Strategy Refocus

Focus and simplicity…once you get there, you can move mountains.

 — Steve Jobs —


Fix the Tax Treaty! (FTT) advocates for the Australian Government to renegotiate the underpinning legacy Australia-US tax treaties and intergovernmental agreements to provide a fair go for all Australians.

Sure, our group also provides other services like educating our members on US-Australian taxation issues and pitfalls, providing a wiki-style knowledge base and maintaining a private forum where members can seek advice and share experiences.

Nevertheless, our core purpose is all about effecting positive change here in Australia.   As a grass-roots volunteer organisation, FTT seeks to

  1. find solutions to the many adverse impacts resulting from the US practices of citizenship-based taxation,
  2. target its efforts in our home country of Australia, and
  3. provide a vehicle for organised collective action.

Our group membership has grown to over 1,200 members in only four years and we are proud to provide help to those in need.  However, group administration demands have increasingly occupied our small Steering Committee leaving little time to actually pursue our core change agenda.  You may not be aware but our group has long had a strategy roadmap, albeit several years old and in need of updating. 

To address this, we are attempting to refocus our strategy and develop an achievable forward action plan.  Any initiatives must focus on key issues, emphasise greater group involvement and leverage the strengths of our membership.

What better way to start this process than to seek input and feedback directly from our group membership?  As such, we recently ran four focus group sessions (via Zoom VC) with volunteers from our group – huge thanks to those members who took the time to meet with us and contribute!

The purpose of these focus groups was to:

  1. double check to see if we are focusing on the right issues and seek to prioritise them
  2. get membership ideas on how we might approach the change process, and
  3. solicit input on how we might translate this into an action plan.

You can view the introductory slides used at the Focus Groups at the end of this blog.

Pleasingly, we weren’t blindsided by any of the discussion content, with most of the key issues already recognised by the Steering Committee and previously documented in our initial strategy roadmap, blog posts, etc.

To summarise the focus group outcomes, I’ve grouped the outcomes into themes below with a brief discussion synopsis:

  1. Top-3 “Pain” Issues
    • Double taxation of retirement accounts (Super, but also ATO taxation of US retirement accounts)
    • Taxation on sale of personal residence
    • Investments taxation restrictions (PFICs)

What was particularly helpful was prioritising the key taxation issues to those few critical issues that impact most of our membership.  The number one issue was clearly the taxation of retirement accounts, where current taxation laws results in double taxation while preventing expatriates from fully taking advantage of their country of residence’s retirement savings incentives.   In short, there is a huge need to reform both US and Australian taxation treatment of retirement accounts in order to provide retirement account portability, facilitate labour mobility and minimise economic leakage. 

Similarly, US taxation on the sale of personal residences in Australia becomes a major issue as high housing costs force Australian residents to tie up a large proportion of their savings in their home with the expectation that these illiquid savings can be “unlocked” during retirement through downsizing or other mechanisms such as reverse mortgages, home equity lines of credit, etc. 

Finally, the investment opportunities available to Australian residents are severely limited by US taxation laws such as PFIC legislation and regulations that punitively tax a wide variety of common non-US investments. 

  1. Focus & simplicity
    • Prioritisation required
    • Wrap up in over-arching themes; eg economic advantages of retirement portability / labour mobility
    • Focus on messages that will resonate with our elected representatives
    • Simple messaging formats; 
    • Provide appropriate level of supporting analysis but avoid analysis paralysis

All focus groups were strongly of the view that in order to be more effective, we need prioritisation, increased focus and simplicity in our efforts.  Framing our requests into over-arching themes such as “effective labour mobility” and “retirement portability” is recommended.  Importantly, we need to focus on justification that will resonate with the key decisions makers, our elected representatives.  For example, we should aim to educate politicians that these changes will actually provide economic opportunities as Australia recovers from the COVID-19 recession. 

Messaging needs to be simple and direct; Infographics were recommended as an effective communication tool for both politicians and media.  Of course, some level of supporting analysis may be required to provide important quantification such as economic metrics, but this does not and should not be exhaustive or hugely time consuming as we need to avoid analysis paralysis. 

