Republicans Overseas in Israel files High Court petition against FATCA agreement
Republicans Overseas in Israel, which can legitimately purport to represent 85% of American voters living in Israel (based on the
results of the last elections) has filed a petition with Israel's High Court of Justice seeking to
stop Israel's banks from transferring required information to the Internal Revenue Service under FATCA. FATCA requires foreign financial institutions to disclose to Lois Lerner's IRS the value of all foreign accounts held by US citizens. US citizens who actually live abroad are up in arms about this because it means that we have to go through two regulatory systems in all of our dealings with local banks (example: I had to fill out a W-9 to show that I have a US social security number in order to get a car loan from an Israeli bank for my car in Israel last year).
If you're a US citizen who lives in the US you no longer have any foreign bank accounts - at least in Israel where long before the Bank of Israel signed an agreement with the IRS, the local banks forced all non-Israeli residents to close their accounts. That means that this is almost entirely about people who live in Israel by any definition.
ROI’s petition claimed that the new information sharing process is not
only beyond government officials’ discretionary authority absent Knesset
legislation, but also in violation of the Basic Laws which create
certain property and privacy rights defending against an automatic
transfer of personal data absent a reasonable chance to object
(currently there is no chance to object.)
In courts in many
countries, including now Israel, the argument is, that the FATCA law and
how foreign countries are implementing, means it functions as a dragnet
of massive amounts of private information which could be misused and
where there is no evidence of wrongdoing.
Zell explained that “we
are not saying the Israeli tax authorities are prohibited from
transferring information to the IRS or other foreign tax authority…where
there is a reasonable basis to suspect tax evasion.”
He said
that Israel can already do this under existing conventions and that the
problem is to “collect and transfer such data to foreign governments
without a showing of cause and without allowing the affected taxpayers
an opportunity to be heard before the information is transferred.”
The
equal treatment issue is that only dual US citizens are being treated
this way by the Israeli government, and not persons who are
dual-citizens of any other countries, let alone most Israelis who are
solely Israeli citizens.
The application is most “absurd” said Zell with cases of persons who merely have an American greed card.
But
so far other litigation against FATCA and its consequences have had
mixed results, with lawsuits in the US and Canada being initially
dismissed and currently pending appeal.
...
“If the Court addresses the merits of the case, I believe our chances
are quite good… The action of the Bank of Israel is highly problematic,
given that there was absolutely no statutory basis for its action…. The
Government Decision…directly infringe[s] upon fundamental rights and no
attempt was made to mitigate the damage,” stated Zell.
He also
said treating American-Israelis differently is “clearly
discriminatory…There is no easy answer to that... the Government simply
disregarded the privacy interests of the affected class, signed what is
effectively an adhesion [coercive] contract and paid no attention
whatsoever to the fact that the US Government…does not provide adequate
protection for private information,” confirmed he said by the European
Court of Justice and Israel’s Justice Ministry.
As Zell said,
“taxpayers have a fundamental right of privacy protected by Basic Law
and statutory law. The Government sought to nullify these rights with
the wave of a hand and the Knesset thus far has said no. We hope the
High Court of Justice will agree.”
I can only wish them luck.
Labels: Bank of Israel, FATCA, High Court of Justice, Internal Revenue Service, Israeli Knesset, Republicans
Bank of Israel implementing FATCA rather than waiting for data exchange agreement
Last week, I reportd that the Bank of Israel was going to enter into a
data exchange agreement with the US Internal Revenue Service to spare the banks having to report information on US citizen accounts in Israel to the American authorities. Now, apparently stung by US investigations into the activities of the Swiss branches of Israeli banks, the Bank of Israel has decided to
implement FATCA immediately.
The banks must apply FATCA by mapping their US customers and having
them sign the appropriate forms. The Bank of Israel is ordering the
banks to appoint an officer responsible for the matter, establish work
procedures, and reporting processes to management. The banks will also
examine the need to sign an agreement with the US authorities and to set
procedures for handling uncooperative customers - including "the option
of refusing to provide banking services to a customer who does not
cooperate with the implementation of the provisions."
