In a pre-emptive move, the Government has introduced enabling legislation for an anticipated inter-governmental agreement with the United States on its controversial Foreign Account Tax Compliance Act, known as FATCA.
Lawyers at Minter Ellison Rudd Watts suggest this means New Zealand’s inter-governmental agreement negotiations have been progressing well and that an agreement should be concluded soon.
The legislation comes in an omnibus tax bill introduced to the House by Revenue Minister Todd McClay, the Taxation (Annual Rates, Employee Allowances, and Remedial Matters) Bill. McClay says the Bill proposes changes to New Zealand's international tax rules.
"The first of these provides that when the inter-governmental agreement with the United States in relation to its Foreign Account Tax Compliance Act is finalised, New Zealand financial institutions will have an appropriate domestic law framework to follow," says McClay.
FATCA was introduced to tackle non-compliance by US taxpayers who make investments through accounts located outside the US. However, the implications of FATCA extend well beyond US borders with all foreign financial institutions potentially being subject to a FATCA related withholding tax on payments they receive directly or indirectly from the US.
In October last year then Revenue Minister Peter Dunne said NZ aimed to negotiate a tax information agreement with the US over FATCA, which the NZ Bankers' Association had estimated could cost local banks NZ$100 million to comply with.
In a note on the Government's legislation Minter Ellison Rudd Watts say the inter-governmental agreement will allow NZ resident financial institutions to register with the NZ government, comply with simplified due diligence and reporting requirements and avoid certain withholding obligations.
Minter Ellison Rudd Watts says the Bill provides:
Treatment of the inter-governmental agreement as a class of double tax agreement referred to as a “Foreign account tax sharing agreement”;
Clarification that no deduction is allowed in respect of amounts withheld on account of FATCA;
Establishment of new record keeping and due diligence requirements for FATCA (to be included as a new Part 11B in the Tax Administration Act 1994). The Bill does not detail what these requirements are but instead refers to the requirements described or contemplated in the intergovernmental agreement;
Information to be reported to the New Zealand competent authority (i.e. the IRD) and, where necessary, third parties, in accordance with the inter-governmental agreement or an Order in Council;
Nullification of arrangements that are designed to circumvent FATCA requirements; and
New absolute liability (i.e. strict liability) and knowledge offences for failing to register for FATCA.
"The introduction of the Taxation (Annual Rates, Employee Allowances and Remedial Matters) Bill is an indication that New Zealand’s inter-governmental agreement negotiations have been progressing well and that an inter-governmental agreement can be expected to be concluded in the near future," Minter Ellison Rudd Watts says.
"An inter-governmental agreement will provide some much desired certainty for New Zealand financial institutions looking to comply with FATCA. While the model inter-governmental agreement produced by the United States Treasury acts a useful guide, a number of details still need to be determined. In the interim, financial institutions should continue to review their due diligence, account opening procedures and information reporting capabilities in preparation for FATCA coming into effect on 1 July 2014."
4 Comments
Can't wait to see the faces on the dual NZ/US citizens and Green Card holders who never knew they needed to pay capital gains on their NZ home sells and report their local NZ bank account to the U.S.
"Information for U.S. Citizens or Dual Citizens Residing Outside the U.S"
Why N.Z. politicians want to hand over the wealth of the estimated 50+ thousand plus dual NZ/US citizens I have no idea.
But if you have under $2 million in assets you better renounce your U.S. citizenship now, if you have over you'll need to pay the exit tax.
http://www.irs.gov/Individuals/International-Taxpayers/Expatriation-Tax
Does FATCA get a leg-rope round those US outfits Google, Starbucks, Facebook, Twitter so they pay some tax in new zealand?
So US citizens resident in New Zealand or with dual citizenship will pay US tax, in the US, in USD, on any profit or gain on property owned in nz, while the nz galahs miss out - genius
Unfortunately for Kiwis, most have no idea what FATCA is, or why this is an especially bad deal for New Zealand.
FATCA is being imposed on your all of your Financial Institutions, (FIs) for the "privilege" of participating in a global economy which is predominately conducted in $ USD. Its 544 pages of regulations and 37 some pages of amendments is onerous to the extreme, and so no wonder this legislation is something the Kiwi FIs are all lobbying for. It provides minor relief from hard business decisions.
It is unfortunate that you and your financial community is being put into this situation.
Rather than advocating that the New Zealand government threaten retailatory actions (like cutting off NSA communication spying aparatus in NZ) for the brazen and unilateral demands placed on you, your privacy and human rights domestic laws are being changed to meet the extortion threats of the international bully, the USA.
What do you think the chances are that America would change it's laws to meet your demands for something from them?
I understand the FIs condundrum in the seemingly untendiable situation they find themselves in, but let's call a spade a spade. The U.S. is extorting their compliance. They in turn, are asking the NZ government to enable the success of the very thing they rightfully hate. The IGA even with the enabling legislation discussed here, still only gets them off the hook for the 30% withholding threat. However, in that regards, it does BAIL them out.
IRD claims aside, the IGA does NOT make the actual FI compliance 'due diligence' and 'need to know standards' any easier or less costly.
This legislation and IGA actions just socialize the enormous compliance cost across all financial institutions, not just your big banks. It makes EVERYONE pay, even if they don't desire any association with U.S. financial markets.
Two simple questions:
1. Where is the cost / benefit analysis that has been done to justify putting this extra cost onto the Kiwi Tax payers and consumers?
Even the IGA and enabling legislation will still cost you big bucks to comply. Everyone will be impacted, not just some (few I would say) American depositers residing in the States. There is little benefit for Kiwis, but your IRD will have to add staff to administer this collection effort for the IRS. This is NOT a treaty with America, and you will NOT get similar reciprocity in spite what you might be told by the IRD.