  1. Develop and conduct sustained campaigns on key issues

Focus groups all agreed on the need to develop clear, ongoing and sustained campaigns on key issues.  Specifics however are challenging with no group consensus emerging.  Further work will certainly be required in this area.  

  1. Seek to identify develop key alliances with political and Industry groups

Focus groups also recognised the need for alliances that would share our objectives and ideally have greater resources and lobbying connections.  Further work is required but potential allies could be State and Industry Development Groups, Australian Super or Investment organisations, etc.

So what comes next?  We’ll be updating our Strategy Roadmap and seeking to develop action plans and sustained campaigns around these simplified and prioritised objectives.  If you missed the focus groups, it’s not too late to provide input into our revised strategy – just drop Karen (karen@fixthetaxtreaty.org) or me (gstreet@fixthetaxtreaty.org) an email with your thoughts.  We are particularly interested in thoughts around how we might conduct effective campaigns on our key issues (Item 3 in the themes summary).

As always, “many hands make light work.”  To bring about positive change, we must leverage our group as a volunteer resource.  Please get involved!


FG Introductory slides:

A glimpse into FATCA reporting….

In the post-FATCA world, Australia’s reporting financial institutions (RFIs) are required to report financial account data on Australian resident US citizens that is ultimately transmitted to the IRS.  Through past Freedom of Information (FOI) requests for aggregate FATCA reporting statistics, we learned that the IRS must be drowning in large volumes of FATCA data of questionable accuracy.   

The lack of publically accountable governance and oversight associated with a program of FATCA’s scope and huge cost[1] is mind blowing.  Furthermore, one of the most disturbing elements of FATCA is that financial reporting on Australian residents is being made to a foreign government with no statutory notification regarding the reported information back to the person being reported on.   How can one know what is being reported regarding their financial affairs and whether it is accurate and correct? 

I decided to find out!  I made use of our FOI regime to request copies of all information being reported to the IRS regarding my personal Australian domiciled accounts so that I could determine if the data is complete and accurate. 

Before I get into my experience, note that we’ve attempted this in the past.  In 2016, Karen made an FOI request seeking disclosure of all reported FATCA data specific to her accounts and learned that for her specific case no records were available, presumably as her financial institutions had yet to identify her as a US citizen.   In early 2017, “Sam” made a similar request and the ATO came back and said that they could not make a decision on whether to release the information without first consulting with the IRS which included providing the IRS with Sam’s personal details.    Sam was understandably unwilling to draw attention to himself given the complexity of taxation of foreign assets and promptly withdrew his request.

In my case, I was pleased to discover that the ATO now seems to be past the “consult with the IRS” nonsense and dealt with my FOI information request within the prescribed period.  Interestingly, they stated they only had reported FATCA information on me for calendar year 2017 with nothing reported in prior years.  This is not surprising as I am still, to this date, receiving requests from Financial Institutions to verify our tax residency as required by FATCA and CRS.

For those interested in the specifics, my report was in the form of a table (presumably from a relational database) that contains the following fields:

  • msg_bet_id: unknown field
  • atchd_doc_ref_id:  a long alphanumeric code that includes the name of the financial institution and perhaps an RFI identifier number?
  • FirstName:  my first name and, sometimes, my middle name
  • LastName: Last name
  • Address:  my address of record
  • Account Type:  listed as NULL on my reports
  • AccountNumber:  “CAPAU#########” where ######### is the account number
  • Amount Balance Cur:  Currency, AUD in my case
  • Amount Balance:  balance (in AUD as above)
  • Account Number Closed Indicator:  NULL in my case as no accounts closed
  • Account Number Type:  unknown but listed as NULL in my reports
  • Payment Amount:  a dollars.cents number
  • Payment_type:  listed in all my accounts as “Interest”
  • TIN:  Taxpayer Identification Number, in this case my social security number
  • TIN Country:  Listed as “US”
  • RFI Name:  name of the RFI

I maintain detailed and accurate financial records using financial personal accounting software.  Cross-checking the reported information against my records suggests that the reported information is reasonable but not precise.  Reported year-end account balances were spot-on, perfectly matching my financial records.  Account numbers and my TIN were also correct.  The reported calendar year interest was generally correct or within reason.  Where our numbers did not perfectly match, I was unable to discover a reason why (for example dropping or adding shoulder interest payments made in the first or last days of the calendar year), however the reported numbers were within 10% and therefore considered acceptable.

