OMG made a fabulous find in Miami Herald about the “destructive” impact of requiring US banks to report on assets held by citizens of other countries.
Well, isn’t this interesting?!? Surprise, surprise. Congressmen are crying about the “disastrous consequences” of such a move.
The Congressmen write:
For more than 90 years, Congress has encouraged foreigners to invest their money in U.S. banks by exempting these deposits from taxes and reporting. This policy has led to hundreds of billions of foreign deposits in U.S. banks, particularly in Florida, creating good-paying jobs and credit for communities and small businesses. In fact, each $1 deposit results in $7 to $9 in sorely-needed economic activity.
What?!? For 90 years, Congress has encouraged investment in US banks by exempting those deposits from taxes and reporting!. Does that sound like a tax haven for tax cheats and tax evaders to anyone else?!? Does that sound like the US economy benefits from being a tax haven?!?
What will happen to IRS highly touted “reciprocity” if US banks don’t have to report on foreign investments? We need to stay tuned!
That is why the entire Florida Delegation has been opposed to this…
http://posey.house.gov/UploadedFiles/IRS-DelegationLetter-March3-2011.pdf
And they want to put bankers in Switzerland in jail for doing what the American bankers have been doing for 90 years!
Nobody ever talks about putting American bankers in jail for encouraging tax evasion and they’ve probably been doing it longer than the Swiss.
If Florida thinks they have problems now, wait until Canadian snowbirds start flying further south to Bahamas or Mexico every winter because of their fear of being targeted by IRS as “US persons.”
I already know three couples who have said this is the last winter they will be renting in Florida. There are warmer, more welcoming and more interesting places to go without facing possible terror from IRS.
@Blaze
One thing I find interesting with all this talk of reciprocality is that the US is already giving Canada this data they collect through DATCA(Canada is the only country they do it for and it applies only to Canadian “residents”) thus unlike the five EU countries there is nothing new they can give Canada in excange for going along with FATCA unlike every other country in the world. If DATCA(which is not really equivilent to FATCA) is what the US is offering in exchange for FATCA then the US made a very stupid move(although good for us) in giving the Canada the DATCA information back in the 1990s.
I am curious to see if all US banks will report the accounts of all US resident Aliens(greencarders) to their country of origin …
Ahhh.. so many acronyms. Watch the John Stossel video on “Everything Illegal in America” and you will know why I’m terrified to step foot in the USA. They may have laws that are totally absurd, but you’ll go bankrupt trying to fight them. The last thing I want to do is fight them.
As a matter of fact, I’m wondering why they haven’t STRIPPED me of godly US Citizenship already?? After all, I’m UNGRATEFUL to America for having set up a life in a different country. What’s with the delay?
Mark, you were born in Brazil, so YOU have nothing to worry about. I WAS BORN there, so the Brazilian government treats us differently, unfortunately.
You could go to America with a sawed-off shotgun and murder 100 people. If you can make it to Brazil in time, you WILL NOT be deported to the USA.
This is where I diverge from the Brazilians. If someone does a MAJOR ILLEGAL act, they should be deported. But Brazil rarely does this for Brazilians born in Brazil. Ok, it never happens.
So my theory is that Brazil will show the US the middle finger on this issue for Brazilians. After all, you are Brazilian because you were born here.
Dumb gringos that come here from America, I expect Brazil to package them with wrapping paper to turn over to the IRS. 🙂
I was surprised to see that there were no comments yet, so I have posted this….for what it is worth..
What IRONY!
Senator Rubio and Rep Posey, may I respectfully suggest that you start in the Senate and the House by repealing FATCA (Foreign Account Tax Compliance Act) which Congress passed in the dead of the night as an amendment buried in the 2010 Hire act.
FATCA requires ALL Financial institutions in the WORLD (more than just banks) to report on all U.S.Persons (that is more than just citizens) who might have accounts with them directly back to the IRS. IE, it turns them ALL into IRS tax collectors with some very punitive penalties for failure to comply.
