0:00:00.000,0:00:13.920
Music
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Herald Angel: So, they say that the only[br]certainties in life are death and taxes
0:00:19.430,0:00:23.900
and even hackers have decided that death[br]is easier to cheat.
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Life is about to get, way more interesting
0:00:27.669,0:00:32.920
for more than 60 million Europeans, and[br]we're going to find out why here is the
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taxman with the international exchange of[br]tax information.
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Why don't we give him a huge round of[br]applause?
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Huge applause
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Taxman: C3 rocks! Yeah, thanks for being
0:00:48.140,0:00:54.541
here I deal with this stuff every day and[br]I'm happy that some other people are
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interested in this because I have the[br]impression the subject hasn't really made
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its way into the public. There's a lot of[br]ignorance out there even among
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specialists. So, thank you very much for[br]listening to what I have to go through
0:01:10.500,0:01:18.920
nearly every day. What am I going to talk[br]about? First, what are FATCA and CRS?
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FATCA is the Foreign Account Tax[br]Compliance Act. CRS, Common Reporting
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Standard. From now on don't remember what[br]it stands for. It's FATCA and CRS. I'll
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give you some practical advice how FATCA[br]affects you and what you can do about it.
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And, at the end, since we're on the[br]political section here at CCC I would like
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to venture 2 or 3 thoughts on what FATCA[br]and CRS means for, let's say, society as a
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whole. Let's see, here we are! This is the[br]most important slide of my talk, so, if
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you got this one you can go home. What is[br]going... What's going on here? You, the
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listeners, we're the pink dudes.[br][Pause]
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Rattling sounds[br]...with bank accounts, financial
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institutions and the parlance of FATCA and[br]CRS. Banks will collect information from
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us, forward it to the local tax[br]administration. In this case, the
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Luxembourg flag suggests we're in[br]Luxembourg. The Luxembourg tax
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administration will collects this[br]information and forward it to the
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designated countries. On the top, we see a[br]foreign tax administration that doesn't
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have a flag. Imagine there's an American[br]flag there. FATCA deals with forwarding
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information from - the German, Luxembourg,[br]French, etc, tax administration's - to the
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United States. CRS the Common Reporting[br]Standard took the idea, the model of the
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American's, copied it and convinced about[br]a 100 nations to sign up. Here in the
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example, we see Germany, France, but China[br]is among the nations that will receive and
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provide information. Russia is there,[br]Chile is there, just imagine the list of
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signatories to the MCAA another[br]abbreviation to the convention that was
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signed on the 29th of October 2014 grows[br]every day. 101 Nations is already pretty
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big. If you look at this schema or at this[br]structure there's something funny. They
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want information about you but they're not[br]gonna ask you. Who are they gonna ask?
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Your bank. Banks are gonna get fined,[br]banks are gonna get in trouble. But they
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gonna forward your information. One of the[br]problems with FATCA and CRS is that the
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terms are rather vague and ill-defined.[br]You think "yeah I've got a bank, I can
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handle my bank no problem" but have you[br]ever thought that your lawyer might need
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to forward your information? Meaning[br]you're a foreign -- you're a foreigner the
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lawyer in his ordinary course of business[br]accepts deposits -- in this case retainers
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and client funds -- and has to forward[br]this information.
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Many lawyers are not aware of this, I[br]believe the law is ambiguous, the reason
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why I take lawyers as an example FATCA and[br]CRS are pretty identical. Under FATCA the
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Germans negotiated that lawyers don't have[br]to report any information, under CRS we
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don't have this exception.[br]So, vague terms, ill-defined terms and a
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huge amount of data being thrown around in[br]the world. I was introduced with the
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example of PayPal, PayPal in Luxembourg.[br]My guesstimate is -- according to SEC
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filings, PayPal has about 150 million[br]accounts, Europe is an important market,
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60 million accounts in Europe -- the tax[br]administration's are going to receive 60
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million notifications about PayPal[br]balances and that's not all I mean think
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about your bank whether your hold shares,[br]whether you have the normal -- how do you
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call it -- deposit, a deposit account, a[br]savings account all this information is
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going to be forwarded. Who is particularly[br]affected? People with connection to
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foreign countries. The guy in pink will be[br]a person with the contact, with the
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relationship, to a foreign country, I will[br]show you what this relationship can look
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like. Okay we're at CCC, XML schema,[br]nothing new for you, it's a tree. Don't
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worry, the more interesting stuff is going[br]on here; the ambiguities in the schema.