I also made a few interesting observations:

  1. All account figures in the report are clearly Australian dollar denominated while the FATCA IGA calls for reporting in US dollars using published spot rates.   The report also provides calendar year-end balances not maximum account balances.  This is interesting as both IRS Form 8938 and FINCEN FBAR reporting require reporting of the maximum account balance during the year in US dollars which no doubt will make automated matching and exception identification more challenging.
  2. In my case, the Australian RFIs have reported all accounts, even when the YE account balance of one account is well below the FATCA reporting threshold and there is no interest income.  For example, one RFI reported the YE balance of a transactional banking account that had a year-end well under $1,000 and no interest income.  Presumably this is due to the rules requiring RFIs to aggregate accounts when testing against the US$50k reporting threshold.   
  3. One of my reported account is a brokerage account yet only the cash account and related interest earnings were reported.  Calendar year dividend income or aggregated share values were not reported in my case, despite the FATCA IGA requiring the custodial account to report total gross dividends, amongst other reporting obligations.

Overall, I was pleased that I was able to obtain this information from the ATO with minimal fuss.  I plan to seek updates on an annual basis and I encourage you to do likewise so that you also understand what personal financial information about you is being reported to the IRS.  Although I presume that government bureaucracies will strive to improve FATCA and CRS reporting systems, it is also apparent that in terms of identifying compliance exceptions, these systems currently have significant deficiencies and are unlikely to trigger widespread enforcement activities for years to come.    


[1] Australia is estimated to spend A$482 million over ten years on FATCA implementation and maintenance; sourcehttp://ris.pmc.gov.au/sites/default/files/posts/2014/05/08_RIS_accessible.pdf

Part 2: Our FOI Journey – Learnings & Next Steps

In Part 1 of this two-part blog, we reviewed our lengthy and largely unsuccessful journey in exercising our Freedom of Information (FOI) rights to better understand the context behind the current 2001 tax treaty and to use this information to better frame our initiatives to improve this important agreement.

Although our FOI requests were largely unsuccessful, we did gain some knowledge and insights along the way.  The purpose of Part 2 is to discuss these learnings and suggest further activities we might consider.

Learnings

So what did we learn?

Continue reading “Part 2: Our FOI Journey – Learnings & Next Steps”

Part 1: Our FOI Journey – Challenges & Pitfalls

Looking For a Needle in a Haystack… 

Those of you who follow our blogs might recall we commenced a Freedom of Information (FOI) campaign with both the ATO and Treasury a full year ago to develop a deeper understanding around the issues we face with an intent to use this information to inform future policies and actions (see Behind the Curtain – FOI Requests, Nov 2017).

In practice, exercising our Freedom of Information rights became a much more involved, complex and time consuming process than initially envisioned.  Along the way we learned a great deal about the FOI process and challenges in obtaining useful information.  Although the information we obtained wasn’t the insightful contextual documents we had hoped for, we still gained some information and insights along the way.

I’ve split this blog into two parts to keep the length down

  • Part 1 – Challenges and pitfalls – Our journey through the FOI process
  • Part 2 – What did we learn and what steps might we consider next?

Continue reading “Part 1: Our FOI Journey – Challenges & Pitfalls”

Have you written your MP yet?

Following Karen’s recent Call to Action! post, we are starting to receive  positive feedback on our Open Letter – Extra-territorial Reach of US Tax Reform Legislation from our elected representatives here in Australia.  This campaign is well aligned with the core purpose of our group being  advocating for the Australian Government to renegotiate the under-pinning legacy tax treaties and intergovernmental agreements to provide a fair go for all Australians.

The Open Letter seeks to draw the Australian Government’s attention to an emerging harmful consequence of US extra-territorial taxation as part of US tax reform but it also serves as an opportunity for you to open a dialogue with your elected representatives about the pressing need for Australia to address the many deficiencies in the current Tax Treaty that disadvantage Australians with US ties.