FATCA was passed silently without debate or any basic cost vs benefit analysis! (Thank you Carl Levin) It was done without any regard to the huge cost of implementation on financial institutions around the world, and without any regard to any other countries privacy laws.There was no thought of what impact it is having on US Expats abroad who are being shut out of normal banking arrangements as a result. There was no consideration of the systemic risks that arise from capital flight, and/or the consequences for inter-bank transaction freeze up between compliant and non compliant banks.
Now, the IRS who had a hand in crafting the language of FATCA, knew they would have a BIG task dealing with the world wide opposition to these actions and so thought, “What is good for the goose, should be good for the gander.” They unilaterally are imposing this same type of FATCA requirement on US banks using their regulatory authority just as Congress has imposed on the WORLD using its legislative statutes.
So now you are feeling the unintended BLOW BACK of stupid imperial Congressional action in the first place! You, Congress, created these “destructive mandates” by your own Congressional actions! You wonder why the US is disliked in so many quarters around the world, well it is because of just this type of unilateral hubristic action. And, I dare say you don’t understand this any more than “W” did when he wondered after 9/11 “Why do they hate us?” It is not because of our freedoms, it is because of our actions!
The IRS and you, Congress, have been in cahoots since 2010 creating a new World Order of bank tax data exchange, and now you are coming up against “The Monster” of your own creation.
What the IRS is doing with it’s new destructive mandate, is as plain as the nose on your face. It is using US bank non resident interest data as a bargaining chip. This is a tactic to try to get EU countries to drop their opposition to FATCA and go along meekly with a reciprocal tax data exchange pact between taxing authorities. It is bribing Italy, Germany, France, UK and Spain with an exchange of tax information form US banks, rather than require those countries Financial Institutions to report directly to the IRS as was required by FATCA.
So, if you want to kill this destructive domestic version of FATCA, which I call DATCA, then repeal FATCA and it will be history!! It is that simple!
BTW, maybe now you there in Florida will have a little sympathy for how Switzerland must feel besieged as they are by the IRS, DOJ and Congress with its FATCA!
@Just Me — great comment to the article — and you’re right, it’s the perfect irony. Looks like recalcitrant and Arrow have also been there. Isaac Brock has again left its mark.
You’re a great detective, OMG. Thanks for posting, Blaze.
I just posted there as well (hope it gets approved by their moderators):
All I can say is CRY ME A RIVER! Like the majority of other commentators here, I am also an expat who has lived in Canada since I was TEN and now find myself beneath the same jackboot heel of the IRS as millions of other expats around the world. If you badly misinformed homelanders would take even five minutes out of your parochial lives to find out what’s going on outside your own borders then you would discover literally an entire world that is now being pushed around by Congress and the IRS. Yes, they have indeed declared war on all expats and foreigners, assuming that every single one is a tax cheat living in a tax haven. The reality is that I pay a far greater proportion of my income in taxes to Canada than ANY of you people do to your government (though I don’t complain, since I receive tangible benefits and services like universal health care that you will unfortunately never see in your lifetimes). Obviously, I do not live in a tax haven. By your own admission, which you were so proud to point out at the beginning of your article, you do. Hypocrisy much?
Now, having cleared the air a bit, I would invite you and all other Americans of whatever political persuasion to join us in fighting these terrible, hugely destructive laws and policies. The US need not worry about Iran developing some puny little hobby bomb. The far greater danger to the US, and the entire world, is the massive neutron bomb of FATCA and the devastation it will wreak on the global economy. You worry about the flight of a few tens of billions of foreign investment dollars from Florida? Try over 14 TRILLION dollars in global foreign investment in the entire US! Time to wake up, Americans. You are your own worst enemy. Your own Congress has created a monster that will devour what’s left of your economy. Take it from a very concerned member of your own family who just happens to live a little further away, but who is very close to the real action.
I invite you to learn much more at isaacbrocksociety.com.