Most, if
not all, of Israel banks are ready to implement FATCA and have signed
their US customers on the forms. As a consequence, the banks have lost
quite a few customers, who decided to withdraw their money and close
their accounts. "Globes" has estimated that more than $4 billion have
been withdrawn from accounts in Israeli banks.
Last week, "Globes" reported that the Ministry of Finance
is in advanced talks with the US Department of the Treasury on an
agreement for the sharing of information on bank accounts held by
foreign residents, and that the economic social cabinet will discuss the
agreement soon.
The agreement will supersede the US government's
demand that Israeli banks will report directly to the US authorities.
Instead, the banks will send the information about US customers to the
Israel Tax Authority, which will send it to the IRS. Despite the
advanced stage of the talks, it is unclear whether an agreement will be
signed before FATCA comes into effect in July.
The Bank of Israel is
demanding that the banks prepare to implement FATCA whether or not the
agreement is signed. "A financial institution that does not cooperate
with the US authorities is liable to various sanctions, including a 30%
deduction from payments originating in the US," it says.
For the record, if you're a US citizen, you're a US customer. And that's making a lot of Americans
give up their US citizenship.
Facing an increasingly out-of-control federal government
in Washington, D.C., record numbers of Americans are giving up their
U.S. citizenship in an effort to escape onerous requirements enforced by
the IRS — which apply no matter where in the world a citizen lives.
Because the IRS requirements have already become so bad, a growing
number of banks around the world are refusing to even accept American
customers in an effort to avoid U.S. government bullying and mountains
of regulations. Following a trend in recent times, with citizenship
renunciations continuing to hit new records, some members of Congress
are slowly starting to take notice.
According to official figures and experts cited by the Wall Street Journal,
almost 2,400 people so far this year have either given up their U.S.
citizenship or turned in their green cards. That means the numbers thus
far are up by at least 33 percent over 2011, when 1,781 did so, more
than twice as many as in preceding years. In 2012, meanwhile, almost
2,000 people reportedly decided to permanently sever Uncle Sam’s grip,
and experts say the real numbers are even higher. By comparison, just
742 renounced their citizenship in 2009.
The exodus is widely expected to continue or even accelerate —
especially among the wealthy and mobile — unless and until Congress
takes action to rein in the IRS and reduce the draconian burdens imposed
on Americans abroad. The U.S. government, of course, is almost unique
in the world in that it demands that citizens pay U.S. taxes and file
massive amounts of complex paperwork no matter where on the planet they
reside and work. According to reports, the only other government in the
world to seek tribute from citizens abroad is the one ruling Eritrea.
Does the American government want us to give up our citizenship? It sure feels that way.
Labels: Bank of Israel, dual citizenship, Internal Revenue Service, Israeli banks, Israeli taxes, Swiss bank account, taxation
Bank of Israel chief: Haredim killing the economy
Haredi MK's are calling for the firing of new Bank of Israel chief Karnit Flug after she claimed on Monday that
the growing number of Haredim are killing the economy.
Flug said Monday that the central reason for the decline in market
growth in Israel is “the demographic trend in Israel, which includes a
growth in the number of hareidim and Arabs, and the aging of the
population.”
MK Aryeh Deri, Chairman of the Shas party, told Kikar Hashabat
that “in normal countries, no matter how important a senior official
may be, he would be fired over such a grave utterance.” Deri accused her
of “slinging mud and refuse on entire sectors in Israel in order to
make excuses for a financial situation for which she is responsible.”
Deputy Health Minister Yaakov Litzman (UTJ) told Kikar Hashabat
that Flug's words are “baseless false accusations against families with
many children, which stem from lack of knowledge and crude
generalizations, which lead to unnecessary hatred and polarization.
MK Nissim Ze'ev (Shas) noted that “all anti-Semites used this excuse,
and said that the world's financial problems are caused by the Jews.
Incitement againt the Jews started mostly from financial subjects.”
Deri is right. In just about any other country in the West, that sort of statement would get you fired. But the level of political discourse here is often worthy of
Der Sturmer, so long as you limit your attacks to Haredim. I guarantee that she won't get away with saying that about the Arabs.
Labels: Bank of Israel, Haredim, Karnit Flug
