This post appeared on the RenounceUScitizenship blog and was motivated by the included brilliant and insightful comment of Badger.
How #FATCA will enslave the world in 2 easy steps http://t.co/JzBqKvNyB5
— U.S. Citizen Abroad (@USCitizenAbroad) October 5, 2013
If #FATCA becomes fully operational, it will result in the following:
Step 1: Non-U.S. countries will (at their expense, whether IGA or otherwise) identify those people who the U.S. defines (a possibly shifting definition) as U.S. persons;
Step 2: Once identified the U.S. will use the existence of those “U.S. persons as the excuse to transfer a share of the GNP of that country to the United States on a permanent and increasing basis. In other words: FATCA is to enforce citizenship-based taxation which is a “forced tribute to the U.S.”
The reasons include:
1. There is nothing to stop the U.S. from expanding the definition of U.S. person, and you can be sure it will do so;
2. U.S. citizenship-based taxation operates to impose penalties taxes on things that are NOT taxable in other countries. Examples: mutual funds, Canadian Controlled Private Corporations, PFICs
3. Items penalized taxed by the U.S. mean a permanent transfer of wealth out of the country, which results in a gain to the U.S. and a loss to the non-U.S. country. Example: Sell your principal residence. A portion of the gain goes to the U.S.
4. The “multiplier effect” in simple economic theory will magnify the amount of the gain to the U.S. and the amount of the loss to the non-U.S. country.
5. This will result in the rest of the world paying a permanent share of its GNP – a forced tribute – to the United States.
6. FATCA negotiations are focusing only on the banks and not on the true effects and operation of U.S. citizenship-based taxation, resulting in a situation where, because they don’t truly understand how U.S. citizenship-based taxation works in practice:
The rest of the world doesn’t have a clue what is coming!
And this doesn’t even discuss the FATCA transfer of data!
The following comment from Badger explains why and how this is so and includes some additional brilliant commentary. I have bolded the portions which are most relevant.
Considering all the work it has taken all of us to really understand CBT and FATCA, and it’s import, as well as Just Me’s DATCA and GATCA, I think that many of those here at IBS know quite a bit more about all this and how it fits together than many politicians, journalists and authors.
It is possible that once forcibly confronted with this letter from Mulcair, and from Rankin, and more public debate, some who embrace FATCA unquestioningly will see that as designed and intended, it will really hurt only minnows and krill abroad, while US residents deliberately hiding money, and US corporations with specialty US accounting and US tax law firms on retainer will find other ways to get around US taxeshttp://www.ips-dc.org/reports/corporate_tax_dodgers .
I would like to ask Linda McQuaig and the Tax Justice Network what they think of the US Ambassadorships for sale to the highest bidder – rewarding all the big political fundraisers http://taxpol.blogspot.ca/2013/09/how-to-buy-us-ambassadorship-and-how.html . And, all those political appointees who were Goldman Sachs executives? What does she think of having had a previous tax cheat for a Treasury Secretary – Geithner,http://blogs.telegraph.co.uk/news/alexspillius/8174427/Tim_Geithners_tax_evasion_/presiding over the FATCA and FBAR persecution of Canadian minnows, and now, his successor Jack Lew with offshore investments in the Caymanshttp://billmoyers.com/2013/03/08/jack-lew-citigroup-and-the-ugland-truth/ , and Penny Pritzker new Commerce Secretary http://en.wikipedia.org/wiki/Pritzker_family with that huge offshore family trust?
There are ‘none so blind as those who will not see’http://www.bartleby.com/100/204.html that FATCA is NOT at all what the US pretends it is, and it is NOT designed nor intended nor going to help the rest of the world, including Canada, because the US is trying to make ALL the world ‘US taxable persons’. FATCA will not bring Canada and the rest of the globe rainbows and unicorns.
Those who are NOT US politicians (with US vested interests and worldview), who laud FATCA as a way of attaining some kind of ‘tax justice’ for the globe should study up on the inherent conflicts between the US system of taxation and the systems of the rest of the world. The US wants to rake in all the global chips – while still allowing loopholes to favour US corporations, and any other US persons who can afford their own personal lobbyists.
I cannot believe that Linda McQuaig truly understands what is at stake for Canada and over 1 million Canadians if Harper enables the US extraterritorial system via FATCA, overlaid on top of the many serious and unresolved problems that we have already identified with the US treatment of our ordinary legal local post-tax Canadian accounts, registered savings, sale of our principal residence, Canadian mutual funds as PFICs, punitive treatment of our estates which pass to non-US spouses and family, and refusal to allow minors and those deemed incompetent to renounce, etc. We are NOT protected from double taxation by the US, nor are the rights of our Canadian-only spouses, family and employers under the BSA FBAR. I want Canadian FATCAnatics confronted with this – and forced to debate it in public here in Canada.
‘A wise man changeth but a fool never will’.
Yeah, just think. Obama may come up with this one: “If you marry a US person, you are considered a US person for tax purposes.” Oh freaking joy!
Honestly, had to relinquish but, how long before the U.S. claims everybody back as citizens just because…they can. Those who say we’re relinquishing/renouncing and dont’ come back don’t get it at all. The U.S. is trying to claim even non citizens as U.S. taxpayers just for being married to a U.S. taxpayer or being born to one already. They already are expanding their tax base by claiming people who have never been their citizens as obligated to them for reporting purposes. It won’t be long till everybody in the world is a U.S. person for tax purposes the way this is going.
Good point Animal, better than any of the contract writers in any country in the world other than US. The term “US person” is owned by USA. The tax treaties partially address dual taxation but my memory of them is that US person is that the definition is left over to USA. The tax treaties also do not address double penaltization nor who has the right to penalize. The stronger tax treaties like Sweden then will collect anything that US assesses.
