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FATCA and Citizen-based Taxation:the way forwardAmerican Citizens Abroad12 June 2013www.americansabroad.org
March 10, 2010• Foreign Account Tax Compliance Act(FATCA) enacted into law• Directed at tax cheats using foreign banksto h...
US Plays Hardball• Ignores privacy laws of other countries• One way flow of information to US• Violates bilateral tax trea...
Intergovernmental Agreements (IGAs)Model 1 (July 2012) Due diligence less onerous Withholding tax eliminated Passthru r...
ReciprocityModel 1 IGA include a provision in which:the government of the United States acknowledgesthe need to achieve eq...
January 2013 : Final FATCA regs.• Promulgated by US Treasury• Nearly 3 years after passage of FATCA• Only 11 months prior ...
February 2014 : Model 2 IGAAnnounced by Switzerland and US Due diligence less onerous Withholding tax eliminated Passth...
Implementation - Reality• Less than 7 months until implementation• IRS favors IGAs, but few countries signedto-date• More ...
Pandora’s BoxWill FATCA lead to worldwideautomatic exchange ofinformation
Wild Cards• Can US provide reciprocity?• Will Europe unite on issue?• Will Europe be able to impose fullreciprocity on US?...
AEI = Complexityn*mU.K. FranceItalyGermanyIrelandHollandSpain
One More Wild Card• Senator Rand Paul’s bill (S. 877) which wouldrepeal:– FATCA reporting requirements that infringe onpri...
Impact on Americans Abroad• Dramatic – renunciation, divorce, relocation…• Treated as criminals - guilty until proveninnoc...
The Solution:Residence Based Taxation (RBT)• FATCA impacts Americans abroad becauseof US citizenship-based taxation• Solve...
RBT = Win-WinWill bring in as much, if not more, taxrevenue to USAutomatic tax collection with minimumadministrative costA...
RBT is on the Table• House Ways and Means Committee andSenate Finance Committee are fullyaware of ACA’s RBT proposal• Chai...
Engage• Visit taxreform.gov– Latest info on tax reform in US– Share your story or ideas• Support RBT - ACA’s proposal is a...
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FATCA and Citizen-based Taxation: the way forward

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Presentation at the Nordic FATCA & Withholding Tax Conference, 12 June 2013

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FATCA and Citizen-based Taxation: the way forward

  1. 1. FATCA and Citizen-based Taxation:the way forwardAmerican Citizens Abroad12 June 2013www.americansabroad.org
  2. 2. March 10, 2010• Foreign Account Tax Compliance Act(FATCA) enacted into law• Directed at tax cheats using foreign banksto hide assets• Congress delegated authority to craftregulations to Department of theTreasury
  3. 3. US Plays Hardball• Ignores privacy laws of other countries• One way flow of information to US• Violates bilateral tax treaties• Threat of 30% withholding tax on US sourceincome AND on sale proceeds of US assets• FFIs required to withhold tax on passthrupayments to non-participating institutions
  4. 4. Intergovernmental Agreements (IGAs)Model 1 (July 2012) Due diligence less onerous Withholding tax eliminated Passthru requirement eliminated Report via governments Reciprocity
  5. 5. ReciprocityModel 1 IGA include a provision in which:the government of the United States acknowledgesthe need to achieve equivalent levels of reciprocalautomatic information exchange . . . [and] iscommitted to . . . pursuing the adoption ofregulations and advocating and supporting relevantlegislation to achieve such equivalent levels ofreciprocal automatic exchange.www.americansabroad.org
  6. 6. January 2013 : Final FATCA regs.• Promulgated by US Treasury• Nearly 3 years after passage of FATCA• Only 11 months prior to FATCA fullyentering into force on January 1, 2014
  7. 7. February 2014 : Model 2 IGAAnnounced by Switzerland and US Due diligence less onerous Withholding tax eliminated Passthru requirement eliminated Report directly to IRS FFIs must obtain written consent of clients Request for administrative assistance procedure forrecalcitrant clients No reciprocity – information flows only to US
  8. 8. Implementation - Reality• Less than 7 months until implementation• IRS favors IGAs, but few countries signedto-date• More reporting delays possible?• Next 7 months will be full of surprises
  9. 9. Pandora’s BoxWill FATCA lead to worldwideautomatic exchange ofinformation
  10. 10. Wild Cards• Can US provide reciprocity?• Will Europe unite on issue?• Will Europe be able to impose fullreciprocity on US?• Complexity of implementation• Will parliaments worldwide enact lawsnecessary to implement respective IGAs?
  11. 11. AEI = Complexityn*mU.K. FranceItalyGermanyIrelandHollandSpain
  12. 12. One More Wild Card• Senator Rand Paul’s bill (S. 877) which wouldrepeal:– FATCA reporting requirements that infringe onprivacy of American citizens– 30% withholding penalties
  13. 13. Impact on Americans Abroad• Dramatic – renunciation, divorce, relocation…• Treated as criminals - guilty until proveninnocent• Financial pariahs: Bank accounts closed Insurance policies refused Job opportunities lost Investment opportunities shut off
  14. 14. The Solution:Residence Based Taxation (RBT)• FATCA impacts Americans abroad becauseof US citizenship-based taxation• Solve all problems not only with FATCA, but:– Report of Foreign Bank and Financial Accounts(FBAR)– Double tax reporting– Double taxation– Taxation of fictive capital gains– Taxation of retirement savings, and more
  15. 15. RBT = Win-WinWill bring in as much, if not more, taxrevenue to USAutomatic tax collection with minimumadministrative costAmericans abroad, and consequently US, willbe more competitiveUS companies will be able to transferAmericans abroad to promote US exports
  16. 16. RBT is on the Table• House Ways and Means Committee andSenate Finance Committee are fullyaware of ACA’s RBT proposal• Chairmen Camp (in the House) andBaucus (in the Senate) are committed togetting tax reform done
  17. 17. Engage• Visit taxreform.gov– Latest info on tax reform in US– Share your story or ideas• Support RBT - ACA’s proposal is available at:www.americansabroad.org• Spread the word

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