So the U.S. wants to impose a 30% withholding penalty on the U.S. source payments of; interest, dividends and securities transactions that are conducted by non FATCA compliant Foreign Financial Institutions and recalcitrant account holders. Now of course the question is, what happens if there is a mistake that is made by the U.S.? Will you get your money back? I believe that the short answer to that question is, no one knows. What the U.S. may promise to do and what it ends up doing are often two different things. From what I have observed of U.S. policy is that when it comes to returning ill-gotten gains the U.S. doesn’t give everything back. A case in point is the softwood lumber dispute.
In the softwood lumber agreement that was reached between Canada and the U.S. the U.S. only agreed to give back 80% of what it had collected. Now why would you as an investor take a chance that 30% of your rightful financial property could be withheld? What would it cost you in time and effort to get the money that is rightfully yours? What is to stop the U.S. from using this 30% withholding requirement as a means to fund its failed government fiscal policies?
As a person who is not a U.S. citizen this whole legislation introduces a new degree of risk without any financial return possible so why would you expose your precious capital to such a ruinous outcome? With FATCA and of citizenship based taxation the U.S. has just found another way to cripple world capital markets by introducing more regulation and risk. Neither of which will generate a dollar in wealth.
it’s simple Toronto, London, Frankfurt, Singapore, and Tokyo should be hanging signs out “FATCA Free Investing.”
@recakcitrantexpat, many are forecasing that FATCA will indeed turn out to be suicide as far as the US being able to attract foreign capital investment.
This was the subject of my article for the American Thinker: http://isaacbrocksociety.com/2011/12/11/fatca-a-ticking-time-bomb-for-the-economy/
Let’s hope they see sense and repeal it.