For the great enemy of truth is very often not the lie — deliberate, contrived and dishonest — but the myth — persistent, persuasive, and unrealistic.- John F. Kennedy, 1962. From NPR's The Best Commencement Speeches, Ever. https://t.co/lHJbiCXvrh

— U.S. Citizen Abroad (@USCitizenAbroad) March 11, 2020

The Myth(s)

Whether #offshore tax evasion was costing USA 200 billion, 100 billion or 36 billion, it's clear that Elise Bean's claim of 200 billion (which she committed to in the Meadows hearing) was fantasy, unsupportable and therefore an intentional false statement! https://t.co/S7hXwDHNWX pic.twitter.com/A6w8Oh8sps

— U.S. Citizen Abroad (@USCitizenAbroad) September 4, 2019

(Of course, as explained here: Treasury believes that criticism of FATCA is also based on myths.)

The Truth

In "Show Me the Money! #FATCA", Professor @WilliamByrnes explains why the Elise Bean claim that tax evasion based on #offshore assets was costing US Treasury $150 billion per year is mathematically impossible https://t.co/GOctkmQBrf

— U.S. Citizen Abroad (@USCitizenAbroad) March 11, 2020

The above tweet references a very rich article by Professor William Byrnes. It terms of the arithmetic he explains it this way …

How much asset value is necessary to generate US$150 billion in ‘hidden’ annual taxable income, the oft reported figure originating with the 2009 Senate UBS hearings? Taking into account a 15 per cent tax rate on investment income, these ‘hidden’ assets would need to generate one trillion dollars of annual income to generate US$150 billion of tax revenue. Using a nearly impossible average annual return of 10 per cent, it would require US$10 trillion of hidden assets of US taxpayers to generate a US$150 billion annual tax gap.

Is it plausible that Americans have hidden US$10 trillion dollars in the global financial system? Probably not because it is reasonably estimated that globally every investment fund, every retirement account, and all the bank accounts combined have an asset value of approximately US$75 trillion. Thus, to generate this illusionary US$150 billion in lost tax dollars, US tax evaders would need to own and have hidden more than 10 per cent of global wealth.

But, actually the claim of 150 billion lost tax revenue is even more outrageous than Professor Byrnes describes. Here is why. In another part of his article he describes how the foreign tax credit rules work. He explains that tax on investment income in many other countries exceeds the 15% U.S. rate and therefore would be used as a credit against U.S. tax owing – resulting in no U.S.tax loss to the United States AND a higher rate of tax to the U.S. tax cheat. (His point is that because of higher foreign tax rates, many people would INCREASE their tax payable by offshoring their investments. He explains it this way in the article:

A US taxpayer that attracts a greater effective tax rate upon the income generated from foreign non-reported assets than the applicable US tax rate will report the income for which the foreign tax credit will exceed the US tax liability. By example, if the effective US rate was 13 per cent on a portfolio, and the investor is attracting 20 per cent foreign tax on the portfolio’s income, then the foreign tax credit will exceed the US tax due on the income. In fact, the investor would be worse off with ‘hidden’ assets because of the additional administration fees for maintaining noncompliant foreign holdings and the additional noncompliant risks such as not being able to report financial mismanagement.

Based on the reasoning, it seems clear that if Americans were to offshore their investments in tax jurisdictions with higher tax rates than in the USA, that there would be NO loss of tax revenue to U.S. Treasury at all. Therefore, the only loss of tax revenue would be if Americans were to offshore their income earning investments in countries with either no tax on investment income or taxes on investment income lower than the U.S. rate.

In other words, not only must Americans be holding be holding 10 percent of global wealth, but:

Americans would have to have been holding 10 percent of global wealth in jurisdictions with taxation of zero percent. Obviously a ridiculous claim (assuming one takes the time to think about it).

Conclusion …

Although the Elise Bean (FATCA justifying) claim of revenue loss of $150 billion annually is a myth – pure fantasy – it’s clear that renunciations of U.S. citizenship because of FATCA are a reality.

Really shameful! #FATCA architect Elise Bean now profits from putting 9 MM overseas Americans in US FATCA concentration camp. As DA only witness at Rep Meandows House FATCA hearing, she said expats didn't want 2 pay tax, not FATCA misery caused them 2 renounce so "good riddance". pic.twitter.com/JKl5i52t7i

— Solomon Yue (@SolomonYue) April 13, 2019