@Animal, @Atticus, and @Mark, and @USCitizenAbroad, I share your fears that the US could at in future expand its definition of US Persons for tax purposes. @Animal, I could see them actually trying to expand US Personhood automatically to NRA spouses, definitely; and also quite possibly for former citizens and green card holders.
I’m thus not convinced that having renounced will offer me absolute protection. They’ll probably introduce stealthy legislation that would still allow for expatriation from citizenship but not US Personhood. It would thus be their way of removing most incentives to expatriate.
We could thus wind up with all the burdens of US personhood but without any of the protections and benefits of US citizenship, thus truly creating second-class citizens in our respective countries of residence (and citizenship)…i.e. ‘might makes right’.
However, if this actually were to actually happen, I’d imagine that ultimately, the resultant backlash would snowball enough for reform to have to take place. But in saying that, history does have a way of repeating itself…
Of course they will expand the definition. Why do you think it is US person and not citizen?
I don’t know if they can legally reclaim those with a CLN. It is the lack of CLN which is the problem for those who relinquished back before 1980 (when it technically wasn’t required) that gave the appearance of reinstated citizenship when clearly that wasn’t the case. The USG then is actually shooting itself in the foot by granting any sort of paper that backs up a claim of citizenship loss.
I do think that they will put steps in place to make it more difficult and a longer process. If it is costly and takes years to dump your citizenship, many won’t bother. However, if the current trend keeps up (and the USG doesn’t change the residency rules necessary for passing on citizenship to offspring), there soon won’t be USC’s enough to make any of their FATCA efforts worthwhile enough for other countries to continue to comply.
And if investments dry up, companies quit hiring USC’s and people can’t afford to leave the US for school – well – they will have gone to a lot of trouble, stirred up a lot of bad will all for nothing in the long term.
We could start hoping for a USG default at the end of the month. Financially speaking this has world wide repercussions but it might turn out to be something that finally pushes the rest of the countries in the world to take action to limit the damage the USG has done and is doing by being the reserve currency. Really, nearly all their power stems from that. Take it away and who cares whether they tax world-wide or not?
@Yogagirl, I’d imagine that people who’ve received CLNs and filed 8854 would be safely out but that they’ll eventually introduce a future cut-off date. I agree that they’ll almost certainly make it more even more difficult and costly. They might also lower the thresholds for the exit tax or could simply obstruct renunciations by making it much harder to get an appointment to renounce, etc. They might also start enforcing the Reed Act.
monalisa, once you have the CLN, you are free. Can’t be undone in a way that another country would recognize at any rate and the USG has to allow people to renounce from a constitutional standpoint but they don’t have to make it cheap or easy.
We are only seeing the beginning of people ending their ties to the U.S. At the present time people are renouncing. If the rules get harder people will just vanish.
http://www.nytimes.com/2013/10/06/opinion/sunday/dowd-welcome-to-ted-cruzs-thunderdome.html?hp
@KalC
That’s awesome. Cruz and the Obamacare portal.
lol. A Canadian brings down the USA in the end. Somewhere, Sir John A. is having a good last laugh.
Yes, after reading the other day that old swiss firms like Nestlé had to check to see where they had US connections, I thought this too. America is setting up a system to tax the whole world. I am amazed that the rest of the world does not see this, falls for the generalization of “tax evasion” and “good for you too”.
I am thinking the “too big to fail” idea is getting way out of hand. I also think that Sophie Int Veld needs to be informed so she can introduce these thoughts to the European parliament.
There are those who don’t understand, or say they don’t, what FATCA is really about. FATCA is NOT about taxes. FATCA is NOT about tax evasion. FATCA is about control and is about making the world “pay tribute” to the U.S.
There are many who do NOT understand (or are willfully blind) to what U.S. citizenship-based taxation means in terms of its practical impact. Even if you try to explain this to Canadian CAs they they think you are delusional. They say:
U.S. citizenship-based taxation in its present form (U.S. citizens abroad are required to live exactly the same way that Homelanders live + U.S. citizens who live outside the U.S. must be tax cheats) is an EVIL EVIL institution. It is evil as applied to U.S. citizens abroad, but it is also evil in how it affects their countries of residence.
These governments dealing with the IGAs are just trying to appease their banks. They are NOT considering the “nuts and bolts” of how citizenship-based taxation works.
It is “citizenship-based” taxation that moves FATCA from being merely EVIL, to being UNCONSCIONABLY EVIL!
In addition, there is one group whose interests are NOT considered in this discussion:
The residents of the country. Why should the people of Canada or any other nation be forced to pay for Homelanders? Why should the people of Canada or any other nation be forced to pay for the U.S. military?
It is time for the world to reject FATCA and avoid exacerbating the problem of having “U.S. persons” in their countries.
But, if the world accepts FATCA NOW, and normalizes “paying tribute to the U.S., it will more difficult to deal with LATER.
If the world allows FATCA NOW, it will need to make the following decision LATER:
Either live under the “Jack Boot” dominance of the IRS; or
Be forced with the prospect of taking more difficult action later – possibly including war.
It’s really that simple.
The world must stand up to and REJECT FATCA NOW!
No matter what the world must reject being governed by the IRS. To reject FATCA now is to avoid the necessity of more difficult action later!
Will watching the Simpsons on TV turn me into a “US Person” under FATCA? Let’s hope not…
anybody care to comment / post on this :
http://thefirm.moneycontrol.com/story_page.php?autono=964798
This may have appeared elsewhere but I thought I’d stick in here because it fits with the “enslave the world” theme. Surveillance, snitching and strict enforcement make slavery possible.
http://www.zerohedge.com/news/2013-10-16/guest-post-are-you-ready-be-unpaid-government-spy