garbo999 suggests this as a separate post. Good idea!!
Sorry for this thread hijack but I have a comment about a Bloomberg article from yesterday. Perhaps this might be worth a separate thread? Accidental Tax Break Saves Wealthiest Americans $100 Billion
The article describes how Congress created a complex law targeting a certain class of the population to make them pay more tax. However, the rich folks who were targeted simply hired expensive lawyers to get around the law. Realizing that the same rich folks take frequent advantage of their 1st Amendment-mandated right to bribe Congress as they see fit, Congress refuses to modify the law.
garbo999 asks:
Anyone see the same future for FATCA? The rich tax dodgers will find myriad ways to escape FATCA while of course all the massive negative effects of FATCA for the little guy will remain in place (not to mention the billions that non-US financial institutions must spend to implement this lunacy as well as the loss of respect that goes with shoving a law down the throat of every other country in the world with an obviously false promise of reciprocity).
A related link at bloomberg: Wealthy N.Y. Residents Escape Tax With Trusts in Nevada
The US is not unique from this type of tax avoidance. For example, there was a case where the owner of a regional chain of UK pharmacies ‘moved’ to Gibraltar a year before the sale of his chain to a UK national chain and because he was a tax resident of Gibraltar, avoided paying UK CGT entirely.
However hard a Gov’t tries the rich have the resources and help to avoid taxes including citizenship based taxation. The US is not going to change its budget trajectory with FATCA. Only easily enforceable domestic taxation will achieve a US balanced budget such as introducing a 5% VAT in the US, raising gasoline taxes, and eliminating mortgages interest deductions.
The uninformed average voter will never accept those ‘increases in my taxes’. Will the general voting populace of the country ever allow to be elected leaders who would favour VAT, increased gasoline prices, mortgage interest deductions from income taxes (and therefore the never-ending mortgage) ever realize? FATCA enforced on US expats in other countries will be the magic bullet — most will not “see” that the real tax evaders RESIDE in the US and send their un-taxed money offshore and get behind a change to Residence-Based Taxation! Get the fair share from all those traitors that have left — FATCA.
With a corporate controlled government I knew there was no way FATCA was going to be about “FATCATS” The majority of them will get and can afford great international tax lawyers and will find every loop hole possible to get around this.
That to me from day one was a given. Sure it’s sold as something that will get them but, that’s not how it’s going to work. I mean how on earth could they afford to really anger their uber wealthy contributors. They can’t. That’s why people like Geither and others get away with things we never could in a million years. See any bank fraudsters in jail yet?
This all such a shame and so preventable. I noticed the experience in Norway and thought about it. For heavens sakes it sounds like they are really out of the loop there with all the threats. All of this was totally not needed. Most expats if not aware of their obligations would have upon learning of them just filed what they needed to. Most are law abiding and wouldn’t have needed the big stick threats at all.
They have behaved like they are dealing with huge criminal organizations here instead of average people with families and modest incomes. There was no need to make all the threats to begin with and no need for the penalties to be applied the way they were. If they are going to be that way then the least they can do is realize they’ve made it impossible for some to keep their citizenship and allow them to go easily. After all this is a mess of their making.
But like with most things in D.C. of course I knew that all the angst, threats and the rest of it were not really going to be targeted at nor affect in the worst ways those who have enough wealth to pay their way round it. That is usually a feature, not a glitch.
@all
I wrote to the Cdn MPs and presented this article’s link.
“I expect my MPs and Prime Minister to say no to FATCA that will make Canadians living in Canada who have any American connection 2nd class Canadian citizens. Are you going to throw us under the bus? . We are not these very rich Americans who shirk their duty to their OWN country while LIVING in the USA…
Help us please!
Give us a life line. Help us escape this slavery of FATCA…This is against our Constitution and Charter of Rights and Freedom.