We’ll share some of the positive feedback we received, but first, we want to again remind all of our members to please write your MP / Senators about this issue.   Presently, our follow-up survey suggests that only seven MPs have been contacted to-date, suggesting that only a small fraction of our membership have taken action.  Most Senators from NSW, QLD, SA and VIC have received at least one letter, making a total of 44 Senators who have been contacted. We have yet to hear from anyone in ACT, NT, TAS or WA who has contacted their representatives.  Without your active involvement, affecting positive change will be difficult.

Continue reading “Have you written your MP yet?”

Behind the Curtain – FOI Requests

 

 

 

 

 

One of the terrific things about living in a parliamentary democracy like Australia is that there are safeguards in place to facilitate transparency of the Australian Government and public services.  One powerful tool is the Freedom of Information Act, or FOI, which provides individuals or organisations with the right of access to documents held by many government agencies.  By law, most public authorities have to respond to an FOI request within 30 days. Their response will either contain the information requested, or give a valid legal reason why it must be kept confidential.  Note that the government agencies may levy charges for locating and making the information available, based on prescribed rates.

Here at Fix the Tax Treaty!, we’ve often wondered whether the Australian Government adequately considered the impacts on Individuals (vs businesses) when negotiating and entering into the Australia – US tax treaty agreements and the FATCA Intergovernmental Agreement (IGA).

We decided to find out!

Continue reading “Behind the Curtain – FOI Requests”

Plan to Succeed (Part II) – Strategy Roadmap & Action Plan

Clearly articulating our group’s vision, objectives and action plans is essential if we are to be effective in achieving our aims. Many of you will recall that the Steering Committee members (Karen Alpert, Caroline Day and myself) have long been working on a Strategy Roadmap document, as previous discussed in a number of blog posts:

“A goal without a plan is just a wish.” ― Antoine de Saint-Exupéry

A good advocacy plan will help our group decide where to spend time and effort to achieve our goals and assist us to be as effective as possible with our limited resources.  The plan will be a key reference document that is periodically updated as we progress towards achieving our goals.

I’m pleased to announce that we have completed a final draft of our Strategy Roadmap.  You can view it here.

Continue reading “Plan to Succeed (Part II) – Strategy Roadmap & Action Plan”

“Just the facts, ma’am” … Introducing the Fix The Tax Treaty Wiki!

I was once involved in a contentious activity involving a polarised stakeholder group comprised of big business, activists, regulators and government representatives.   Despite all parties agreeing to fact-based outcomes, I observed “the facts” changed depending on the party involved and decision makers were often presented with inconsistent, confusing and unverifiable information even by different members within the same faction.    At times, I was contacted by policy makers or media with questions and frustratingly could not immediately respond as the information was not at my fingertips.

The lessons I learned from this were if you want to affect change, you must gather your supporting evidence (the “case for change“) early and it must be verifiable and readily accessible.

Continue reading ““Just the facts, ma’am” … Introducing the Fix The Tax Treaty Wiki!”

Our Stories – The Human Element

When we tell other Australians about the issues we face from the long reach of the United States, it is easy to lapse into technical speak – double tax, PFICs, NIIT, FATCA, IGAs and the like.   But the reality of the situation is something more and deeply emotional:  fear, anger, frustration and resentment are only some of the gut feelings most of us experience.

To affect positive change, we need to educate Australian policy makers and the public on the harm being inflicted on not only a large group of people but also the Australian economy.   By its very nature, this is a technical topic and our arguments require verifiable stats, well thought-out positions, identified and viable alternatives, a business case and the like.

However, like any good novel, we will stand a better chance of hooking our audience if we also appeal to them on an emotional or gut level.

This is where you come in.  Continue reading “Our Stories – The Human Element”

Strategy Document Feedback

Just before Christmas, Karen released our initial Steering Committee work on the group strategy for your feedback through the blog comments, our Facebook Group or Private Message.   Perhaps the timing was not the best given how frenetic things get for most of us over the holiday season? Continue reading “Strategy Document Feedback”