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It is promoted by the OECD, the[br]Organization for the Economic Cooperation
0:06:53.060,0:06:57.479
and Development. Cooperation and[br]development sound so good and at the end
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they just pass our tax information around.[br]Some of the problems here, one of the
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problems, transliteration; a hundred and[br]one nations as of December signing up.
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What about the information we're going to[br]get from China? Are they gonna send
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Chinese characters? And imagine there's a[br]German in China. A friend of mine, Robert,
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his name in China is 罗伯特, how is this[br]information gonna come back? If you look
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at Bulgaria you have Cyrillic, Cyrillic,[br]if you transliterate it to German is
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transliterated in a special way, the[br]Germans have a DIN, a norm, to
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transliterate Cyrillic. That norm is not[br]identical with how the French
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transliterate Cyrillic characters, so if[br]the Germans ask about suspicious character
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Anton Chekhov and ask the French[br]authorities, they might not talk about the
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same guy, because the spelling is slightly[br]different.
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the ambiguities in this schema are in a[br]way more irksome because here I just have
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three nodes, the header, the financial[br]information-- financial institution and
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the person or account information. The[br]OECD went overboard and has meta
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information on each of those nodes,[br]describing what type of information is
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supposed to follow. So what's going to[br]happen -- or how is anybody to interpret
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information where in the header you say[br]it's new, on the FI node you say it's
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corrected and then the person/ account[br]info you say it's gonna be deleted. How
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are we going to resolve this? For me an[br]example of lawyers and technology, meaning
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anybody who works with this, will have[br]some pain and suffering.
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Okay, practical advice. First of all, what[br]type of information is going to be
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reported.[br]You see here the name, address, the
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jurisdictions of residence, TINs, that's a[br]tax payer information number, and the date
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of place of birth.[br]So at one point I was trying to make the
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presentation a little more visual and I[br]was looking for images for place-- place
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of birth and I found somebody who wrote to[br]this-- to this request to provide this
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information -- home delivery. No that's[br]not what is meant when the OECD asked for
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the place of birth it's the date of birth[br]is important. If you have two Pierre
0:10:01.440,0:10:08.990
Dupont that's the way to keep them apart,[br]meaning your birth date information is
0:10:08.990,0:10:15.610
relevant to keep you apart from other[br]people having your name. The information
0:10:15.610,0:10:22.810
itself is fairly technical, there's[br]nothing really going overboard. The idea
0:10:22.810,0:10:29.750
of FATCA and CRS was to catch individual[br]tax cheats. We're not talking about
0:10:29.750,0:10:37.520
corporations dodging taxes or anything. We[br]are trying to-- or FATCA is trying to
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catch people who evade taxes. How did[br]Americans in particular evade taxes in the
0:10:42.870,0:10:51.060
past? They had a trip to the Bahamas with[br]the suitcase full of money and deposited
0:10:51.060,0:10:56.240
the money in an account there. Maybe they[br]got a credit card and used the credit card
0:10:56.240,0:11:02.310
in the United States to live off the[br]interest that the account accumulated.
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Since Bahamas, Cayman Island, Turks,[br]Caicos didn't have any exchange in regards
0:11:09.720,0:11:14.500
to this information with the United[br]States. These Americans went home free
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thus cheating the taxman. Later on they[br]became a little smarter, instead of
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signing up for an account themselves they[br]created corporations or trusts. So it's no
0:11:27.440,0:11:32.790
longer in the name of your own name but in[br]the name of your trust that you hold these
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funds. So the information that the banks[br]are forwarding, is actually -- how to say
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-- it's fairly technical, they are not[br]going overboard. That having said you
0:11:48.000,0:11:53.220
might disagree with the whole idea of tax[br]exchange-- of exchanging tax information
0:11:53.220,0:12:01.450
but this is basically what you expect to[br]see when you're looking for tax cheats.
