The tax acronyms; #FATCA, AEOI, specified US persons | http://t.co/LHlN2CUgee http://t.co/DnR118GJZS – I made the news in New Zealand
— Citizenship Lawyer (@ExpatriationLaw) April 18, 2014
Oh well. It appears that (at least for now), the anti- FATCA submissions to New Zealand were of little effect.* A comprehensive description of the rejection is here and New Zealand based commentary on the FATCA capitulation (calling it a crime) is here.
An interesting article by Gareth Vaughn – New Zealand based journalist – describing FATCA in the context of information exchange includes:
What’s a specified US person?
In terms of individuals in NZ who may be affected, a key definition is “Specified US Person.”
“The United States taxes on what is known as a citizenship basis, meaning that US citizens continue to have tax filing obligations irrespective of how long they have lived overseas,” IRD says.
“However, the number of people affected is not known because Inland Revenue does not keep statistics related to the potential offshore tax liability of individuals. The data released by Statistics New Zealand as part of Census 2013 recorded 21,462 people born in the United States that are ‘usually resident’ in New Zealand.”
However, as BNZ points out in a submission on NZ’s implementation of FATCA, many bank customers will be impacted.
“Although FATCA reporting is restricted to US persons/US specified persons whose account values exceed certain thresholds, in order to identify those customers there is an unavoidable impact on customers who are not US persons/US specified person who use New Zealand financial institutions. Specifically, those customers will still have to be asked various questions in order to determine that they are not US persons/US specified persons,” says BNZ.
Just what “US specified persons” means is raising concerns at how wide the net will be cast. Will it drag in just US citizens? Or will their spouses, partners, children and business partners also be included? And what about green card holders?
“The only individuals that are to be reported on for FATCA purposes are persons who have been identified as being “Specified US persons” that hold (or in certain circumstances control) US Reportable accounts,” IRD says. “It is expected that the definition of ‘Specified US Person’ will largely be synonymous with a person that is a United States taxpayer under US domestic legislation.”
“A spouse, partner, child, or business partner of such a Specified US Person will not be reported on merely because of their relationship to such as person,” says IRD.
“Various mechanisms are being put in place, both at the financial institution and Inland Revenue level that are designed to prevent over-reporting of spouses etc. who are not themselves specified US persons. This means that if, for example, a Specified US Person and their non-US person spouse have a joint account, only the information on the Specified US Person will be provided to Inland Revenue.”
It’s becoming increasingly clear, that when it comes to “U.S. persons” (primarily U.S. citizens) – the best thing is to NOT be one. Hardly a surprise that, as reported by journalists in Canada, relinquishments and renunciations of U.S. citizenship are increasing.
* As described by Osgood at the Isaac Brock Society:
The Finance and Expenditure today released it’s report back to Parliament on this bill, including the FATCA enabling legislation. I have not had time to read it in full, but the short version is that all of the submissions opposing FATCA and the IGA were rejected.
The report states:
About half the submissions we received on the bill concerned these
FATCA-related provisions. Much concern was expressed that providing
such information would breach individuals’ privacy rights,
and constitute a form of discrimination contrary to the New Zealand
Bill of Rights Act 1990 and Human Rights Act 1993. It was argued
that the proposals would entail the release of data about spouses and
children who were not “US persons” in American tax law. More
broadly, the view was expressed that the US system of taxation
based on citizenship rather than residency is unjust, and that FATCA
and the inter-governmental agreement impinge on New Zealand’s
sovereignty and should not be accepted.
On the other hand, the financial services industry was generally supportive
of the proposals in the bill, expressing the view that failure
to comply with FATCA is not an option. Non-compliance would entail
significant penalties, effectively amounting to a 30 percent tax on
banks’ investment and funding income from the USA, which banks
rely on to provide mortgage finance and commercial loans in New
Zealand; it would therefore adversely affect New Zealand citizens
We considered these issues carefully, seeking comment from the
Ministry of Foreign Affairs and Trade. While we sympathise
with the concerns, and initially shared a number of them, we have
reached the view that the proposed inter-governmental agreement,
and the amendments proposed in this bill to implement it, are in
New Zealand’s best interests. We therefore support the proposals in
the bill, recommending just two relatively minor amendments.
The full text can be found starting on page 12 here: http://www.parliament.nz/resource/0002241958
Perhaps of more interest is the IRD report on the submissions, which can be found here: http://taxpolicy.ird.govt.nz/sites/default/files/2014-or-arearm.pdf. The FATCA section starts on Page 109. Asking the IRD to review this was pointless in my opinion, it should have been done by an independent group. Some excerpts:
The proposals attracted more than 50 submissions, mostly from individuals (including some from overseas). Submissions from these individuals were unanimously opposed to FATCA and the IGA and, by extension, the proposed changes.
It seems obvious from submissions that many of the individuals concerned do not consider information-sharing in this case to be appropriate. However, government is in the position of having to make such judgements on a national, rather than individual, level. As set out in ―Entering into an IGA‖ section of this report, officials consider that a sound public policy argument exists in this case that justifies New Zealand entering into an IGA – a necessary part of such an action being that the information collection and transmission contemplated in the IGA will occur. The privacy of the individuals concerned was a factor that officials examined in reaching this view, but it was, on balance, deemed to be outweighed by other public-interest considerations.
The United States model of taxation is not new, so it appears reasonable to assume that citizens of the United States are aware both of their citizenship rights and obligations.
That the submissions be declined.
I would like to thank everyone here that made submissions to this bill (to no avail).