“In Ernest Hemingway’s reminiscence A Movable Feast, one gets a glimpse of life among American expatriate artists and writers living and having adventures in Paris during the Roaring 20s. Today, American expats live all over the world – having adventures in Africa, creating art in Berlin, helping children in Cambodia, discovering ancient spirituality in India, and starting businesses in Tianjin. But all this may soon come to an end.”
Will FATCA mark the end of American global migration?
Assuming that ALL countries implement the FATCA just like the US wants it, then yes, it would change things forever.
Tax slavesAmericans would be limited to tourist visits abroad to all of the cliché tourist spots and not much more. It’s chilling. However, if you look at the current immigration system for most countries, it’s NOT easy to get into a country and become a citizen. You must have some sort of “connection” (i.e, marriage, birth, investment, years of residency). The only difference in a FATCA world is that the US Citizen would have to renounce US Citizenship, the same thing that is happening already.
*It will not be just Americans; with all the global tax agreements that are being put into place it will affect everyone. As a US/Brit living in Switzerland I’m potentially taxed in 3 countries! I will be dumping the US soon, but I don’t qualify for Swiss citizenship so pay tax in both UK and Switzerland. If the finances get too stretched with all this business there’s the possibility that we may eventually have to move back to the UK just to survive. There will be many others in similar situations who, having claimed another nationality because their parents or grandparents were British, Irish, Dutch, German, etc, and yet are working far from their home country. It’s turning into a global nightmare because returning cash strapped citizens won’t necessarily be able to find jobs in their home country so will likely be unemployed and a burden on the state.
Is their any reason you must still pay tax to the UK? You are not a UK resident. Do you own any property in the UK or stay there for a large number of days.
@Tim, yes we have bank accounts which (sometimes!) earn interest which gets taxed and which we want to keep, but we also recently inherited my late father-in-law’s estate and we have a dorment business in the UK. Haven’t really paid much UK tax in recent years because it was just any interest from the accounts, but will be a bit more now with the estate. Expect we’ll sell the house, but we’ve got to do some clearing out first before it can go on the market. We don’t stay in the UK much at all, only a week or two at a time max so no more than a month per year.
UK & Switzerland have also recently signed a tax agreement which comes into force in January 2013 so I expect we’ll be signing more pieces of paper from the banks to allow them to give details to the relevant authorities.
Great article. Thanks for finding that. A writer in the US who seems to have gotten it right!
BTW. here is the author and his email. I have written him a note, thanking him for his efforts.
@JustMe, Thanks for posting his email address. I sent him a thank you as well. I plan to do that for every supporting article from now on to help ensure that these journalists who are standing up for what’s right know that there is a crowd of appreciative support behind them.
The only thing I’d add to his article is that this won’t just cause Americans to return to the U.S., but also to renounce US citizenship so that they can live a normal life abroad.
You know, I tried several times to post a comment on this article, along the lines of my email to the author. It seems, at least for me, even though I signed up for an account, the only pop I get says “Log in to Facebook to leave a comment.” I do not have a FB account, and will not have, EVER! 🙂
So, this is what I was going to post, but never mind. 🙂 If anyone wants to steal any portion of these comments and use, have at it. I am moving on. 🙂
Just a note to thank you for your article, and let you know you pretty much nailed it.
I would add, that this should not be a surprise, however, for any American or “US Person” who has been watching the IRS offshore jihad for the past 4 years.
It started in 2008 with DOJ prosecution of UBS for marketing tax evasion schemes on US homeland shores.
It expanded to a 2009 Voluntary Disclosure process that chewed up Expat Minnows in a one-size-fits-all Draconian penalty regime designed for Homeland Whales and based upon a little known Foreign Bank Account Report (FBAR) form. This entire process was condemned by the National Taxpayer Advocate, as a”bait and switch” program in their reports to Congress which were ignored.
It then was followed by the 2010 Hire Act and FATCA of which you now speak.
So, there is a even bigger story here, but without people like you who are at least willing to write about FATCA portion, it is a story that remains off the radar for the MSM. If you heard anything, it was superficial and inaccurate stories about ‘Tax cheats coming clean”.