Why is it that non-resident, non-US citizens (seem to be) easily able to maintain US-based bank accounts whilst US citizens abroad are having them forcibly closed under the “know your customer” legislation of the Patriot Act?
Don’t expect these senators to lift a finger to repeal FATCA, because FATCA affects “foreign people” and “traitors” and will “bring in big IRS fines”. Economic reality and the fact that the US will be facing massive disinvestment even if this domestic legislation is repealed don’t register in these peoples’ heads!
I posted the following to expose double standered of US press:
The US press often blindly repeats outrageous excuse, why it is good to allow foreign nationals to evade taxes by depositing in US tax free. They say:
Another compelling reason to scrap the IRS’s mandate is that the release of sensitive financial information to foreign governments like Venezuela would put individuals and their families at risk of political persecution, criminal harm, extortion and kidnapping.
Most developing countries have strict financial and currency controls, so businesses and people must inform treasury before transferring funds overseas. This is to keep their currency won’t be devalue by wealthy speculators or other manipulators.
Most foreigners hiding in the USA also tax evaders and earning interest tax free. I am from developing country and income tax department tracks all income and savings, if it is earned honestly. In our country, we call it white money, which is the money earned honestly. In this case source of income is well documents. The criminals (politicians, unscrupulous businessman and government officials) extract money illegally. They can’t show source of the money. They can’t deposit the money in local banks or invest in companies, because they can’t show source of the money. What they do is purchase dollars in black market and invest in secret accounts.
Both Switzerland and USA rewarding them by hidden ill-gotten gains and rewarding them earn interest tax free. Most developing countries are disparate for hard currency they can transfer the money to their country any time as gifts from friends in the USA.
If IRS is not tracking the money and source of the money, it most likely be used for criminal activities both with in the USA and abroad.
Any person rich enough to hide money in the Switzerland and USA usually have enough political connections and network to protect them selves from kidnapers.
There may be 1% genuine cases and they can always show ‘reasonable cause’ along with source income to IRS, demonstrate why their accounts must not be reviled to their countries.
Every other country need to collect taxes from residents, just like IRS need to collect taxes from US citizens living in the USA and hiding money in tax heavens to deliberately evade taxes.
Is it acceptable to show an isolated or factious example of kidnappings in Venezuela to protect tax cheats and criminals? The IRS can always protect investors from such rogue countries, but banks must provide the data to IRS. How do IRS know, how the money was earned? How does IRS know that the money will not be used for illegal activities with in the USA? Since most of the money is hidden in secrete accounts in a tax heaven called USA, the investors obviously evading taxes in their countries (which prove most of them are already criminals). The US banks and congressmen fighting to continue this process only protecting the BLOOD money.
Also I am sure many US citizens living in the USA opened accounts in the names of foreign family members and depositing their money in those accounts to evade taxes in the USA. I heard it is a secret practice in many ethnic immigrant communities.
A friend emailed this to me, thought some of you need a laugh
The IRS decides to audit Grandpa, and summons him to the IRS office.
The IRS auditor was not surprised when Grandpa showed up with his attorney.
The auditor said, “Well, sir, you have an extravagant lifestyle and no full-time employment, which you explain by saying that you win money gambling. I’m not sure the IRS finds that believable.”
“I’m a great gambler, and I can prove it,” says Grandpa. “How about a demonstration?”
The auditor thinks for a moment and said,”Okay, go ahead.”
Grandpa says, “I’ll bet you a thousand dollars that I can bite my own eye.”
The auditor thinks for a moment and says, “It’s a bet.”
Grandpa removes his glass eye and bites it. The auditor’s jaw drops.
Grandpa says, “Now, I’ll bet you two thousand dollars that I can bite my other eye.”
Now the auditor can tell that Grandpa isn’t blind, so he takes the bet.
Grandpa removes his dentures and bites his good eye. The stunned auditor now realizes he has wagered and lost three grand, with Grandpa’s attorney as a witness. He starts to get nervous.
