By SEN. RAND PAUL Posted 05/16/2013 06:14 PM ET
Earlier this week, I introduced a bill that would reform the Foreign Account Tax Compliance Act (Fatca).
Originally tacked on as the “pay-for” to a 2010 bill to incentivize hiring, Fatca was intended to crack down on overseas tax evasion.
That’s not been the reality, however.
Instead, the Treasury Department has chosen to manipulate Fatca to establish an international financial snooping scheme that violates the Constitution, disregards the mutual respect of sovereignty among nations, increases the national debt, and threatens America’s economic competitiveness.
Fatca, with little fanfare, made sweeping changes to privacy laws.
It required every non-American financial institution — banks, credit unions, pension funds, stock and investment firms, etc. — to register directly with the U.S. Internal Revenue Service (IRS) and agree to provide specified financial data on the accounts of any “U.S. Person.”
What came next was all too predictable: rather than expose themselves to Fatca’s new withholding penalties, these overseas financial institutions simply began shutting down the accounts of their American depositors and selling off American investments.
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Besides making lives of American living and working abroad plain hell.
For what it’s worth (not much), here’s my humble response to the article:
That’s a refreshing article by Rand Paul. Finally, someone who understands! Nice response too, SwissPinoy. Personally I’d take a retirement home in Switzerland over one in Florida any day. 😉
For being the crazy person many Americans and much of the media portray him to be, Rand Paul sure gets FATCA.
I was born in Florida and visit there often. Last time I went we took a drive up to my old home town, Melbourne. Much of what use to be pristine beach front is now lined with McMansions. In the 60’s it would have been considered insane to build where people are building now. A large storm surge will one day wipe these places out. Another factor to consider when buying real estate is rising sea levels. A rise of 1m would wipe most of Florida out, making what’s there today look like the Florida Keys. If I bought any there, it would be on its highest elevations because it could feasibly be waterfront one day.
Rand Paul: “These deals, known as “intergovernmental agreements,” are not nearly as innocuous as many Fatca supporters would have you believe. Indeed, they are a significant departure from normal standards and practices.
Before, the IRS would exchange financial data with overseas revenue services once some sort of “suspicious activity” signaling tax evasion had been identified.”
Within the US, the normal standard practices and procedures involves a “National Non-Filer Strategy to identify non-compliant taxpayers and design methods to encourage their compliance. Before contacting a non-filer, the IRS will often attempt to identify the non-filer’s occupation, location of bank/savings accounts, sources of income, age, current address, last file return, adjusted gross income of last filed return, taxes paid on last filed return – amounts and methods of payment (withholding, estimated tax, pre-payments), number of years delinquent, and the non-filer’s standard of living. They will search public records for evidence of additional unreported income, tax assessor and real estate records for assets held by the non-filer, and records of professional associations and business license bureaus for information on businesses being operated by the non-filer. They will also search sales tax returns and the state records to disclose corporate charter information including principals of any businesses that have failed to file returns. They will contact the last known employer to determine if the non-filer is still employed and the specific occupation of the non-filer.
Determining the specific occupation of the non-filer can lead to additional sources, such as labor unions, professional societies, trade associations, etc. They may also determine whether there is a pattern of non-filing (multiple non-filed years provide a pattern of behavior), whether there have been repeated contacts by the IRS, indications that the non-filer had knowledge of filing requirements (i.e. professional with an advanced education, person who works directly in the tax field), whether there is a history of cash transactions (i.e. purchases by cash, cash deposits as evidenced by currency transaction reports, etc.) and whether there are indications of significant unreported income (i.e. substantial interests and dividends earned, investments in IRA accounts, stock and bond transactions, high mortgage interest paid, etc.). When contacting the taxpayer from a civil perspective, the IRS will attempt to gather as much information as possible to arrive at a substantially correct tax assessment. They will also attempt to establish reasons for the non-filing by asking specific and direct questions (i.e. Why were returns not filed? Did you know that you were required to file returns?).
If a non-filer is contacted by the IRS, the examiner will determine the cause (does the non-filer lack records, ability to pay, lack of education, etc.) and may offer necessary information or assistance (preparation of returns, payment arrangement information, etc.) to secure full cooperation. If the non-filer is uncooperative (won’t respond or refuses to cooperate), third party contacts will be made to determine the non-filer’s income. If the examiner discovers subsequent acts of tax evasion (false statements, refusal to make records available, etc.), they will consider whether the case should be referred for a criminal investigation. The examiner will also be alert to attempts by the non-filer to conceal or transfer assets to evade collection of tax later assessed. In these cases, a jeopardy (immediate) assessment may be considered.
During non-filer examinations, the examiner will determine if related returns (corporate, partnership, employment tax, and excise tax returns) have been filed as required. They will also search for spin-off cases involving relatives, employees, employers, subcontractors, partners, and even return preparers. If a non-filer is involved in a family business, the examiner should determine if all family members have filed returns. If the non-filer is involved in a partnership, the IRS should determine if partnership returns have been filed and determine if all partners have filed returns. For delinquent corporate returns, they should determine if all shareholders have filed returns. Penalties are not typically be easily waived in non-filer cases without reasonable cause.”
Thank you Rand Paul for recognizing how FATCA targets American’s abroad without due process.