FATCA now, as being implemented, an imperial fiasco and that is has even more negative impacts than just those on U.S. Expats living around the world.
Think of it as the financial equivalent of the preemptive invasion of Iraq. What a great idea that was, eh? FATCA is based upon one good intention, to stop Homelander offshore tax evasion. It is a unilateral invasion of the Treasury of every country on the globe, and forces U.S law on them irrespective of their own statues and Constitutions. We know from experience that unilateral US actions are a road to hell paved with unintended consequences and collateral damage! U.S. Hubris, knows no limits. Ask the Iraqis. FATCA is no different, except that their are no precision guided missiles int his war, and no “shock and awe” for evening TV coverage.
BTW, the real surprise, is that FATCA costs and impacts are coming back onto the homeland shores, in the form of a FATCA domestic version, DATCA, and with resulting capital flight out of U.S. Banks. Call it FATCA Fallout.
The U.S., is the biggest Tax haven in the world, after all! In-spite of our focus off shore, and demonization of countries like Switzerland, the world comes to American shores to hide ill gotten gains. Our banks and our capital system benefit from the loans that result for your home and car purchases. Your credit card balances are probably backed by Mexican drug money, if the truth were told.
Now, Congress has been preempted by the Treasury to force DATCA reporting on U.S. banks, and the OECD is working hand in hand with the FATCANATICs to hijack FATCA into a global system, or GATCA with many negative impacts on a world economy designed to stop capital flows and increase the ability of deficit bound countries to tax more easily. They want to stop tax competition between countries.
Now some here might think that is a GREAT idea, and some like me, a realist, see the negative consequences of these global schemes put together by the OECD and Treasury technocrat elites without regard to the will of the people. However, bias aside, what is not good for the 99% and democracy as a whole, is when this all his happens out of sight and without public discourse in a broader media environment.
Where is the public debate? It is not happening. Like like those derivatives financial engineering products that brought down the world’s economy. You only learn what was happening by reading the books after the fact, like “Liars Poker, Too Big to Fail, All the Devils are Here, or The Big Short” . Get ready for the book,” FATCA Fiasco, What happened?” as your first public glimpse into understanding what caused the next systemic shock to the global financial system.
If you are interested in these subjects, there is a lot of commentary and active interest at a Canadian blog, called Isaac Brock Society. This is not comprised of financial elites, but average middle class folks spanning the ideological spectrum who are being impacted by stupid US citizenship taxation and FATCA policies.
Here is one early post specifically on FATCA, but if you look around, especially on the archives, you will see an active community of bloggers writing on these issues and trying to educate the uninformed. Make yourself “fool proof” and join in.
FATCA: A ticking time bomb for the economy
Great comment. If you can’t post it, would you at least email it to him? “Imperial fiasco” I love double entendre.
I did email portions of it last night.
The New York Times: “A Long-Distance Relationship With the I.R.S.”
From the article:
“America is a trading nation and a nation of immigrants. It is also a nation of lawyers, many of whom are employed by the government. No surprise, then, that the Fatca legislation runs to several hundred pages.”
“What Fatca is expected to raise instead of money, tax specialists warn, are confusion and expense. After widespread criticism of the law’s complexities from banks and expatriate groups — American Citizens Abroad warns on its Web site that Fatca will have a “devastating impact”…….
At last, the New York Times, the newspaper of record, finally carries the FATCA story! Fairly good, until it gets to describing the Voluntary Disclosure process which minimizes the risks. Also fails to bring full circle to the DATCA component where the FATCA style reporting comes back to the Homeland banks all all non residents in the world’s 193 countries.
Still, it is a start, a reference point. Too bad, the NYTs doesn’t have a comment section, unless this story gets moved to the http://rendezvous.blogs.nytimes.com/, and that would be the place to make comments, corrections, or additions to the story. I will keep watching for it to pop up there, like David Jolly’s piece did some time back It might have a new title, but same story.