“Want to go double or nothing?” Grandpa asks. “I’ll bet you six thousand dollars that I can stand on one side of your desk, and pee into that wastebasket on the other side, and never get a drop anywhere in between.”
The auditor, twice burned, is cautious now, but he looks carefully and decides there’s no way this old guy could possible manage that stunt, so he agrees again.
Grandpa stands beside the desk and unzips his pants, but, although he strains mightily, he can’t make the stream reach the waste basket on the other side, so he pretty much urinates all over the auditor’s desk.
The auditor leaps with joy, realizing that he has just turned a major loss into a huge win.
But Grandpa’s own attorney moans and puts his head in his hands.
“Are you okay?” the auditor asks.
“Not really,” says the attorney. “This morning, when Grandpa told me he’d been summoned for an audit, he bet me twenty-five thousand dollars that he could come in here and piss all over your desk and that you’d be happy about it.”
Don’t Mess With Old People!!!
The US media is now starting to connect the dots between FATCA and DATCA, although the headline of this article is misleading and there is some misinformation about what is required of US expats. Everybody go post comments to this article.
New IRS Rule Benefits Only Foreign Dictators
http://spectator.org/archives/2012/03/08/new-irs-rule-benefits-only-for
“But the FATCA is already an extraterritorial power grab of doubtful legitimacy. In December 2011, the United States led the charge at the United Nations against the attempt by Eritrea to impose a Diaspora Tax on its citizens abroad. The Security Council resolution was passed on the grounds that it violated human rights. The U.S. has not imposed a Diaspora Tax on its citizens. They are free to leave the country as they wish — unless they happen to earn more than $9,350 abroad, at which point they are subject to significant punishment from the IRS for failing to file a tax return.”
We must make sure both FATCA and DATCA are coupled. That is, IRS must enforce DATCA if IRS wants to enforce FATCA. If IRS wants to not enforce DATCA then IRS must not enforce FATCA.
All those nations and dictators don’t allow transfer of funds from local banks to foreign banks, unless one is part of the ruling elite. All these propaganda is to delink DATCA from FATCA, by using implausible or frivolous rationalization.
It is essential for national security to collect information about investments from foreign nationals. FBAR is nothing but collecting such information about US citizens living abroad. Having bank accounts in the countries they have been living for all their life or for many decades is not a crime, but still the IRS is collecting that information. But most of the drug trafficking and terrorism is originated from foreign nationals. So why there is a resistance to collect the information or find source of income, to make sure it is not earned illegally. There is no harm in collecting information, but IRS can withhold the information from rouge nations.
Tracking mostly discourages cheats and criminals. Most of the honest investors don’t disinvest, if they were given assurance that their genuine interests will be protected and addressed. But the opponents of DATCA want blanket protection to all foreign nationals, even if they are from democratic countries in Europe or Asia. No questions asked how they earned the money or are they evading taxes. This is exactly Swiss banks have been doing. Delinking FATCA from DATCA is purely a double standard.
If a person is not living in the USA or Switzerland and deliberately hiding money from his government, he is a criminal or at least a tax evader according to the law of most nations. It is extremely important for the USA to track investments of criminals for national security. The people opposing DATCA are only looking at short term gains and knowingly encouraging criminals or tax evaders to hide money in the USA.
The USA is already sharing investments of Canadian citizens with Canada. This didn’t discourage honest Canadians from investing in the USA. The things that are discouraging Canadians from investing in the USA are complex tax-code and hidden landmines such as FBAR/FATCA.
@rivka88 – I really enjoyed the joke and the conclusion – ‘don’t mess with old people’. : )
@omghe’sstillanamerican
Thanks for the heads up this morning on the American Spectator commentary by Iain Murray. I don’t usually read partisan magazines, but maybe I should, as this appears like it could become a partisan issue for 2012 elections. Unfortunately, that will mean that many progressives will close their ears to the subject, which is unfortunate, as this really is not a partisan issue.
