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Posted on 08/19/2011 5:49:41 AM PDT by rabscuttle385
NEW YORK (Reuters) - A U.S. law meant to snuff out billions of dollars in offshore tax evasion has drawn the criticism of the world's banks and business people, who dismiss it as imperialist and "the neutron bomb of the global financial system."
The unusually broad regulation, known as FATCA, or the Foreign Account Tax Compliance Act, makes the world's financial institutions something of an extension of the tax-collecting Internal Revenue Service -- something no other country does for its tax regime.
Conceived as a way to enlist the world in a crackdown on wealthy Americans evading tax, it gives global financial institutions and investment entities a choice: either collect and turn over data on U.S. clients with accounts of at least $50,000, or withhold 30 percent of the interest, dividend and investment payments due those clients and send the money to the IRS.
Foreign institutions and entities that refuse, or fail, to do so face bills for the taxes due, a draconian penalty of 40 percent of the amount in question and heightened scrutiny by the IRS.
"FATCA is a blunt instrument for which foreign banks have no choice but to each spend tens of millions of dollars to help the U.S. enforce its own tax law," said Scott Michel, a tax lawyer at Caplin & Drysdale in Washington, D.C.
A senior American finance executive at the Hong Kong branch of a major investment house told Michel that FATCA was "America's most imperialist act since it invaded the Philippine Islands in 1899." The regulation, Michel said, was "engendering a profound and growing anti-American sentiment abroad."
Dean Marsan, a tax lawyer and former senior tax counsel at Lehman Brothers who has written extensively on FATCA, called the rule "a U.S.-centric law for the world."
(Excerpt) Read more at finance.yahoo.com ...
That’s what happens when you elect a Socialist who mistakes ideology for economics.
“ Hey,Obama! It’s the math, stupid. You have just run out of other people’s money!”
And if the foreign banks ignored the regulation, how would the US enforce it? By invading Switzerland?
Heightened scrutiny by the IRS! I bet banks based in China and Russia are just quaking in their boots, an IRS agent shows up on their doorstep wanting to see their books and he's going to be laughed out of the bank. Don't hold your breath waiting for them to send in that 40% either...
My question. If some wealthy individual has so much money and are willing to break the law and risk prison to hide it offshore. Do you really think they are going to truthfully tell the bank they are a US citizen, knowing the bank must report that to the IRS? Nope, they will obtain whatever fake documents (passports, birth certificates etc.) they need to claim they are a citizen of some low tax country or some country with no reporting requirements.
The US would enforce it by not allowing foreign banks or their affiliates to do business in the US. I think that the intention of the government is to create an economic Berlin wall in order to keep the money of the US citizens in the US. This way, US citizens’ money would be more exposed to confiscation under the aegis of an arcane and overly complex tax code.
It’s safer to buy a safe, fill it with metals, and take your chances with regular criminals as opposed the ones that make the laws.
Don’t the Clintons have a huge amount of their money in a Cayman Islands account?
Actually, it’s even easier than that in many cases, particularly since the market and the economy are doing so poorly. What many of the very wealthy who are subject to US jurisdiction have been doing is simply marking their (known to the US government) assets to market - which in this climate frequently means they have net losses for income tax purposes - paying the so-called exit-tax, and giving up their US citizenship or green card. Once they’ve done that and have moved overseas, they are no longer subject to the information reporting the IRS is seeking to have over them.
I’ve talked to some acquaintances who have worked with some of these folks in doing just that.
Of course, once that’s been done, it doesn’t mean that they cannot invest money in US assets or through US markets, they simply do so as nonresident alien individuals through an opaque foreign corporation, the same way that hedge funds and private equity funds have managed the investments of foreigners in the US for years.
Basically, other than doing the mark-to-market and taking something of an immediate tax hit, none of this really changes a lot of these folks’ investment structures, and it simply chases them offshore where they ultimately end up owing a lot less US tax than they owed when they were US citizens/residents.
It’s a stupid, pointless, draconian, despotic policy all ‘round.
The real intention of FATCA is to make doing business with Americans so annoying that foreign banks will refuse to open accounts for Americans thus restricting the ability of money to flee oppression.
I know, I know. Sometimes I say the craziest things.
Good points
Wonder how many banks will the IRS to go do something improbable to themselves?
Does the author mean “sniff out” meaning locate & uncover, or “snuff out” meaning destroy & eliminate?
Of course, it’s hard to tell which motive is which given the Obama regime’s attitude toward money and/or firearms in the hands of ordinary citizens.
I predict a ton of foreign accounts owned by Americans with a balance of 49,000 :)
lol
I think you are on to something. As the Obama oppression increases, he can't have people and assets fleeing the US so he will need to have a financial and regulatory Berlin Wall to stop all but the most determined.
Spot on. We’re watching cattle being herded for the trip to the slaughterhouse.
OR ELSE WHAT??!! The IRS can ASK these banks to do anything they like, but to presume they have jurisdiction to REQUIRE them to do anything (assuming they have no operations in the US) and punish them for non-compliance is beyond ridiculous. Does the IRS imagine that jurisdiction comes attached to US citizens, that they have the authority to prohibit offshore entities from doing business with US citizens while outside US territory? Am I to start being concerned with the laws of the Sudan or Mozambique, having not left the US in years?? Ludicrous. Complete fabricated bullshit.
Other than the extension to foreign shores, how is this different ffrom the current system where employers, banks, car salesmen, etc, are forced to act as tax collectors for the US government.
The income tax should be abloished. Along with the direct election of senators, lifetime tenure for judges, release of sex offenders (I don’t mean a 17 year old and a 15 year old), illegal and most legal immigration, foreign aid, and a number of other things.
What should be installed is the return, in force, of the death penalty (hanging seems humane enough to me), voter ID, closed borders, English only, a justice system based on the concept of punishment, not rehabilitation, loser pays in civil court, and again, a number of other little things.
Don’t get me started, as I don’t have time right now.
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