HELP US!!! Think of a way for us to not be affected…Sure there may be Americans who live in the USA who have money in Canada and have not claimed their Canadian accounts. That is tax evasion…but we who live here pay Cdn taxes and we are not evading Canadian income taxes. We earn no money in the USA….The American government is taking money away from Canada by allowing the USA to fine and penalize Canadians.
Tell the USA that America must be a resident based taxation country like the rest of the world.. “
@ northernstar
That would certainly convince me but then I have EMpathy. Time will tell if Harper, Flaherty and our individual MPs do or not. All we can do is keep trying to convince them to do the RIGHT thing. I think its time to for the “Bugger the Bankers” video again.
@EM
Awesome…it went right on my FB.
I’m not fond of politicians, bureaucrats or lawmakers, however, I’m also not a fan of those who feel that they’re entitled to my wife’s hard-earned money – that includes many American homelanders. Should I win the $50M, Lotto Max this year…(I’d really have to play in order to have a miniscule chance and I actually have better places for my money to go – not to the United States) I will be telling the US homelanders… “Bugger YOU!”
@Calgary411 – It won’t be Americans voters that will force my proposed taxation changes on Homelanders, it will be the Chinese when the US loses sole reserve currency status and the US has to deal with a limited national credit card limit.
China will be the largest world economy by 2020, it’s the largest automotive market in the world today, it’s current building up a new commodity exchange with 24 hour trading due in the next year or so including gold. With gold it will have the second largest reserves soon after overtaking Germany second only to Fort Knox.
China is on the move and will demand more say how the world economy will run. The US will remain the transatlantic power, but China will own SE Asia which will account for nearly 50% of the world population by 2100. This is all going to happen by default and the US can’t stop it.
However the pressures are going to exert themselves long before 2100. The only thing that may stave off China for the US in the short term is cheaper energy from fracking so those precious extra dollars can be reinvested in the US rather than shipping them off to the Middle East.
Here is an article of interest…. Yanks – and Their Money – Go Home
To monitor and control American taxpayer’s assets offshore, the US has already implemented strict financial foreign reporting compliance. Other countries desperately in need of more taxes to support their social entitlement programs have similarly followed suit.
Every US taxpayer must report more than $10,000 in cash held offshore and other cash transactions (through the FBAR Form TDF-90.22-1 and 8300, 4789, 4790, etc); report transactions with a foreign entity (Forms 3520, 8865, 926, etc); and report information returns for foreign owners and entities (Form 3520A, 8858, 1120-F, 5471, 5472, 8621, W-8Ben, W-81MY, 8805, 1042, etc), to name but only a few of the foreign reporting requirements. But starting this year US taxpayers must also start reporting any and all types of assets offshore with a total value of more than $50,000 on the new (draft) Form 8938 (see FATCA below).
These are examples of the trend in the US government’s political and social engineering of its taxpayers, and exerting its control over the global financial system. And here’s how the lastest took place.
In 2010 President Obama signed into law the Foreign Account Tax Compliance Act (FATCA), effective for US taxpayers beginning for the 2011 tax year, reported in 2012. The official position was that it was enacted to prevent offshore tax abuses by US taxpayers. While there may have been a grain of truth in claiming the higher ground, the real truth of the matter is that it is yet another restrictive measure against the outflow of US taxpayer capital from the US to other countries.
By any other name it’s called currency controls. We have discussed this here in prior newsletters.
What’s significant it that the US has implemented this far reaching legislation forcibly onto foreign soils, effectively making foreign financial and non-financial companies in other countries IRS reporting agents on US citizens and businesses. Simply stated, it is an arrogant display of US government authority in an attempt to force foreign companies to act as their watchdog over US taxpayers offshore.
There are still many uncertainties with the compliance requirements, and many countries are actually considering either cutting their investment and financial ties with all US investments and/or their US clients. The international fallout against FATCA has been enormous, but it has seldom been reported in the US media. And this is where the problem really begins.