@Kris you are exactly right, that we have to keep DATCA and FATCA linked in the mind of those that write on these subjects, so I added my comments to the Spectator commentary. However I would disagree about the effectiveness of the “tracking” and why we should support it or not be concerned about it. It is never limited to its well meaning intentions of it’s creators and it never discourages the practices that it is supposedly attempting to stop.
It just creates new forms and complexity of life issues for the innocent, and that is harm enough combined with the draconian penalties for benign failure. Also, there are many Foreign governments that don’t tax foreign interest, so it is not our place to decide that we in the US need to tell their tax authorities. But I digress, and understand your point, just will respectfully disagree with it.
@Just Me: All I want to insist is that DATCA and FATCA must not be delinked. I feel what the US press and banking lobby is promoting this propaganda to justify this kind of delinking. Have you ever seen any article explaining to US people against why IRS collecting FBAR information related to the accounts of grandmothers living all their lives in Canada or Europe? Even if they don’t owe taxes, the fines could ruin their lives and their husband, who is even not US citizen. But there is study stream of propaganda and opposition from politicians, banking industry and US-press against DATCA.
I am 100% sure that the DATCA will never be implemented. Let the politicians and banking propaganda explain, what percent of investment is from honest people? What percent of money was made honestly, by showing source of money? Can they justify why they are hiding their money in a tax heaven? Is it fair? Isn’t it double standard? It is saying tax-evasion or hiding illegally earned money in the banks is OK, as long as it helps US banks. The US banks don’t want to have a burden to track investments of foreigners and reporting to IRS, so they are building a case for delinking DATCA from FATCA. I respectfully disagree with you, because I am living in a country where government refusing to take lists containing names of people hiding money in tax-heavens. This is because the list includes members of ruling families, politicians and their criminal supporters.
Since all this propaganda against DATCA is highly biased, so I want to state facts they conveniently ignored for every one to get balanced picture, so every one see why FATCA and DATCA must not be delinked. I am sure eventually FATCA likely be implemented and they never implement DATCA (because it costs money to US banks and political lobbies supporting US banks do every thing to derail DATCA). Sorry for being cynical.
@Kris
There are a couple issues with DATCA vs FATCA. One is FATCA is far more intrusive on foreign banks than what DATCA(which already exists for Canadian held US accounts)is on US banks. Second is DATCA is a key part of the FATCA “agreement” with the EU 5 Countries. Without DATCA the EU 5 probably walk away from their agreements with US which makes FATCA a lot harder sell. Third is the IRS has no specific legislative authority to implement DATCA(even though it already exists for Canadian accounts)which leaves any implementation almost certainly subject to legal challenge.
@Kris…
Like I said, I understood your points about keeping DATCA and FATCA linked, and I agree. That is why I always point out to reporters the Irony of Congressional complaints about DATCA when they are the one that passed FATCA, One drives the other, and no separating them.
I was just disagreeing with you on the need to have FBARs or any of the offshore account reporting that Congress puts on grandmothers in Canada like the new form 8398. It accomplishes nothing, as criminals and crooks aren’t going to fill out one anyway. It is just a penalty tool to catch the unwitting. It value is only in raising penalty revenues. I just don’t think that reporting of accounts does anything to solve any of the offshore tax evasion issues the US is worried about, and it makes the average person’s life more complex, burdensome and dangerous should they benignly fail. That is my only point. If I misunderstood you, and you too are concerned about this, then I apologize.
Back to linking FATCA and DATCA…. Here is what I just told one Reporter who I have been having email exchanges with. He was trying to understand why Rubio and Iain Murry were concerned about giving tax data to Venezuela or Cuba, etc..
‘What these authors are doing is taking a narrow view of DATCA (my term) and it’s impacts (making a worse case analysis of what it might mean using your dictator of choice for emphasis) and not recognizing, in my opinion, that it is FATCA that is driving this action on the part of the IRS. The IRS needs a bargaining chip to get EU countries to go along with FATCA. Once the IRS overcomes opposition there, the rest of the world’s countries will fall into line. So, they are offering up the exchange of tax data that they will get from imposition of DATCA on US banks, and then UK , France , Germany , Italy , and Spain will meekly go along with FATCA. Clever strategy, and it might just work.
