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Herald Angel: So, they say that the only
certainties in life are death and taxes
and even hackers have decided that death
is easier to cheat.
Life is about to get, way more interesting
for more than 60 million Europeans, and
we're going to find out why here is the
taxman with the international exchange of
tax information.
Why don't we give him a huge round of
applause?
Huge applause
Taxman: C3 rocks! Yeah, thanks for being
here I deal with this stuff every day and
I'm happy that some other people are
interested in this because I have the
impression the subject hasn't really made
its way into the public. There's a lot of
ignorance out there even among
specialists. So, thank you very much for
listening to what I have to go through
nearly every day. What am I going to talk
about? First, what are FATCA and CRS?
FATCA is the Foreign Account Tax
Compliance Act. CRS, Common Reporting
Standard. From now on don't remember what
it stands for. It's FATCA and CRS. I'll
give you some practical advice how FATCA
affects you and what you can do about it.
And, at the end, since we're on the
political section here at CCC I would like
to venture 2 or 3 thoughts on what FATCA
and CRS means for, let's say, society as a
whole. Let's see, here we are! This is the
most important slide of my talk, so, if
you got this one you can go home. What is
going... What's going on here? You, the
listeners, we're the pink dudes.
[Pause]
Rattling sounds
...with bank accounts, financial
institutions and the parlance of FATCA and
CRS. Banks will collect information from
us, forward it to the local tax
administration. In this case, the
Luxembourg flag suggests we're in
Luxembourg. The Luxembourg tax
administration will collects this
information and forward it to the
designated countries. On the top, we see a
foreign tax administration that doesn't
have a flag. Imagine there's an American
flag there. FATCA deals with forwarding
information from - the German, Luxembourg,
French, etc, tax administration's - to the
United States. CRS the Common Reporting
Standard took the idea, the model of the
American's, copied it and convinced about
a 100 nations to sign up. Here in the
example, we see Germany, France, but China
is among the nations that will receive and
provide information. Russia is there,
Chile is there, just imagine the list of
signatories to the MCAA another
abbreviation to the convention that was
signed on the 29th of October 2014 grows
every day. 101 Nations is already pretty
big. If you look at this schema or at this
structure there's something funny. They
want information about you but they're not
gonna ask you. Who are they gonna ask?
Your bank. Banks are gonna get fined,
banks are gonna get in trouble. But they
gonna forward your information. One of the
problems with FATCA and CRS is that the
terms are rather vague and ill-defined.
You think "yeah I've got a bank, I can
handle my bank no problem" but have you
ever thought that your lawyer might need
to forward your information? Meaning
you're a foreign -- you're a foreigner the
lawyer in his ordinary course of business
accepts deposits -- in this case retainers
and client funds -- and has to forward
this information.
Many lawyers are not aware of this, I
believe the law is ambiguous, the reason
why I take lawyers as an example FATCA and
CRS are pretty identical. Under FATCA the
Germans negotiated that lawyers don't have
to report any information, under CRS we
don't have this exception.
So, vague terms, ill-defined terms and a
huge amount of data being thrown around in
the world. I was introduced with the
example of PayPal, PayPal in Luxembourg.
My guesstimate is -- according to SEC
filings, PayPal has about 150 million
accounts, Europe is an important market,
60 million accounts in Europe -- the tax
administration's are going to receive 60
million notifications about PayPal
balances and that's not all I mean think
about your bank whether your hold shares,
whether you have the normal -- how do you
call it -- deposit, a deposit account, a
savings account all this information is
going to be forwarded. Who is particularly
affected? People with connection to
foreign countries. The guy in pink will be
a person with the contact, with the
relationship, to a foreign country, I will
show you what this relationship can look
like. Okay we're at CCC, XML schema,
nothing new for you, it's a tree. Don't
worry, the more interesting stuff is going
on here; the ambiguities in the schema.
It is promoted by the OECD, the
Organization for the Economic Cooperation
and Development. Cooperation and
development sound so good and at the end
they just pass our tax information around.