Unfortunately, whereas it notes that having a ‘foreign’ (i.e. non-US) bank account doesn’t mean it is in any way ‘nefarious’, it doesn’t use any examples of our local accounts -held where we live – because we live outside the US. It focuses only on non-US accounts held outside the US by US RESIDENTS. It also ends with a lengthy and inaccurate commercial message touting the benefits of OVD as the only way to correct inadvertant errors.
There are many dimensions to it: I feel like entering into a field with landmines to start a new high-tech business. I have been researching, market potential, preparing business plans and planning to start a high-tech business for many years. The effective taxes in India is much higher and yet it is giving me feeling that I am entering a landmine of penalties, after spending lot of money to file 5471 for a nearly dormant company. An active business must make many decisions and answerable to non-US investors and partners and deal with banks. I left the USA more than 15 years ago and have no ties with US investors. It is my dream business and already spent many years creating foundation, so I can’t forget doing this. Also an Indian dual-citizen can’t do business with government or defense department without relinquishing US citizenship.
I hired a CPA to file past few years of Zero tax returns to relinquish citizenship, but unable to understand what I signed, except I know I don’t owe any taxes because luckily I have very low income, have dependent children and paid high Indian taxes. It is a huge distraction from my work and lot of stressful. But starting a business is different. It needs to export to the USA and Europe both products and services. The business will be cash strapped in the beginning and Investors would run away, if I need to spend lot of money on US tax regulations that I am scared. If my expensive CPA or I make a mistake (I am sure my ignorance or superficial knowledge is very dangerous), it is like stepping onto a landmine (e.g. I have to spend lot of time and money, and such distraction could kill the company or I will be fired).
@Bharat, I see how not only is it almost nightmarishly difficult for us to conduct our ordinary household banking if we’re duals, but running a business becomes impossible. What is the answer other than if we can backfile and renounce? This is insanity. Just the thought of doing this for a lifetime makes me ill and depressed. Never knowing if there will be a new law, or a new form, and always, the insane penalties. Who can live that way? And for what?
No other country does this. We are being held hostage by the US, against our will.
@Bharat This is what all of us are facing in one way or another. Many of us have other nationalities and live in the country of our nationality. Our rights to exersize our economic liberty in our own countries are being violated. The non-discrimination clauses of our constitutions are being violated and our governments are not standing up for us.
The effect of this is very much like the Nueremberg laws of the 30’s. Congress is so ignorant and callous that most of them don’t have any idea or don’t care the mess that they have made.
This has already destroyed my family. My wife, who has never even been to the US, cannot go on this way. Those that are compliant pay lots of money for accountants and in some high-standard-of-living countries such as Switzerland, even being compliant means getting squeezed by double taxation. Whether compliant or not, jobs, bank accounts, and housing are threatened or have already been destroyed for many of us.
The time of sitting and waiting and writing letters has past. We must be much more vocal. We must go out into the streets and protest.
*@Jefferson and @Badger, I agree it seems as though our respective governments have given in to the US and are not protecting us, even though we also have citizenship in those countries. It feels as though they’ve sold out and honestly don’t care. We don’t have equal status; we’re second-class citizens.
My husband has been very patient about the whole thing but is not happy that if I stay compliant will continue to face annual accounting fees of at least $2000 just to stay right with the IRS. I will have had to pay around $17,000 in professional fees to get compliant. (over $3000 just for 2011 alone). Plus five figure sums in double taxation on what were merely phantom gains in mutual funds.
Obviously not as bad as Lisa’s problems, or Calgary’s or probably Bubblebustin’s but still pretty freakin’ awful.
I realize that renouncing would simplify my life…my 2011 tax return was almost 300 pages long!!!
They have tried to reassure me that the IRS will probably not be nasty to me as I’m not a whale, but have still warned me that my return will inevitably face extra scrutiny because of its huge size. I fear that to renounce right now with open statutes of limitation could thus raise further red flags. I also have to know that I can continue to visit my parents. But am thinking of doing this more and more in spite of the risks because don’t want to be burdened with this for the rest of my life…even with a simplified tax return going forward, they’ll still be at least 80-100 pages long which is ridiculous :/
@Badger, I agree that I don’t want to live the rest of my life burdened with all this. I wouldn’t put it past them to add even more complex filing requirements such as forcing a mark-to-market annual tax on changes in the currency values of our assets in relation to the US dollar. I wouldn’t even put it past them to subsequently retroactively reinstate U.S. Personhood to renunciants so that their annual reporting obligations to FINCEN and the IRS would be reinstated.
