A view this little as a bit of crocodile tears. The IRS might complain at some level about the burden of FATCA but it is a burden the IRS and its parent Agency US Treasury whole heartedly requested. Additionally the IRS is on the record in terms of admitting to moving funds from Customer Service to offshore and FATCA related enforcement something they were under no obligation to do given the core importance of taxpayer assistance in a voluntary self assessment system and the fact on many previous occasion the IRS has chosen not to enforce many aspects of tax law due to limited resources(see sailing permits, reid amendement, non resident alien estate tax, cfc check the box and on and on). The IRS appears to be playing a deceitful game of trying to have its cake and eat it to by being able to shift money from taxpayer assistance to FATCA and to eventually get new money from Congress to bring taxpayer assistance back up to previous pre FATCA levels. Additionally other former senior IRS officials who are not listed on this letter such as Michael Kirsch and Richard Harvey are on the record as stating FATCA and international enforcement is far far more important to the social cohesion of the United States than traditional taxpayer assistance.http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2669543Again to cite people like Harvey and Kirsch back in the days (1970s/1980s) when the IRS had much more international taxpayer assistance non compliance was still very high whereas under the more enforcement centric heavy handed FATCA in theory international non compliance is going down. So from the Kirsch/Harvey(both were high level IRS/Treasury officials) there is actually very little value in traditional taxpayer assistance in the whole scheme of things relative to enforcement first.Additionally the IRS has picked other "policing" type authorities that don't have much to do with tax. The IRS needs to strongly look at giving these up especially if they are short of resources. IRS agents don't need guns and badges and if they need police-type assistance during audits for example they should call in the assistance of "real" police such as is done in Canada and other countries not have their own internal private IRS/CI police with guns, flashing lights, and badges.
Published Nov 11, 2015 by Tim
I don't have any inside info but I guess I would be surprised if there really is that much revenue to be found in international compliance for individuals residing abroad. Yes, gotcha penalties, but tax revenues in the long term? I don't really quite see it when most nonresident USPs live in high tax countries. Once you get past the transition (roundup) period, with proper foresight and planning is there really that much tax to get from Canadian residents for example? But maybe the gotcha penalties are sufficient to make the attention worthwhile, I really don't know. Still, the data protection issue seems like a real concern. To the extent keeping a lock on the vault isn't a top priority for funding, that would make me think there is a systemic policy problem rather than an agency problem.
Published Nov 11, 2015 by Allison Christians
I don't necessarily agree with this but my guess is those in favor in international compliance(like a Michael Kirsch) would make an argument along the lines of that international compliance of US individuals in Canada in of itself might not bring in much revenue the second and third order effects of letting individual non resident compliance go unenforced are very costly. For example if resident US citizens see lots of US citizens living in Canada not being in tax compliance(even if the revenue loss is very minimal) they might did decide not to comply with US tax law either which conceivably(according to Kirsch and Harvey) would be quite expensive and detrimental.I personally think this argument isn't that sound and perhaps dangerous institutionally for the IRS to make. Basically is cutting core customer service functions to fund a enforcement program that will bring in very little direct revenue directed towards a population the IRS knows little about on the basis of preventing second and third order tax morale and compliance among resident US citizens something the IRS really want to get up and pound the chest about to defends. If anything if the international enforcement don't work due to legal challenges etc than conceivably second order domestic tax morale problems could made be made worse not better than if the IRS just let sleeping dogs lie.
On another note I feel it would be good for both Canada and the US for someone to do a book on the last five years of FATCA and its implementation interviewing both sides(Canada and the US, pro and con) and the major players on each side such as yourself, myself, Jesse Eggert, Itai Grinberg, Richard Harvey, Joe Arvay, John Richardson, Ginny Deegan, Stephen Kish, Murray Rankin, Doug Schulman, Brian Ernewein, Terry Campbell, James Jatras, Nina Olsen and Stephen Shay(and a bunch others I have forgotten). My inspiration for this idea is the book recently written by Chantal Hebert and Jean Lapierre called the Morning After discussing the behind the scenes politics of the 1995 Quebec Sovereignty referendum. My personal suspicion is what might find out the behind the scenes of FATCA implementation was a lot like the behind the scenes of 1995 referendum if not actually worse(i.e. having referendum not actually make QC a sovereign country as was publically claimed but in reality to improve its bargaining position vis a vis the rest of Canada).Below is a video and interview with the authors that appeared on CBC a while back.https://www.youtube.com/watch?v=MHKhoe0EBNQhttps://www.youtube.com/watch?v=l9SU-0Mpqv4Most importantly a history should be done as Chantal Hebert points out before everyone goes to their grave.
Residence-based taxation for the US would solve most of this...how about you plead THAT. IRS???
Published Jan 23, 2016 by Unknown