Australian banks hand over a large amount of sensitive banking and financial data to the United States IRS. This happens through the FATCA Act. Despite the huge intrusion to privacy and information of Australian citizens, no privacy impact statement was ever prepared for the Act.
The government has also failed to negotiate mutual recognition of retirement instruments like 401Ks in the US and super in Australia, meaning dual citizens are double taxed. This will only cost Australian taxpayers more as retirement funds are lost to US taxes.
Transcript
[Chair]
As well, Senator Roberts.
[Malcolm Roberts]
Thank you chair. Thank you for attending again. I want to talk about, oh, ask questions about FATCA, which for people on the committee, who don’t understand. In implementing the US Foreign Account Tax Compliance Acts, that’s FATCA, in Australia. One major group of stakeholders has been ignored from the very beginning. They’re the individuals, typically dual Australian and US citizens. Whose financial data is being reported to a foreign government. So this goes beyond the question of, why are we reporting data on Australian citizens to a foreign government? But it goes into the specifics of FATCA. In drafting the post-implementation review of FATCA, did treasury consider the impact on those Australians whose accounts were being reported to the internal revenue service in America?
[Jeremy Hirschhorn]
I got to take that on notice.
[Malcolm Roberts]
Okay. Thank you. If not, why did treasury decide that this group of Australians were not significant stakeholders in the Australian implementation of FATCA?
[Jeremy Hirschhorn]
So Senator I’m happy to provide whatever information we can on that conservancy US initiative.
[Malcolm Roberts]
It is and it’s hurting dual citizens all around the world because United States is the only country I understand that taxes on citizenship basis. Whereas every other country, taxes on residency. So an Australian citizens-
[Chair]
You can understand from the official’s point of view, it’s difficult for them to answer on the policy of another country. So perhaps-
[Malcolm Roberts]
This is to do with reporting.
[Chair]
I understand-
[Malcolm Roberts]
Under that policy,
[Chair]
But perhaps look keep going with your line of questioning, but it might pay if we can put these on notice and then at least give the officials the chance to consider this in some more data,
[Malcolm Roberts]
Some of them, they will have to be taken on notice, I accept that at the time.
[Jeremy Hirschhorn]
Maybe just one context about the interaction of FATCA which is indeed another country sovereign, right And their sovereign, as you point out they tax they’re citizens on a different basis from pretty much every other country. I think there’s maybe one or two others, who tax on a citizenship basis, not developed countries. That FATCA was designed in a way that it would penalise, let’s say if the Australian government did not collaborate, did not interact at all with the FATCA system. It was designed in a way to force other countries banks to report the data with a penalty tax of 30% on all their US earnings, which would effectively stop those banks from actually operating in the international banking system. It was a very strong unilateral measure. The Australian government and many other governments negotiated to try to mitigate that through in a sense providing some of the information or in a sense agreeing to be a conduit for some of that information from domestic banks to the US government, primarily to save domestic banking industry from this measure. So it’s the consequence of the Australian government. Not, in a sense having that information flow would be, there’d be a 30% withholding tax on pretty much all the US source income of Australian organisations.
[Malcolm Roberts]
I’m aware that it’s blackmail. So let’s continue asking questions and what has to come on notice, but I thank you for that clarification. What was the number of accounts and aggregate values reported to the American internal revenue service in the fact that data sent by the ATO in September 2018 September 2019 and September 2020. You’d have to taken it on notice
[Jeremy Hirschhorn]
I’ll probably take that on notice but if you give me one second, I might just clarify
Yes senator, I’m going to have to take that on notice
[Malcolm Roberts]
Thank you. Of these accounts how many were held by Australian residents? I imagine you have to take that on a notice too how many were under the United States dollar 50,000 minimum reporting threshold?
[Jeremy Hirschhorn]
So again.
[Malcolm Roberts]
Yep were there any accounts reported by institutions that qualify as local client base banks under the FATCA agreement? So this one, you probably third question I have is how are account holders informed that firstly their data is being sent to the internal revenue service or secondly the amounts being reported under FATCA? What opportunity do account holders have to correct the information reported about them to a foreign government?
[Jeremy Hirschhorn]
So Senator, I’ll take those on notice but primarily the relationship of the account holder is with their bank who first provides the information to us which we then on provide.
[Malcolm Roberts]
Yep.
[Jeremy Hirschhorn]
And so many of those the notification points will be matters between a bank and its clients. I would say that the clients would generally be, I would expect would almost universally if not universally be advised that they are a person with US indigene and be asked for more information to clarify their US potential status
[Malcolm Roberts]
Which raises more questions. But anyway, that’s not for now, thank you for that. Why wasn’t a privacy impact statement, PIA conducted with regard to FATCA reporting and given the quantity of data being sent to foreign governments under both FATCA and the CRS the common reporting standard shouldn’t a privacy impact statement be conducted as soon as possible?
[Jeremy Hirschhorn]
So Senator, look I’ll have to take that on notice, but I don’t think that’s
[Witness]
I think between the two of us we’ll take that on notice.
[Malcolm Roberts]
Is it acceptable for financial institutions doing business in Australia to deny accounts or otherwise discriminate against Australian individuals because of their citizenship or national origin?
[Jeremy Hirschhorn]
So again Senator, I suspect that’s a matter for different specialists who specialise in discrimination matters.
[Malcolm Roberts]
Well, you’re discriminating because you’re, sorry the ATO is discriminating by sending that information by requiring it off certain individuals in Australia.
[Jeremy Hirschhorn]
Sorry senator I was focusing on your question, which is should the bank be able effectively stop customer relationship? I mean, really that’s a matter for the bank and its and its discrimination law in terms of the information we receive, Yes we do share information with the US. We share information with many peragrando of common reporting standard, which is a multilateral solution. We do provide information to many other countries and also receive information from many other countries.
[Malcolm Roberts]
Okay. Thank you.
[Jeremy Hirschhorn]
So the CRS is a two way so we’ve received both in and out for example, and again I don’t have the numbers with me but we received a lot of information about Swiss bank accounts, for example, under the CRS.
[Malcolm Roberts]
And the previous question was about the privacy impact statement. So what recourse do Australian individuals have when they are denied accounts due to their US citizenship?
[Jeremy Hirschhorn]
Senator, I think that that would probably be a matter of for APRA or ASIC.
[Malcolm Roberts]
Last question Chair, FATCA reporting includes reporting on the Australian income of Australian residents, has treasury expressed their support of a same country, exception to FATCA as recommended by the US taxpayer advocate?
[Jeremy Hirschhorn]
Is that a question of treasury?
[Malcolm Roberts]
Yes
[Jeremy Hirschhorn]
Senator, I’ll take that on notice.
[Malcolm Roberts]
Okay. Thank you. Just a final statement. This not only affects US residents, it affects Australians because we have to pay more of our tax to people in America who are Australians who have superannuation and have to go on the pension because they’d been taxed to the hilt by the Americans. There’s a dual taxation, so Americans get slugged, they have a different definition of superannuation than we do. So our superannuation accounts are taxed heavily because they happened to be Americans who had got dual citizenship. There’s a lot of cost involved in this for our country. Thank you very much.