Some of the problems here, one of the
problems, transliteration; a hundred and
one nations as of December signing up.
What about the information we're going to
get from China? Are they gonna send
Chinese characters? And imagine there's a
German in China. A friend of mine, Robert,
his name in China is 罗伯特, how is this
information gonna come back? If you look
at Bulgaria you have Cyrillic, Cyrillic,
if you transliterate it to German is
transliterated in a special way, the
Germans have a DIN, a norm, to
transliterate Cyrillic. That norm is not
identical with how the French
transliterate Cyrillic characters, so if
the Germans ask about suspicious character
Anton Chekhov and ask the French
authorities, they might not talk about the
same guy, because the spelling is slightly
different.
the ambiguities in this schema are in a
way more irksome because here I just have
three nodes, the header, the financial
information-- financial institution and
the person or account information. The
OECD went overboard and has meta
information on each of those nodes,
describing what type of information is
supposed to follow. So what's going to
happen -- or how is anybody to interpret
information where in the header you say
it's new, on the FI node you say it's
corrected and then the person/ account
info you say it's gonna be deleted. How
are we going to resolve this? For me an
example of lawyers and technology, meaning
anybody who works with this, will have
some pain and suffering.
Okay, practical advice. First of all, what
type of information is going to be
reported.
You see here the name, address, the
jurisdictions of residence, TINs, that's a
tax payer information number, and the date
of place of birth.
So at one point I was trying to make the
presentation a little more visual and I
was looking for images for place-- place
of birth and I found somebody who wrote to
this-- to this request to provide this
information -- home delivery. No that's
not what is meant when the OECD asked for
the place of birth it's the date of birth
is important. If you have two Pierre
Dupont that's the way to keep them apart,
meaning your birth date information is
relevant to keep you apart from other
people having your name. The information
itself is fairly technical, there's
nothing really going overboard. The idea
of FATCA and CRS was to catch individual
tax cheats. We're not talking about
corporations dodging taxes or anything. We
are trying to-- or FATCA is trying to
catch people who evade taxes. How did
Americans in particular evade taxes in the
past? They had a trip to the Bahamas with
the suitcase full of money and deposited
the money in an account there. Maybe they
got a credit card and used the credit card
in the United States to live off the
interest that the account accumulated.
Since Bahamas, Cayman Island, Turks,
Caicos didn't have any exchange in regards
to this information with the United
States. These Americans went home free
thus cheating the taxman. Later on they
became a little smarter, instead of
signing up for an account themselves they
created corporations or trusts. So it's no
longer in the name of your own name but in
the name of your trust that you hold these
funds. So the information that the banks
are forwarding, is actually -- how to say
-- it's fairly technical, they are not
going overboard. That having said you
might disagree with the whole idea of tax
exchange-- of exchanging tax information
but this is basically what you expect to
see when you're looking for tax cheats.
Number 5, not only your account balance as
of the 31st of December so you still have
a chance to change that today and
tomorrow, if you take all the money out
then nothing is gonna be reported, and
your dividends and gross proceeds of--
gross proceeds for the sale of shares or
other financial assets is going to be
reported.
That's-- that's a lot. Okay how do banks
find out whether you are a potential tax
cheat? I listed the three main criteria
they're looking for. They ask you-- or if
they know whether you're resident of
reportable jurisdiction; if you are an
American your birth certificate is
sufficient. I've seen it with other banks
that they come around now to ask "Show me
a birth certificate", if you're an
American, your information is gonna be
reported to the United States, to the IRS.
If you give the-- a mailing address or a
residence address in a country abroad,
that similar will trigger the bank to look
a little more carefully at your account.
What banks typically do is when they find
this information they send you a self-
certification. They ask you "Please
certify this information". They basically
ask you "Were your tax resident and is the
mailing address correct?". And think about
number three: Phone numbers. The phone
number the bank has on record will trigger
this additional search or sending out the
self-certification form. Meaning, you've
got a Google number with a zero zero one
country code your bank is gonna ask you
and if you don't respond, they're gonna
send this information to the United
States. Your tax account information.