Well that is enlightening. Thanks, bubblebustin!
@swisspinoy what’s rich to you and why do you say your are not rich, do you think rich U.S. persons living overseas should not be able to escape FATCA?
“Hearing that this was in for the long-term, with no relief insight, I headed over to the US embassy to renounce US citizenship. I’m not rich and I’m not a witch. I’m not a terrorist, I oppose Al Qaeda and I oppose violence. “
@statelessman, good question and I really don’t know. I was just combatting the common stereotype that all expats are “rich”. Yet, I supposed that I could be considered as being “rich” or may become so, depending upon how one looks at it. I’m certainly considered to be doing much better than my family in the states who likely considers me as being “rich”. Rich in debt, I’d say.
In my view, FATCA should have nothing to do with expats regardless of their financial situation. America doesn’t need to be sticking its nose into my local checking account. That’s the job of the local authorities.
@swisspinoy thanks for the answer, I just dislike the minnow talk I hear sometimes, where one group tries to shift burdens to anyone but them.
“indications that the non-filer had knowledge of filing requirements (i.e. professional with an advanced education”
Now we know why the OVDI program has “education level” as their criteria. I guess they look at it as if one should have been smart enough to have known better.
I think I will then hit myself with a brick. Maybe that will make me dumb enough.
@Mark Twain, from what I have read,this is not limited to OVDI and a brick won’t help, especially when one’s non-resident alien spouse has a doctorate:
“Do you have any hobbies?”
Thanks SwissPinoy for your comment. Rand Paul sure stirs passions of those who don’t like him. I just tweeted that article to David Frum and got a response from another twit that
FATCA was designed to catch tax evaders. And that article WAS written by a “swivel eyed loon.”
To which I replied…
Design and application are two separate subjects. FATCA fails on both accounts and unintended consequences profound!
and read the comments from left wing liberals that support and understand the issue better than you! 🙂
You say you dislike the Minnow talk, and I understand your point, but how else do you get liberals to listen to an issue than divide and conqueror! They have to see it in stark terms, and that characterization, simple and imperfect as it is, does that. They always claim to be for the little guy, so let’s give them some ‘little’ terminology that they might relate to. Now, of course, it is very subjective, and my definition of a minnow is different than yours, but the point is to make them see that broad nets cast into the global sea sweep in everything and not just the intended targeted Big Fish! 🙂 These nets are NOT dolphin friendly.
@statelessman, just me
I glean something new from this report every time I read it, and one particular paragraph stands out in the context of what the IRS is having to defend itself for today:
“There were other patterns of conduct that did not fit OVDI: corporate noncompliance, unfiled FBARs from minor children, more complicated and yet legitimate trust structures, and the like. No doubt the IRS initially designed the program believing more hardcore tax cheats would come forward than did. But it was clear by the end of OVDI #1 than most of those who came forward did not fit that category. Some agents have conceded that although they would have imposed no penalties in a particu- lar case, they were told to take a hard line…”
In spite of knowing many should not be in OVD#1, the IRS was instructing its agents to continue to take a “hard line” with those clearly undeserving of penalties. Reading this, can anyone argue that they weren’t targeting minnows?
For the Rand Paul haters: Even a broken clock is right twice a day.
@Just Me — FATCA was justified/sold on the basis of going after the rich but designed to go after everyone, there is a lot more cash for the government going after the middle class than just going after the rich and the law makers know it and sold it on the basis of a lie.
Some of the super wealthy ($100 Million+ in assets) want these types of laws as it creates hurdles to future competition, they will generally advocate higher taxes and more regulation on the “rich” ($250k a year in salary) as a way to keep people from reaching their level of wealth.
I no longer have any skin in the game as I’ve paid to exit, but I would like to see all my former countrymen more free not just some of them.
I posted a comment on Sen Rand Paul’ letter in Investor Business Daily and would encourage others on this site to do the same. Rand Paul needs all the support he can get from those affected by FATCA and citizen based taxation. It feels like a complete uphill fight given Singapore and Russia also caving in, but my hope is that perhaps the Senator can bring it to a head in Congress.
Thanks for doing that. I wanted to, but it is a Facebook social plug in, so since I do not do Facebook, unable to comment….
The thing about this article I focus on, his Rand Pauls final statement, which is addressing the FATCA IGA reciprocity DATCA issue…
Read More At Investor’s Business Daily: http://news.investors.com/ibd-editorials-perspective/051613-656356-limit-foreign-access-to-your-bank-accounts.htm##ixzz2Tl6hmbtG
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How can any partisan Dem or Rep be against that, regardless of what they might feel about Rand Paul personally…?
If Congress were given a chance to relook at FATCA and vote on the issue related to DATCA uncluttered by other amendments; and really decided that is what they wanted to do, then I would still not like it, but would accept that it is a transparent democratic process, and so be it.
The current end run around Congress that the FATCA IGAs represent, is frustrating and a greater abuse of power than the current tax exempt status tempest in a tea pot. But, I love that public battle anyway, as it is opening the Pandora’s box of “lack of trust”, and we should ride the coat tails of that controversy to point to other abuses the IRS has perpetrated like the application of OVDP FBAR penalty administration .
Thanks, Steve Klaus, from me as well, also a non-Facebook user.