Here are a few examples of just how onerous the FATCA compliance is: for foreign financial entities, there is a 30% withholding tax imposed on the financial institution for a failure to enter into an agreement with the IRS agreeing to identify and annually disclose its US account holders directly to the IRS; for foreign non-financial entities a 30% withholding tax imposed on payments made if they fail to certify that it does not have any substantial US owners, or it fails to disclose the identity of the US owners; and in all cases, requirements that the foreign entities obtain a US tax identification number and then report on IRS forms. Foreign financial entities currently include hedge funds, private equity funds, and other investment vehicles, and are therefore not limited to banks. Non-financial entities cast a much wider net.
The first lever the US government currently has over the foreign financial and non-financial entities is the payments of US sourced fixed and determinable annual or periodical income on their US related investments, as well as gross proceeds from the sale of assets that generate US source interest or dividend income to them.
And as a result of FATCA, US taxpayers living at home are now required to file Form 8938 to report assets of more than $50,000 held offshore. For US taxpayers living abroad, the amount is adjusted to $400,000 at year end, or more than $600,000 at any time during the year. And if you haven’t already picked it up, Form 8938 makes redundant the FBAR TDF 90-22.1 (cash more than $10,000) as noted above, but both are still required. Go figure.
The list of questions, requirements, and unknowns for foreign financial and non-financial entities is long. And just how the IRS will enforce these burdens on foreign entities on foreign soils beyond the 30% withholding tax imposed on them remains unclear. How can American politicians arrogantly expect foreign companies in other countries to comply with these extra-territorial laws?
And why would a bank in New Zealand or Australia, for example, provide the IRS with all US account holder information? The cost in tiny New Zealand (population 4+ million) and its banking system are calculated at more than $10 million. This is a huge cost of doing business for this small country, and it serves to decrease the demand for US depositors around the globe at all foreign banks.
FATCA is all about the US government implementing currency controls on its US taxpayers, and extending it dominance to every corner of the world.
But what happens if New Zealand – recently rated the friendliest place on earth – or other financial entities elsewhere, refuse to comply? Will US troops march in and demand to see the bank records? Will the US impose huge import tariffs on New Zealand goods? Will the DHS (department of homeland security) demand restricted visas for all New Zealand residents visiting the US? Maybe this is why Obama announced that 2,500 US marines will now be stationed nearby in a new US military base in peaceful Australia.
There will be huge unintended consequences with the new law: less foreign investment into the US economy at a time when it is needed most; and less US dollar investments offshore by timid US souls. The confusion and complications will drive away business of entrepreneurs and investors around the globe. While Congress and Obama tried to sell FATCA as a benefit for the US tax system, it will instead have tremendous negative impacts around the globe, and particularly for the US economy.
This law must be repealed, but for now, it stands.
Remember that FATCA is designed to control capital outflow from the US financial system as the US economy continues to weaken at home, and on a global perspective. With the increased need for more taxes, fewer entitlements, a social and political system that is withering, and worse, it begs the question: Do you really want to have 100% of your financial future tied to the US economy? courtesy: http://www.davidtanzer.com/david_tanzer_articles.asp?article=asset+friendly+trends%3F
@NativeCanadian
For US taxpayers living abroad, the amount is adjusted to $400,000 at year end, or more than $600,000 at any time during the year.”
From the IRS:
You are filing a return other than a joint return and the total value of your specified foreign assets is more than $200,000 on the last day of the tax year or more than $300,000 at any time during the year; or
You are filing a joint return and the value of your specified foreign asset is more than $400,000 on the last day of the tax year or more than $600,000 at any time during the year.
There already is a loophole….If you were not born in the US and have a foreign passport it basically impossible for a bank to determine that youre a Fatca victim
Also let’s not forget that US companies are not taxed on their non US source income so long as it is held overseas. Apple, Cisco and many many other US companies are holding many BILLIONS and BILLIONS of USD overseas with no US taxes, and prefer to spend it overseas rather than bring it ‘home’ to be taxed by the USG. Unfortunately, everyday US citizens living, working, saving and investing overseas do not have that luxury and FATCA tries to ‘ensure’ that every cent, rupee, baht, pound…made overseas, saved, invested overseas is accounted for on the individual’s US tax return. Completely the reverse of what the law and policy should be.