What can you do about it? Be local.
Meaning check with your bank, whether all
the information the bank has on file about
you reflects a local residence. I have
heard -I cannot verify it- that certain
countries make this a business by
providing easy resident certificates,
meaning you can go to countries so easily
obtain a certificate of residence then go
to your bank and open an account. When the
bank is reviewing the information it sees
taxman local guy.
This information doesn't have to be
forwarded to another country because he
supposedly is paying his taxes locally. Is
there a legal option; is there a legal
opportunity or is there a case for lawyers
here? It's a little doubtful.
In Germany, the Germans changed the law in
the fiscal code regarding the
consultation. Typically, or before the
automatic exchange of tax information, the
Germans asked you, consulted you, gave you
a chance to voice your objections, before
they would forward your information to
another country. For automatic exchange of
information like FATCA and CRS, this is no
longer the case. Nevertheless, there has
been a case in Germany decided by the
fiscal court in Cologne, where the German
tax administration wanted to forward
information to the Turkish government in
regards to some payment, a German company
has made.
So, the German company thought, their
contact and Turkey would be burnt and they
provided an expert opinion, that turkey
does not safeguard tax information. The
Turkish finance minister claimed the
country, but the court was not convinced.
So the court in Cologne said: "German tax
administration, you can not forward this
information to a country that doesn't
follow data privacy laws!" Let's look at
FATCA and CRS. We're talking about 60
million; hundred million accounts being
distributed all over the world. The courts
are not -I believe- not going to shoot
down CRS and FATCA. They will not ask the
tax administration to hear you, before
your information is being passed on to
another country. However, if you can come
up with an expert opinion and say: "My
information is gonna hurt me in Turkey or
wherever", I believe the fiscal courts in
Germany would issue an injunction, would
prevent the German tax administration in
Bonn, to forward the information. Think
about turkey. Turkey, nothing incentive,
but it's a third world country. Compared
to any other third world country in the
world, you can most likely obtain an
expert opinion from -regarding any third
world country- that they are not
protecting data; that they are not
protecting tax information in the country.
They're gonna use it to shame you, so even
though I'm not really convinced, that the
legal solution is a good one, it will be
interesting to see what the courts say in
this regard.
A little ray of hope was, that for another
tax information exchange, the French,
their Conseil d'État, recently decided,
based on a law signed -oh, it wasn't a
law, it was a decree by Louis XVI.
Laughter
This was, I means,
it must have been weeks before he
was beheaded 1791, that they didn't want
to participate in this other tax
information exchange, which is a country-
by-country reporting regarding companies.
So maybe -we have not heard the courts
yet- maybe, there's still something to
come. Ok, let's look at the consequences
of this.
I'm very concerned about CRS and FATCA.
On the one hand, anybody who is a little
international, might run into problems.
For FATCA, Americans have problems opening
bank accounts in Europe, because the
European banks think, it's not worth the
trouble. So Americans are complaining
about not being able to bank outside the
United States. With CRS this is a little
different, because a hundred nations; they
can't always refuse foreigners. But you
see, that the target of FATCA and CRS are
individuals like you and me, who are a
little mobile and travel and work across
the globe. Our life is a little more
difficult with this. The other thing is:
If you think that you want to create a
start-up in the space, the compliance
burden is very high. This type of law
prevents starts of innovation in the
space.
That's it already. I hope you have some
questions, so I can elaborate a little
more on individual details, that you might
be interested in. Thank you very much.
Applause
Herald: Great! So, questions. If you have
a question: Again,
please, the microphones
are here and here in the aisles, so
already in the back.
Person 1 from audience: Yeah, hi! I was
wondering, if it was possible to know, if
the information has already been traded or
sent to other countries or things like
that.