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Number 5, not only your account balance as[br]of the 31st of December so you still have
0:12:09.310,0:12:15.570
a chance to change that today and[br]tomorrow, if you take all the money out
0:12:15.570,0:12:21.810
then nothing is gonna be reported, and[br]your dividends and gross proceeds of--
0:12:21.810,0:12:28.040
gross proceeds for the sale of shares or[br]other financial assets is going to be
0:12:28.040,0:12:36.760
reported.[br]That's-- that's a lot. Okay how do banks
0:12:36.760,0:12:47.280
find out whether you are a potential tax[br]cheat? I listed the three main criteria
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they're looking for. They ask you-- or if[br]they know whether you're resident of
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reportable jurisdiction; if you are an[br]American your birth certificate is
0:12:59.760,0:13:05.351
sufficient. I've seen it with other banks[br]that they come around now to ask "Show me
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a birth certificate", if you're an[br]American, your information is gonna be
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reported to the United States, to the IRS.[br]If you give the-- a mailing address or a
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residence address in a country abroad,[br]that similar will trigger the bank to look
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a little more carefully at your account.[br]What banks typically do is when they find
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this information they send you a self-[br]certification. They ask you "Please
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certify this information". They basically[br]ask you "Were your tax resident and is the
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mailing address correct?". And think about[br]number three: Phone numbers. The phone
0:13:56.300,0:14:03.130
number the bank has on record will trigger[br]this additional search or sending out the
0:14:03.130,0:14:09.260
self-certification form. Meaning, you've[br]got a Google number with a zero zero one
0:14:09.260,0:14:14.780
country code your bank is gonna ask you[br]and if you don't respond, they're gonna
0:14:14.780,0:14:22.990
send this information to the United[br]States. Your tax account information.
0:14:22.990,0:14:31.380
What can you do about it? Be local.[br]Meaning check with your bank, whether all
0:14:31.380,0:14:37.760
the information the bank has on file about[br]you reflects a local residence. I have
0:14:37.760,0:14:42.650
heard -I cannot verify it- that certain[br]countries make this a business by
0:14:42.650,0:14:50.400
providing easy resident certificates,[br]meaning you can go to countries so easily
0:14:50.400,0:14:58.310
obtain a certificate of residence then go[br]to your bank and open an account. When the
0:14:58.310,0:15:04.320
bank is reviewing the information it sees[br]taxman local guy.
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This information doesn't have to be[br]forwarded to another country because he
0:15:08.820,0:15:18.040
supposedly is paying his taxes locally. Is[br]there a legal option; is there a legal
0:15:18.040,0:15:25.880
opportunity or is there a case for lawyers[br]here? It's a little doubtful.
0:15:25.880,0:15:32.850
In Germany, the Germans changed the law in[br]the fiscal code regarding the
0:15:32.850,0:15:40.500
consultation. Typically, or before the[br]automatic exchange of tax information, the
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Germans asked you, consulted you, gave you[br]a chance to voice your objections, before
0:15:47.390,0:15:52.390
they would forward your information to[br]another country. For automatic exchange of
0:15:52.390,0:16:00.301
information like FATCA and CRS, this is no[br]longer the case. Nevertheless, there has
0:16:00.301,0:16:08.811
been a case in Germany decided by the[br]fiscal court in Cologne, where the German
0:16:08.811,0:16:14.170
tax administration wanted to forward[br]information to the Turkish government in
0:16:14.170,0:16:18.960
regards to some payment, a German company[br]has made.
