HOW the heck did this year go by so fast, thus far? Here it is, July, and on this hot, humid, overcast Guangzhou summer morning, I start another article.....I seem to remember saying the same thing in January - only that seems like yesterday - I guess I'm in a tax time warp.....

There, now that we've done a brief introduction, let's get to that subject I hold near and dear: FATCA. It is just about time for initial application for the brand new Global Intermediary Indentification Number (GIIN), the number that the IRS is going to require of FFI's as part of their registration process where they must agree to certain administrative, documentation, withholding and reporting requirements in order to avoid a 30 percent withholding tax on US source income, beginning January 1, 2014.

At the end of June, the ever user friendly (yeah, I am definitely being sarcastic!) US Internal Revenue Service released details about the number that, upon successful online application, the applicant will receive.

There are going to be four parts to this number:

1. The first five alphanumeric characters will be randomly generated and will become the basic FATCA ID. The next five digits will either be all 9s if you are a single member FFI; or all 0s for a Lead FFI. Yes, you've got that right - the first part of your overall ID is ten digits long....and there's more to come....how nice!!
   
2. Now comes a number which will indicate the order in which the FFI member registered compared to others in a group. Deloitte, in their 28 June release explaining this, states that if you are the 55th entity to register within your category/group, then this would be 00055. So.....a8r2U0000000055 is our start, assuming that those first five (a8rsU) was what was randomly generated. I was tempted to write sNaFu or FuBaR but there is not likely going to be a lucky random recipient for either of these IDs - and, perchance, if there is, I wonder if those recipients would be willing to sell these IDs to me? Hell, I'd even be willing to go on that IRS data base just for the opportunity.....and then there's more:
3. Two letters are next, indicating your category: ME for member; LE for lead; BR for branch; SL for single; SP for sponsor. Adding to our previously developing number, we now get a8rsU0000000055LE.
4. And finally, the final three digits are the ISO numeric code for the country. Deloitte uses Spain, 724, in their example. Thus, a Spanish FFI (and remember, an FFI can mean a whole lot more than just a bank!) could very well have the following as their FATCA GIIN: a8rsU0000000055LE724. I used to joke about the Bank of China's inordinately long account numbers but compared to the GINN, the B of C is 'small'!

Are you sure you want to add this to the list of numbers you have to remember? Are you sure you want to be the first to sign up, knowing that once you start the process, you are being data-mined by the IRS? Hey, Mr Snowden (wherever you may be - or going to) - do you have any info about the NSA and the IRS sharing data???

Anyway it's your decision, my friends - happily, all I have to do is write about it and criticize it, I don't have to make that decision.

And what happens if, after you've applied and been given your number, your country and the IRS sign an IGA, creating the possibility that you might now come under a completely different set of rules and procedures than you have paid consultants an extortion-like fee to set you up for compliance? FATCA compliance work appears to be a very, very, very boring set of tasks, albeit quite profitable to work with, as there are not going to be a whole lot of FATCA compliance specialists around. Me? Nah - I want no part of that process: I've been preparing tax forms for 47 years and I've earned the right to do other things in life that matter - for instance - playing more jazz as a chromatic harmonica player (now, if I can ever figure out how to get my website working properly, I just might be able to publicize where and when I play!!!)

It is late morning on the 8th of July that I write this. The headline article in today's FT covers the 'divide' between the U.S. banking industry, which sides with the EU regarding regulatory requirements against the Obama administration's comprehensive information reporting requirements that it is unilaterally attempting to push. Who is really behind this program - is this the same person or persons who snuck FATCA into the HIRE-FATCA tax act that was unanimously passed by both houses of Congress in March, 2010 without any of those legislators ever reading a major tax change that none of them even voted upon in the initial bills from their respective houses of Congress that were to be combined, rather than massively changed, as was the case. Is this democracy in action? Now don't go on assuming that I am a conservative Republican....no, my friends, I am a life-long Democrat who has never voted Republican in his life - I voted for Obama......but I am very upset about this administration's fiscal/tax policies which are so naively misguided......

On 3 July 2013 I received a copy of a letter from Congressman Bill Posey (R-Florida), a high-ranking member of the House Financial Services Committee. Posey, in this letter to Treasury Secretary Jack Lew, states that the Treasury Department, in promising equivalent levels of reciprocal automatic exchange of banking information to foreign FATCA partners, has gone and done something simply not to be found in the HIRE-FATCA Act - this is something that would have to be enacted through Congress as a new, separate matter and that neither the House Financial Services Committee nor the House Ways and Means Committee - both committees would have to approve this bill prior to sending it on to the entire House - would vote for it because the banking industry in the U.S. is absolutely opposed to this.

I understand that the banking industry in the U.S. is opposed to this - heck, the U.S. banks have absolutely no idea which, if any of their individual customers is not a U.S. citizen - no one, to my knowledge, has either been asked this question by a U.S. bank, nor asked to show their passport. Can you imagine the costs that the U.S. banks will have to incur to meet exchange obligations? They will not tolerate this - and neither will the House Republicans who are automatically opposed to anything favored by the Obama administration.

If this is the case, then how valid are those IGAs that have already been signed? How slowly will those who entered into the IGA be to amend/update the IGA to comply without equivalent exchange of information? At what stage will other jurisdictions state that they will not implement their agreement until there is equivalent exchange of information at an affordable cost?

These are obviously questions that I can't answer but which I raise in contention that FATCA will never float as it stands.

I love living in China and traveling throughout China, India, Thailand and Japan on a regular, recurring basis. Regardless of how the Japanese or their banking industry feels about it, Japan has the technological sophistication to meet FATCA's reporting requirements. The other three jurisdictions? Forget about it! Hey, that's half the world's population. There are approximately 200 jurisdictions in the world, today. How many of them have the ability to comply? How many really want to comply? How many won't comply simply because they can't afford it? 'Partial' FATCA is as utterly meaningless for the US (where more ill will will result, side by side with new, imaginative ways and locations to park hidden financial assets) as partial GST will be for India!

Data mining is a thing that is here to stay. Nothing is private, anymore. Perhaps we should be thankful to FATCA because it will help make financial centers of the world a bit more transparent. Yet the U.S. is not going to be able to dictate what the requirements and standards will be - this is the political reality as I see it. True, only time will tell how close my prognostications will turn out to be....but if what I have written makes sense to you, then perhaps you and your bank/fund/insurance company/investment advisor should not be the first FFI on the block and 'delay' going online for that GIIN.......and after making this decision, head for your favorite bar and bar tender - and have him or her pour you a real strong GIN and tonic - this GIN will yield far more satisfaction - I guarantee it!!