US to crackdown on tax cheats and tax havens. In my proposed scenario the US would guaranteed basically that Canada would maintain a relatively similar system of income tax to that the US and would not become a tax haven. (Of course you still have differences that have to be papered over vis a vis Estate Tax vs Deemed Sale and different cap gains issues)
Deputy Assistant Secretary Corwin to Travel to Europe, Asia, September 17-28 to Discuss FATCA Implementation
ReplyDeletehttp://www.treasury.gov/press-center/media-advisories/Pages/09172012B.aspx
No visit to Canada though. Interesting. In Canada there would be people on Parliament Hill and in front L'Esplanade Laurier(home of the Department of Finance) protesting. I might see if a few contacts of mine in Paris want to hold signs in front of the OECD.