@ Mike. That is a very big loophole but what (well-advised) foreign financial institution would dare to risk it? The FFIs will require W-9s or W-8s from everyone (Swiss banks are now doing this). So, aside from fraudulent declarations, the only uncertainty will be for those persons born abroad to a US citizen parent where the amount of physical presence in the United States of the parent which would automatically confer citizenship on them is hard to determine in hindsight…
What an awful mess because a single country conflates citizenship with taxation and thinks it makes sense to enlist foreigners by financial force to hunt their citizens down! My fear is that FATCA will achieve very little in terms of finding tax revenue from those hidden US persons, but because of its complexity and impenetrability in non-English speaking, relatively unsophisticated parts of the world, instead will create a nice little (big) earner for the IRS in terms of withholding come July!
@Mike Couldn’t agree more about your loophole. Unless the banks start handing over all their data or even if the IRS cross checks against ‘missing’ FATCA records, it will be very expensive money to pursue vis-à-vis chasing domestic taxpayers.
My belief is that if the IRS pressured an American abroad for tax, it would be a long expensive battle to get the money if ever. Only a number of countries have sign the Mutual Collection Agreements and then it has to go through the countries’ tax collection procedures so it wouldn’t be a slam dunk for the IRS. Unless the local country is going to freeze assets on behalf of the IRS there would be an opportunity to shield many of your assets from them.
Again it goes back to discrimination, treating one resident citizen different from another and also others having unfair advantage simply because of their place of birth.
Mike and Don What’s this? A little breath of common sense on IBS? How refreshing.
@Duke of Devon
Can you speculate as to what the US’s response would be when they figure out that bank customers are being less than forthcoming about their US personhood?
@Steve Klaus
It is one rule for ‘DNA persons’ and a different and better rule for “Paper Persons”
@Duke of Devon…
Will prior to 2010 a lot of Americans abroad where just passively non compliant or didn’t think much about the cost of citizenship, so were mostly non willful. Didn’t know or didn’t understand. After FATCA, a lot of Americans (who don’t renounce) are going to be turned into active liars and evaders, so FATCA irony will be that it is creating that which it is supposedly trying to stop.
and then there are those like this.
https://twitter.com/lizinrome/status/413718090908569600
They already avoid estate and gift taxes via trusts like GRAT. FATCA will be no great hurdle for those with the money for a good accountant.
http://www.bloomberg.com/news/2013-12-17/accidental-tax-break-saves-wealthiest-americans-100-billion.html
I agree with the comments here and I stand by my statement that I didn’t think FATCA would stand a chance in hell of catching those “tax evaders.” This legislation was passed in 2010 – it MIGHT be implemented in 2014. Anyone with bad intentions and enough money to pay expensive cross-border tax experts has already taken the necessary steps to avoid FATCA. I went back and looked at articles in the months following passage of the HIRE act and the experts were already warning their clientele and telling them to come on in for a consult. “We’ll help you figure this out.”
Another thing to consider is that sometimes regulation is the tax haven’s friend. OK, kids, here are the rules and now all of you can get on with figuring out ways around the rules. The more convoluted they are, the better the chance that folks will find ways around them. “I told you not to go to that party and stay out so late.” “But, Dad, you didn’t say that I couldn’t take the archbishop’s beamer for a spin and I WAS back before midnight.”
When I saw these words — complying – power to force – tax evaders – punishing miscreants – prosecution – penalties – tax cheats – enforcement – wrongdoing — I had to leave a comment. The article couldn’t even be bothered to put a name on the monster. IT’S FATCA!!!!
http://www.blacklistednews.com/Swiss_Banks_Are_Now_Agents_for_the_IRS/31488/0/38/38/Y/M.html