I also don’t understand if there can be a window in increased vulnerability after a renunciation whereby the person renouncing would still have an open statute of limitations for Fatca and FBAR with the IRS but as a former citizen, with no longer any constitutional protections…this could thus make them sitting ducks for persecution as a form of deterrent. It thus seems to me that it’s only really safe to renounce if you have a completely straightforward situation and with little assets.
@ Jefferson D. Tomas, I know it doesn’t help you and your wife, but know that others here empathize. My family has been harmed by this, and there have been days and nights when I have wondered how to carry on. I have other friends and acquaintances in the same boat – most without any significant means. They all have been citizens and residents of Canada – for decades, or lifelong. None have significant US economic ties or US sourced income, yet they are deemed taxable by the US for the rest of our lives. And some of their minor, or young adult children too.
And we are effectively prevented from the legal savings avenues offered to our fellow citizens – those in the US, and those here where we live. I am very bitter everytime I read yet another article on consumer finances that touts the TFSA, since every benefit our federal government offers is denied to me. With every article that urges us to invest in one, another dual Canadian-US citizen, or permanent resident is harmed by being exposed to the US persecution of almost all possible saving or investment we might do for our households and for our old age residents. For a recent example; http://www.moneyville.ca/article/1294491–tax-free-savings-accounts-10-things-you-need-to-know The TFSA is a pet project of Minister Flaherty – yet he knows how toxic it is for 1/32 Canadian citizens and says nothing to warn them away. And, he has not gotten any exemption for TFSAs, RDSPs, and RESPs under the Canada/US tax treaty – and he knows this very well. He is guilty then of colluding with the US in harming those Canadians who take his advice to buy into the TFSA, not knowing that the US punishes it as a ‘foreign trust’.
My only comfort is that I tell myself that we must carry on in order to not let the US win without opposition. We must carry on and work within our legal and political means to plague the US with as much opposition as we can muster in our respective countries. Not much comfort I know, but as in the example that Just Me has shown us – we can warn other people of the pitfalls and try to expose the US to as much scrutiny as possible – as well as the CBA and our own politicians who collude or assist the US by default – agreeing to sacrifice a portion of their citizens for some trade or other perceived benefit to the financial sector.
Have a look at this post – and read the *document by Scott D. Michel, presented this month at one of those tax conferences on international compliance. http://isaacbrocksociety.ca/2012/01/23/fatca-the-need-to-know-basis-is-not-satisfied/comment-page-4/#comment-104098 Very clearly concludes with the purpose of FATCA – to generate revenues for the US, including penalty revenue. Also, to collect current information on our legal post-tax assets to cash in on any future appreciation, and potentially, to cash in on our estates.
They may very well make it harder to renounce, or make other claims on our assets. We are at the mercy of the caprices and greed of those resident in the US – who will stop at nothing to lay claim to our non-US savings and assets. Better to tax us, than to pursue US corporations or others in the US with the ear of Congress and the Senate – and who can pay to influence the US tax code to their own advantage – whereas we have no effective voice at all.
Re: “I also don’t understand if there can be a window in increased
vulnerability after a renunciation whereby the person renouncing would
still have an open statute of limitations for Fatca and FBAR with the
IRS but as a former citizen, with no longer any constitutional
protections…this could thus make them sitting ducks for persecution as a
form of deterrent. It thus seems to me that it’s only really safe to
renounce if you have a completely straightforward situation and with
little assets.” You’re right, we don’t know, and this lack of transparency only benefits the US.