What is good for the Kiwi goose is NOT good for the U.S. gander!
America (the hypocritical king) is NOT going to impose a domestic FATCA (DATCA) on its financial institutions in any significant way that provides your IRD with all the same complex data on NZ resident Kiwis they are requiring of your FIs on U.S. Persons residing in New Zealand and in America.
There is too much opposition in Congress for this to happen, as represented by this letter from influential Congressman Bill Posey.
He has already had legislation passed in the last Congressional session to stop the IRS from requiring even meager non resident alien interest reporting by USFIs to the IRS, which they hope to use as trading fodder for the IGA compliance.
The U.S. Treasury needs additional legislation passed by both the Senate and the House to accomplish a full blown DATCA. They will NOT get it.
Right now, the IGA contains only vague reciprocity promises which the FATCAnatics are calling a bi-lateral negotiation. That is the opposite of what it is.
The IGA is a one way cram down!
They are giving you some annex exemptions to coerce your compliance, promising a little bit of interest info on Kiwis resident in NZ that USFIs don't really have. Try to add something else you want, or limit this to just residents holdings in each others countries FIs and you will quickly find you can not change the boiler plate of their demands.
Question 2. How many impacted "U.S. Persons" are there living amoungst you? America is looking for them too, and not just their homeland Citizens. How many dual citizens, greencard holders and their spouses and children are now residing in New Zealand? 10,000, 50,000, 100,000 or more?
If you don't have the answers to just these 2 questions above, I would say, get them before you proceed further. There are many other questionsone should be asking. Here is a list of 121 others MPs should ask Revenue Minister Todd McClay, before he just bows down to his U.S. masters and sign onto a very bad deal.
Just like Trans Pacific Pact, (TPP), which is negotiated in secret, you are being asked to surrender your soverignty to America. By burying this in an omnibus bill, the tax bureaucrats at the IRD are assuring that America has its way before thousands of Kiwis living in New Zealand know they have been thrown under the bus.
This is tax policy laundering by stealth. That is how it got passed in America, and that is how it is imposed on Kiwis. Never a straight up and down debate or vote. It has to be hidden inside something else!
FATCA only gets occassional reporting in specialized publications catering to the elite compliance or regulatory types. You don't see this story on the front pages of the New Zealand Herald, or nightly news on TVNZ, now do you? Why not? Too boring, or they don't want the masses to know what they are up to?
Now, you might think that stopping off shore evasion is a noble goal. Maybe you like the idea of a global GATCA, where tax and financial data is being exchanged automatically between big taxing and big spending governments, but what is the cost to the world economy for this idealist agenda? What are the systemic risks to the global economy for this added complexity on top of BASIL III, AML, KYC, SWIFT, Frank Dodd, etc, etc...? Is anyone asking?
Also, what are the safeguards against ID and data theft for all this data exchange? How much information will now be processed by third party vendors? Who has access, and how secure is it?
If you or your politicians don't know how broad the category of "U.S. Personhood" is, or understand how rampant data and ID theft is in America, then you should be thinking twice before you sign up!
It could be yours, your wife's, your children's, or your business partners comprehensive banking data which sent back to the International Revenue Service (IRS) on American shores. What are they doing with it? Who has access?
If you are connected to a U.S. Person by marriage or business, if you are tainted with any U.S. indicia or are only an accidental American by birth, you will be subject to this loss of privacy and put at risk. Even if you still have a green card, and have not officially surrendered it, you will be caught up in this net.
Remember, America does NOT follow international norms. It alone, (except for Eritrea) taxes based upon "citizenship". New Zealand, like the rest of the enlightened nations of the world, taxes on "residency", as it should be. You pay taxes where you recieve services.
For dual citizens, this means U.S. Citizenship has dominance over Kiwi Citizenship even if you live in Wellington, Dunedin or Dargaville! If you are connected with or have signing authority on any accounts of any U.S. designated 'Person' then your data is winging its way back to the U.S. homeland IRS data servers whether you like it or not! And remember, the U.S. decides who a U.S. Person is. The New Zealand government doesn't get to say or disagree. It is an ever expanding list.
So, stop and think about what your IRD is proposing to do with this legislation.
Of course the FATCA Compliance Complex, (the BIG International Accounting firms and armys of CPAs and lawyers) who are co-enablers of the 'You Must Comply' FATCA message will get rich with the consulting hours they will bill out. Examine their self interest before you just accept their enthusiasm for FATCA compliance.
One final point: I know that New Zealand continues its special spying relationship as a member in good standing of what is internationally known as the "5 eyes". You, along with Canada, UK, Australia and the US, are a cooperative participants in the NSA spying coalition.
Just like the UK citizens are now learing from Guardian Snowden reports, personal cellphone and web data information on Kiwi citizens is probably sucked up and stored like has been done with UK citizens. It is probably destined for Utah's NSA storage center.
So, if you like NSA spying on you, then you will love FATCA!
This is just another back door spying operation on NZ financial institutions and customers under the guise of stopping tax evasion.
As Senator Carl Levin, an author of FATCA has said, all of this FATCA data will be made available to the U.S. law enforcement agencies. Why? Once they have this back door access, with their insatuable demand for more data, with their hacking prowess, and with no limits placed on their actions, they will have EVERYTHING on EVERYONE in New Zealand.
So, I would not rest easy on the "She'll be right Mate" or "I have nothing to hide" attitude.
Remember, Amerca is the Largest debtor nation, and the BIGGEST tax haven and the largest spy master pursuing the mission of total global information awareness. FATCA is, plain and simple, a back handed effort to extract additional information and tax revenues / penalties from Kiwis. It is a hand in your NZ treasury cookie jar to help finance the latest entitlement program that homeland Americans don't want to pay for with their taxes.
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