I am not sure that Iain Murry or Senator Rubio get that connection, and so are engaging in hyperbolic misdirected attention related to Dictators, or countries that we are not on good terms with, be it Cuba, Venezuela, North Korea, Libya, Iran, pick your country. That is to attract the attention of partisans, but is disingenuous in many ways. It could be an outcome, but probably unlikely, as they will do like they always do in Congress. They will pass another 100 page amendment that creates loops holes and more complexity to screen out reporting of tax data to the most current “axis of evil” country whoever it may be!
That is my opinion, anyway, and even if you don’t have a dog in this fight, it is fascinating to watch. We are creating a new world order of interconnected tax data exchange and the media (you being the exception) seem to be missing the bigger story. At least that is how I see it from the far shores of NZ! ”
Further I said…
I am sure you are correct that this may emerge as a talking point for the candidates in our partisan politics….however, these words of Shulman keep returning to my mind.
“we are in the middle of an unprecedented period for our global international tax enforcement efforts…we have pierced international bank secrecy laws, and we are making a serious dent in offshore tax evasion.”
and, I think the evidence shows, he wants the rest of the world to join the effort whether or not they tax or care about their residents off shore accounts back in America.
And of course, there is the unequal application of tax rules as the US taxes Citizens anywhere in the world, and every other country he is trying to enlist in this effort just taxes based upon residency,(territorial system). It does get muddled. And so, partisans resort to simple talking points!
Wonder what would happen if a EU country like Greece say, decided to tax it’s Diaspora, like the US does, to deal with its budgetary problems back home in the Islands? Interesting thought experiment.
@Just Me
I have said it before is the IRS was in someways stupid(although good for us Canadians) to have already “given” their bargaining chip away to Canada many years ago with the existing Canadian only DATCA program. Now there is nothing they can give Canada that it doesn’t already have. Instead you now have Canadian Finance Minister Jim Flaherty as the most vocal FATCA critic among any countries Finance Minister. The only way to expand DATCA beyond its existing purpose would be to create some type of “Canadian Person” classification under US law which is very unlikely to happen. They could try to simply steamroll over Canada but that is unlikely either. Canada might be small but it is one of the US’s largest trading partners thus both sides would get hurt in a major FATCA “war”. Canada is also not really a finance country either in the way Switzerland, Singapore, or the UK is. There is a big financial sector in Canada but it is more dedicated to facilitating real economic activity than speculation.
@Just Me: Thank you for clarifying. I agree, it is fascinating. I believe DATCA will never be implemented. But linking FATCA with DATCA, we can educate fair Americans about suffering of accidental dual-citizens. Only time will tell what will happen.
@Kris, JustMe, Others: If DATCA is not adopted, doesn’t that throw “reciprocity” out the window? If that happens, doesn’t IRS lose their agreement with the European nations?
@kris…
I don’t think Americans want to be educated, is my cynical view of things, but keep trying anyway. Thanks for your contributions. It is darn hard to get the attention of some media sources on the story. It is like totally ignored as if nothing was boiling over the border.
@Tim..
Canada is definitely in a better spot, and certainly way more vocal in opposition to misguided US policy. Australia and New Zealand are just passively going along, is my read, or non read, as nothing is being said or commented on in the press down here. It is almost as bad as American MSM coverage.
@Blaze.
Well, it might kill the reciprocity that was in the agreement, but it still doesn’t undo FATCA. The agreement just meant that the FFI (foreign financial institutions) wouldn’t have to deal directly with the IRS. They would just have to give the information required directly to their Revenue agencies. How that would be accomplished is an open question, and still doesn’t let them off the hook for identifying, collecting and transmitting US person data to their Tax authorities.