 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 tax man with the international exchange of tax information. Why don't we give him a huge round of applause? 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 on how FATCA affects you and what you can do about it. And at the end, since we're in the political section here at CCC, I would like to venture two or three 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've got this one, you can go home. What is going on here? You, the listeners, we're the pink dudes. We have bank accounts, financial institutions, and the parlance of FATCA and CRS. Banks will collect information from us, forwarded to the local tax administration. In this case, the Luxembourg flag suggests we're in Luxembourg. The Luxembourg tax administration will collect 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 administrations to the United States. CRS, the common reporting standard, took the idea, the model of the Americans, copied it and convinced about 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 going to ask you. Who are they going to ask? Your bank. Banks are going to get fined. Banks are going to get in trouble, but they're going to afford 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 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 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 administrations are going to receive 60 million notifications about PayPal balances. And that's not all. Think about your bank, whether you hold shares, whether you have the normal deposit account, savings account. All this information is going to be forwarded. This is particularly affected. People with connection to foreign countries. The guy in pink will be a person with a contact, with a 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 sounds so good. And at the end, they just pass our tax information around. Some of the problems here. One of the problems, transliteration. 101 nations as of December signing up. What about the information we're going to get from China? Are they going to send Chinese characters? And imagine there's a German in China. A friend of mine, Robert, his name in China is Law Borte. How is this information going to come back? If you look at Bulgaria, you have Cyrillic. Cyrillic, if you translate it to German, is translated in a special way. The Germans have a DIN, a norm to translate Cyrillic. That norm is not identical with how the French translate 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 the schema are in a way more irksome because here I just have three nodes. The header, the financial information, a 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 in the person account info you say it's going to be deleted. How are you going to resolve this? For me an example of lawyers and technology, meaning anybody who works with this will have some pain and suffering. OK, practical advice. First of all, what type of information is going to be reported? You see here the name, address, the jurisdictions of residents, tins that's a taxpayer 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 of birth and I found somebody who wrote to this request to provide this information home delivery. No, that's not what it meant when the OECD asked for the place of birth. So the date of birth is important. If you have two pierre du pont, 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 fat guy ends here as was to catch individual tax cheats. We're not talking about corporations dodging taxes or anything. We're trying to, or fat guy 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 came in Ireland, Turks, Caicos didn't have any exchange in regards to this information in 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 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're not going overboard. That having said, you might disagree with the whole idea of exchange in tax information, but this is basically what you expect to see when you're looking for tax cheats. Number five, 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 going to be reported. And your dividends and gross proceeds for the sale of shares or other financial assets is going to be reported. 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're an American, your birth certificate is sufficient. I've seen it with other banks that they come around now and ask, show me your birth certificate. If you're an American, your information is going to be reported to the United States, to the IRS. If you give the emailing 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, where are you 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 got a Google number with the 001 country code, your bank is going to ask you. And if you don't respond, they're going to 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 residence certificates. Meaning you can go to countries, easily obtain a certificate of residence, then go to your bank and open an account. When the bank is reviewing your information, it sees taxman, local guy. His 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 FATKA 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 in Turkey would be burned and they provided an expert opinion that Turkey does not safeguard tax information. The Turkish finance minister claimed the contrary, but the court was not convinced. So the court in Cologne said, German tax administration, you cannot forward this information to a country that doesn't follow data privacy laws. Let's look at FATKA and CRS. We're talking about 60 million, 100 million accounts being distributed all over the world. The courts are not, I believe, not going to shoot down CRS and FATKA. 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 going to hurt me in Turkey or wherever, I believe the fiscal courts in Germany would issue an injunction, would prevent the German tax administration and bond to forward your information. Think about Turkey. Turkey, nothing against Turkey, 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 regarding any third-world country that they're not protecting data, that they're not protecting tax information. And on the contrary, they're going to 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 court say in this regard. One 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 no, it wasn't a law, a decree by Louis XVI. This was, I mean, it must have been weeks before it 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. Okay, let's look at the consequences of this. I'm very concerned about Sierres and Fadka. On the one hand, anybody who is a little international might run into problems. For Fadka, 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 Sierres, this is a little different because 100 nations, they can't always refuse foreigners. But you see that the target of Fadka and Sierres 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 startup in this space, the compliance burden is very high. This type of law prevents startup innovation in this 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. Great, so questions. If you have a question again, please, the microphones are here and here in the aisles. So already in the back. 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? Fadka 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, Sierres, 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. Great. Do we have a question from the internet? Yes, somebody on ISE wants to know, because when you have an American social security number of someone, you can commit identity theft. Is that problem the same for German tax IDs or are they more immune to that? To be honest, okay, two 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 the foreign country is basically considered a tax cheat and will be treated differently from local residents. That is a problem I see. All right, from up front. 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 the amount of money at the end of the year. The two are completely incongruent. 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 you have any thoughts on this? 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. 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 are 10 new special characters we can't use. So the tax administrations across the globe, they're 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. Okay, we have time for one short one and a very short answer. So can we go to the front here? Yeah, one question. In which country are you tax-resident when you are living in several countries for quite a long time in the years? For instance, three countries four months. Very good question. And banks are supposed to figure this out. But banks, 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, residents here in the United States and Eritrea, hey. Something Eritrea and United States have in common. Place of birth is enough. In Eritrea, I was told paying tax is more of an option, but okay. So you are, the bank will ask you on the self-certification, where are you tax-resident? And you're supposed to know, which is a little painful. I mean, you're for four months in a 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. Great. Let's give the tax man a warm round of applause.