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.
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.