0:16:18.960,0:16:27.050
So, the German company thought, their[br]contact and Turkey would be burnt and they
0:16:27.050,0:16:37.070
provided an expert opinion, that turkey[br]does not safeguard tax information. The
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Turkish finance minister claimed the[br]country, but the court was not convinced.
0:16:42.820,0:16:50.090
So the court in Cologne said: "German tax[br]administration, you can not forward this
0:16:50.090,0:16:59.050
information to a country that doesn't[br]follow data privacy laws!" Let's look at
0:16:59.050,0:17:04.480
FATCA and CRS. We're talking about 60[br]million; hundred million accounts being
0:17:04.480,0:17:12.919
distributed all over the world. The courts[br]are not -I believe- not going to shoot
0:17:12.919,0:17:20.409
down CRS and FATCA. They will not ask the[br]tax administration to hear you, before
0:17:20.409,0:17:27.470
your information is being passed on to[br]another country. However, if you can come
0:17:27.470,0:17:34.769
up with an expert opinion and say: "My[br]information is gonna hurt me in Turkey or
0:17:34.769,0:17:43.149
wherever", I believe the fiscal courts in[br]Germany would issue an injunction, would
0:17:43.149,0:17:51.110
prevent the German tax administration in[br]Bonn, to forward the information. Think
0:17:51.110,0:17:57.709
about turkey. Turkey, nothing incentive,[br]but it's a third world country. Compared
0:17:57.709,0:18:04.610
to any other third world country in the[br]world, you can most likely obtain an
0:18:04.610,0:18:10.600
expert opinion from -regarding any third[br]world country- that they are not
0:18:10.600,0:18:18.090
protecting data; that they are not[br]protecting tax information in the country.
0:18:18.090,0:18:26.690
They're gonna use it to shame you, so even[br]though I'm not really convinced, that the
0:18:26.690,0:18:33.940
legal solution is a good one, it will be[br]interesting to see what the courts say in
0:18:33.940,0:18:41.370
this regard.[br]A little ray of hope was, that for another
0:18:41.370,0:18:49.959
tax information exchange, the French,[br]their Conseil d'État, recently decided,
0:18:49.959,0:18:54.490
based on a law signed -oh, it wasn't a[br]law, it was a decree by Louis XVI.
0:18:54.490,0:18:57.490
Laughter[br]This was, I means,
0:18:57.490,0:19:02.039
it must have been weeks before he[br]was beheaded 1791, that they didn't want
0:19:02.039,0:19:06.550
to participate in this other tax[br]information exchange, which is a country-
0:19:06.550,0:19:13.620
by-country reporting regarding companies.[br]So maybe -we have not heard the courts
0:19:13.620,0:19:22.889
yet- maybe, there's still something to[br]come. Ok, let's look at the consequences
0:19:22.889,0:19:29.510
of this.[br]I'm very concerned about CRS and FATCA.
0:19:29.510,0:19:37.250
On the one hand, anybody who is a little[br]international, might run into problems.
0:19:37.250,0:19:42.919
For FATCA, Americans have problems opening[br]bank accounts in Europe, because the
0:19:42.919,0:19:48.870
European banks think, it's not worth the[br]trouble. So Americans are complaining
0:19:48.870,0:19:57.979
about not being able to bank outside the[br]United States. With CRS this is a little
0:19:57.979,0:20:05.789
different, because a hundred nations; they[br]can't always refuse foreigners. But you
0:20:05.789,0:20:14.110
see, that the target of FATCA and CRS are[br]individuals like you and me, who are a
0:20:14.110,0:20:20.820
little mobile and travel and work across[br]the globe. Our life is a little more
0:20:20.820,0:20:28.929
difficult with this. The other thing is:[br]If you think that you want to create a
0:20:28.929,0:20:38.799
start-up in the space, the compliance[br]burden is very high. This type of law
0:20:38.799,0:20:43.570
prevents starts of innovation in the[br]space.
0:20:43.570,0:20:51.140
That's it already. I hope you have some[br]questions, so I can elaborate a little
0:20:51.140,0:20:57.320
more on individual details, that you might[br]be interested in. Thank you very much.