Taxman: FATCA was originally implemented
in 2010. The first exchange, I mean banks
were required to submit the information,
on the 30th of June 2015. So we've already
seen two rounds of exchanging data with
the United States. For the Common
Reporting Standard, CRS, we're going to
see the first exchange next year. Until
the 30th of June, banks were required to
submit the information, until the 30th of
June. The tax administration itself has
three more months, until the 30th of
September, to forward the information to
the respective countries.
Herald: Great! Do we have a question from
the internet?
Angel: Yes. Somebody on IRC wants to know,
because when you have an American social
security number or someone, you can commit
identity theft. Is the problem the same
for German tax IDs or are they more immune
to that?
Taxman: To be honest... Okay, 2 parts to
the answer: a) I'm not an expert on German
tax numbers and identity theft, in the
United States social security number is a
lot more important. So, once you have
social security number, you get loans and
everything else. Typically when you apply
for a loan with a car or wherever, you
don't -- at least according to my
experiences, which is very limited -- you
don't provide your German social security
number. The encryption of the information
etc. is something I would not be worried
about. I mean encryption in this space is
a solved problem and the tax
administration, they'll follow best
practices, so that the information is
going to be used by third party, I
believe, is not a major problem. The other
thing is, however, that everybody is
basically considered... everybody who has
connection with a foreign country is
basically considered a tax cheat and will
be treated differently from local
residents. That is a problem I see.
Herald: All right. From up front.
Person 2 from audience: So, I've had the
displeasure of having to file an F bar
and, as part of the F bar, it asked for
the highest amount of money in my account
at any point in time in the year. And I
filled all that out and so forth, as
condescending as it was, but now you're
saying the fact, actually, now wants to
report my amount of money at the end of
the year. The two are completely
incongruent! Like how... I mean you're
kind of spelling out that there's going to
be a giant data mess. Is this going to
factor into that? Do have any thoughts on
this?
Taxman: As I mentioned about FATCA, the
date to report information is the 31st of
December; that's for account balances. For
sale of shares, any time during the year.
For information regarding interest and
dividends, any time during the year.
Talking about "data mess": Yes, I'm pretty
much convinced this will be a huge data
mess. Think about for Germany: German
public servants receiving 20 million
records -- and this is only PayPal, we're
not talking about credit cards, we're not
talking about bank accounts. This is just
one measly little company. So, and it's
not only the Germans, and, by the way,
American tax administration was completely
overwhelmed by the implementation of
FATCA. You could see it that they changed
the technical requirements by changing the
FAQs on the website. So, you went to the
website a week later and found out "Oh,
there're 10 new special characters we
can't use", so the tax administrations
across the globe, they are overwhelmed,
and what's going to happen with these
data... It will depend on each country and
the data privacy standards. I mean, the
Germans take this very seriously, but
think about a small country whether it's
Luxembourg or some country in the
Caribbean, Panama: These guys, they lack
certain practices; they haven't been, so
to speak, under attack; they haven't been
able to develop the defenses. So, a lot of
data will float around the internet in the
end, I believe.
Herald: Okay, we have time for one short
one and a very short answer, so can we go
to the front here?
Person 3 from audience: Yeah, one
question: In which country are you tax
resident when you are living in several
countries for quite a long time in the
year? For instance, 3 countries, four
months. How is it decided?
Taxman: Very good question and banks are
supposed to figure this out, but banks ...
quiet laughter Yeah, I mean the bank has
to report, so banks are overwhelmed, so
that makes you an expert in the different
laws of each jurisdiction you're in. For
Germany, I believe it's 183 days residence
here. In the United States and Eritrea...
Hey, something Eritrean and the United
States have in common, place of birth is
enough. In Eritrea, I was told, paying
taxes more of an option, but okay.
laughter So you are... the bank will ask
you on the self-certification "Where are
your tax resident?" and you are supposed
to know, which is a little painful. I
mean, you're for 4 months in the country.
Are you tax resident? You don't know the
funny tax laws everybody has. So, the
burden is on you. I mean, the bank tries
to put the burden on you, because you're
not going to get fined, the bank is going
to get fined.
Herald: Great. Let's give the taxman a
warm round of applause.
[Applause]
[Music]
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