@monalisa, I hear your situation, and empathize. We all face a range of constrictions in this, and suffer from not being able to predict what will come next. Renouncing now, or in the near future, is not possible or desirable for some, I know. And you raise a very good question – what rights do we have now as citizen’US taxable persons’ that we would lose after renouncing – in terms of protection from the most egregious excesses of the US? And given that failure to file properly with the FATCA form for individuals can extend SOLs to a whole return, and do away with the effective SOLs that previously existed (except FBAR stays at 6yrs.), the IRS basically has pushed for unrestricted powers.
*Worth reading very thoroughly – also mentions the CRA notice of refusal to assist in collecting FBAR penalties in Canada:
International Tax Enforcement
November 8-9, 2012
New York, NY
OFFSHORE ACCOUNT ENFORCEMENT ISSUES – 2012
Scott D. Michel, Caplin & Drysdale, Washington, D.C.
This paper may have been presented at the conference in which the Taxpayer Advocate Nina Olson made her comments about the serious issues raised by the IRS design and implementation of the OVD programs, and the unfounded presumption by the US and Treasury, that all of us were guilty of willful evasion and hiding ‘offshore’ accounts – (though we pay all taxes in full in the countries where we actually live and our local bank accounts are entirely transparent to our resident tax agency).
A business manufacturing a product in Canada for a customer outside of Canada in many cases receives the funds to manufacture that product via the SWIFT money transfer service in NY, which is preferable to other methods of money transfer that are slow and cumbersome. US persons with Canadian companies wishing to do business with customers outside of Canada and using SWIFT are vulnerable to having 30% of their manufacturing money withheld because of FATCA, should compliance issues arise for that business owner. Business accounts with ‘indicia’ suspecting the account holders as being US persons will be scrutinized and subject to withholding. FATCA will make a Canadian business owned by a USP fraught with threats of confiscation and thus less competitive internationally. It’s absurd to think that the bank that provides the SWIFT service to that customer is threatening to turn that very customer in to the IRS and thus destroy that customer’s company in Canada!
@bubblebustin, and @bharat.
Very helpful to hear how FATCA burdens those trying to run any kind of business outside the US – if any US ‘taxable person’ is involved. Basically FATCA and US extraterritorial tax blocks us in just about every aspect of our otherwise unremarkable private and business lives.
And the joke is that those the US pretends to be thwarting are most likely on to some other strategy right now, and thumbing their noses. It is like the US is lining up a whole village for search and seizure without a warrant, followed by interrogation and then execution without a trial, while pretending this will punish the bank robber who is already safely miles away counting his stash and laughing.
Thank you for your support. It is horrible to apply suffocating regulations on duel-citizen living abroad (having very little or no connection to the USA and have no plans to live in the USA), where the regulations are not much differently from regulations imposed on suspected tax-evader or money launderer under parole (and imposing life-altering penalties even for innocent mistakes, for example due to not able to get proper tax advice or lack of knowledge of the most complex alien tax code of a foreign nation). I hope the USA gives an amnesty for dual-citizens to easily relinquish US-citizenship, if duel-citizen living in a high tax nation for more than couple of decades (No one lives in high-tax nation to evade US taxes).
“It is like the US is lining up a whole village for search and seizure
without a warrant, followed by interrogation and then execution without a
trial, while pretending this will punish the bank robber who is already
safely miles away counting his stash and laughing.”
@ badger — That is so well put that I’m keeping it and I will use it … unless you copyright it. 🙂 I am thinking of a song called “Sitting in the Basement Stealing from Chet” about a guitar player learning and using some of the unique Chet Atkins “licks”. I’d use it in quotes with a (b) at the end and I’d do the same for others like Just Me (jm) too. That way Brockers would know the true source at least. To add to your description I would point out that the village police are nowhere to be seen, having come to an “understanding” with the US. Perhaps they accepted an offer they couldn’t refuse?
If FATCA is Obama’s New Year Surprise look at what Osborne has in store for the UK. Big Brother had nothing on these two turkeys.
I don’t use a credit card but I suppose if everyone went back to using cash it would only make them speed up the arrival of the totally cashless society.
I see you saw that one too.
LOL to you UK homelanders. Big Data coming to get you too. I put 3 of them up, over on the FATCA question thread, for lack of any other appropriate place.