0:20:57.320,0:21:04.260
Applause[br]
0:21:04.260,0:21:07.230
Herald: Great! So, questions. If you have[br]a question: Again,
0:21:07.230,0:21:10.331
please, the microphones[br]are here and here in the aisles, so
0:21:10.331,0:21:14.160
already in the back.[br]Person 1 from audience: Yeah, hi! I was
0:21:14.160,0:21:18.110
wondering, if it was possible to know, if[br]the information has already been traded or
0:21:18.110,0:21:21.210
sent to other countries or things like[br]that.
0:21:21.210,0:21:28.480
Taxman: FATCA was originally implemented[br]in 2010. The first exchange, I mean banks
0:21:28.480,0:21:36.170
were required to submit the information,[br]on the 30th of June 2015. So we've already
0:21:36.170,0:21:41.459
seen two rounds of exchanging data with[br]the United States. For the Common
0:21:41.459,0:21:47.140
Reporting Standard, CRS, we're going to[br]see the first exchange next year. Until
0:21:47.140,0:21:53.099
the 30th of June, banks were required to[br]submit the information, until the 30th of
0:21:53.099,0:21:57.280
June. The tax administration itself has[br]three more months, until the 30th of
0:21:57.280,0:22:03.740
September, to forward the information to[br]the respective countries.
0:22:03.740,0:22:06.680
Herald: Great! Do we have a question from[br]the internet?
0:22:06.680,0:22:12.100
Angel: Yes. Somebody on IRC wants to know,[br]because when you have an American social
0:22:12.100,0:22:17.330
security number or someone, you can commit[br]identity theft. Is the problem the same
0:22:17.330,0:22:21.619
for German tax IDs or are they more immune[br]to that?
0:22:21.619,0:22:28.370
Taxman: To be honest... Okay, 2 parts to[br]the answer: a) I'm not an expert on German
0:22:28.370,0:22:34.529
tax numbers and identity theft, in the[br]United States social security number is a
0:22:34.529,0:22:39.039
lot more important. So, once you have[br]social security number, you get loans and
0:22:39.039,0:22:44.929
everything else. Typically when you apply[br]for a loan with a car or wherever, you
0:22:44.929,0:22:48.580
don't -- at least according to my[br]experiences, which is very limited -- you
0:22:48.580,0:22:55.269
don't provide your German social security[br]number. The encryption of the information
0:22:55.269,0:23:01.490
etc. is something I would not be worried[br]about. I mean encryption in this space is
0:23:01.490,0:23:08.029
a solved problem and the tax[br]administration, they'll follow best
0:23:08.029,0:23:15.660
practices, so that the information is[br]going to be used by third party, I
0:23:15.660,0:23:22.429
believe, is not a major problem. The other[br]thing is, however, that everybody is
0:23:22.429,0:23:26.140
basically considered... everybody who has[br]connection with a foreign country is
0:23:26.140,0:23:31.049
basically considered a tax cheat and will[br]be treated differently from local
0:23:31.049,0:23:37.860
residents. That is a problem I see.[br]Herald: All right. From up front.
0:23:37.860,0:23:41.370
Person 2 from audience: So, I've had the[br]displeasure of having to file an F bar
0:23:41.370,0:23:45.929
and, as part of the F bar, it asked for[br]the highest amount of money in my account
0:23:45.929,0:23:51.250
at any point in time in the year. And I[br]filled all that out and so forth, as
0:23:51.250,0:23:57.389
condescending as it was, but now you're[br]saying the fact, actually, now wants to
0:23:57.389,0:24:01.410
report my amount of money at the end of[br]the year. The two are completely
0:24:01.410,0:24:04.860
incongruent! Like how... I mean you're[br]kind of spelling out that there's going to
0:24:04.860,0:24:09.019
be a giant data mess. Is this going to[br]factor into that? Do have any thoughts on
0:24:09.019,0:24:14.690
this?[br]Taxman: As I mentioned about FATCA, the
0:24:14.690,0:24:21.380
date to report information is the 31st of[br]December; that's for account balances. For
0:24:21.380,0:24:30.539
sale of shares, any time during the year.[br]For information regarding interest and
0:24:30.539,0:24:37.309
dividends, any time during the year.[br]Talking about "data mess": Yes, I'm pretty
0:24:37.309,0:24:45.259
much convinced this will be a huge data[br]mess. Think about for Germany: German
0:24:45.259,0:24:55.341
public servants receiving 20 million[br]records -- and this is only PayPal, we're
0:24:55.341,0:25:01.009
not talking about credit cards, we're not[br]talking about bank accounts. This is just
0:25:01.009,0:25:08.110
one measly little company. So, and it's[br]not only the Germans, and, by the way,
0:25:08.110,0:25:12.799
American tax administration was completely[br]overwhelmed by the implementation of
0:25:12.799,0:25:19.590
FATCA. You could see it that they changed[br]the technical requirements by changing the
0:25:19.590,0:25:25.029
FAQs on the website. So, you went to the[br]website a week later and found out "Oh,
0:25:25.029,0:25:30.889
there're 10 new special characters we[br]can't use", so the tax administrations
0:25:30.889,0:25:35.720
across the globe, they are overwhelmed,[br]and what's going to happen with these
0:25:35.720,0:25:44.159
data... It will depend on each country and[br]the data privacy standards. I mean, the
0:25:44.159,0:25:50.850
Germans take this very seriously, but[br]think about a small country whether it's
0:25:50.850,0:25:59.049
Luxembourg or some country in the[br]Caribbean, Panama: These guys, they lack
0:25:59.049,0:26:03.340
certain practices; they haven't been, so[br]to speak, under attack; they haven't been
0:26:03.340,0:26:11.789
able to develop the defenses. So, a lot of[br]data will float around the internet in the
0:26:11.789,0:26:15.739
end, I believe.[br]Herald: Okay, we have time for one short
0:26:15.739,0:26:20.330
one and a very short answer, so can we go[br]to the front here?
0:26:20.330,0:26:24.600
Person 3 from audience: Yeah, one[br]question: In which country are you tax
0:26:24.600,0:26:29.369
resident when you are living in several[br]countries for quite a long time in the
0:26:29.369,0:26:32.799
year? For instance, 3 countries, four[br]months. How is it decided?
0:26:32.799,0:26:38.519
Taxman: Very good question and banks are[br]supposed to figure this out, but banks ...
0:26:38.519,0:26:43.230
quiet laughter Yeah, I mean the bank has[br]to report, so banks are overwhelmed, so
0:26:43.230,0:26:51.519
that makes you an expert in the different[br]laws of each jurisdiction you're in. For
0:26:51.519,0:26:59.119
Germany, I believe it's 183 days residence[br]here. In the United States and Eritrea...
0:26:59.119,0:27:04.480
Hey, something Eritrean and the United[br]States have in common, place of birth is
0:27:04.480,0:27:12.710
enough. In Eritrea, I was told, paying[br]taxes more of an option, but okay.
0:27:12.710,0:27:17.970
laughter So you are... the bank will ask[br]you on the self-certification "Where are
0:27:17.970,0:27:23.560
your tax resident?" and you are supposed[br]to know, which is a little painful. I
0:27:23.560,0:27:27.660
mean, you're for 4 months in the country.[br]Are you tax resident? You don't know the
0:27:27.660,0:27:33.480
funny tax laws everybody has. So, the[br]burden is on you. I mean, the bank tries
0:27:33.480,0:27:38.870
to put the burden on you, because you're[br]not going to get fined, the bank is going
0:27:38.870,0:27:43.610
to get fined.[br]Herald: Great. Let's give the taxman a
0:27:43.610,0:27:54.169
warm round of applause.[br][Applause]
0:27:54.169,0:28:00.029
[Music]
0:28:00.029,0:28:18.000
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