Posted on 04/03/2010 6:00:07 AM PDT by Candor7
It couldn't have happened to a nicer country. On March 18, with very little pomp and circumstance, president Obama passed the most recent stimulus act, the $17.5 billion Hiring Incentives to Restore Employment Act (H.R. 2487), brilliantly goalseeked by the administration's millionaire cronies to abbreviate as HIRE. As it was merely the latest in an endless stream of acts destined to expand the government payroll to infinity, nobody cared about it, or actually read it. Because if anyone had read it, the act would have been known as the Capital Controls Act, as one of the lesser, but infinitely more important provisions on page 27, known as Offset Provisions - Subtitle A—Foreign Account Tax Compliance, institutes just that. In brief, the Provision requires that foreign banks not only withhold 30% of all outgoing capital flows (likely remitting the collection promptly back to the US Treasury) but also disclose the full details of non-exempt account-holders to the US and the IRS. And should this provision be deemed illegal by a given foreign nation's domestic laws (think Switzerland), well the foreign financial institution is required to close the account. It's the law. If you thought you could move your capital to the non-sequestration safety of non-US financial institutions, sorry you lose - the law now says so. Capital Controls are now here and are now fully enforced by the law.
Let's parse through the just passed law, which has been mentioned by exactly zero mainstream media outlets.
Here is the default new state of capital outflows:
(a) IN GENERAL.—The Internal Revenue Code of 1986 is amended by inserting after chapter 3 the following new chapter:
‘‘CHAPTER 4—TAXES TO ENFORCE REPORTING ON CERTAIN FOREIGN ACCOUNTS ‘‘Sec. 1471. Withholdable payments to foreign financial institutions. ‘‘Sec. 1472. Withholdable payments to other foreign entities. ‘‘Sec. 1473. Definitions. ‘‘Sec. 1474. Special rules. ‘‘SEC. 1471. WITHHOLDABLE PAYMENTS TO FOREIGN FINANCIAL INSTITUTIONS.
‘‘(a) IN GENERAL.—In the case of any withholdable payment to a foreign financial institution which does not meet the requirements of subsection (b), the withholding agent with respect to such payment shall deduct and withhold from such payment a tax equal to 30 percent of the amount of such payment.
Clarifying who this law applies to:
‘‘(C) in the case of any United States account maintained by such institution, to report on an annual basis the information described in subsection (c) with respect to such account, ‘‘(D) to deduct and withhold a tax equal to 30 percent of—
‘‘(i) any passthru payment which is made by such institution to a recalcitrant account holder or another foreign financial institution which does not meet the requirements of this subsection, and
‘‘(ii) in the case of any passthru payment which is made by such institution to a foreign financial institution which has in effect an election under paragraph (3) with respect to such payment, so much of such payment as is allocable to accounts held by recalcitrant account holders or foreign financial institutions which do not meet the requirements of this subsection.
What happens if this brand new law impinges and/or is in blatant contradiction with existing foreign laws?
‘‘(F) in any case in which any foreign law would (but for a waiver described in clause (i)) prevent the reporting of any information referred to in this subsection or subsection (c) with respect to any United States account maintained by such institution—
‘‘(i) to attempt to obtain a valid and effective waiver of such law from each holder of such account, and ‘‘(ii) if a waiver described in clause (i) is not obtained from each such holder within a reasonable period of time, to close such account.
Not only are capital flows now to be overseen and controlled by the government and the IRS, but holders of foreign accounts can kiss any semblance of privacy goodbye:
‘‘(c) INFORMATION REQUIRED TO BE REPORTED ON UNITED STATES ACCOUNTS.— ‘‘(1) IN GENERAL.—The agreement described in subsection (b) shall require the foreign financial institution to report the following with respect to each United States account maintained by such institution: ‘‘(A) The name, address, and TIN of each account holder which is a specified United States person and, in the case of any account holder which is a United States owned foreign entity, the name, address, and TIN of each substantial United States owner of such entity. ‘‘(B) The account number. ‘‘(C) The account balance or value (determined at such time and in such manner as the Secretary may provide). ‘‘(D) Except to the extent provided by the Secretary, the gross receipts and gross withdrawals or payments from the account (determined for such period and in such manner as the Secretary may provide).
The only exemption to the rule? If you hold the meager sum of $50,000 or less in foreign accounts.
‘‘(B) EXCEPTION FOR CERTAIN ACCOUNTS HELD BY INDIVIDUALS.—Unless the foreign financial institution elects to not have this subparagraph apply, such term shall not include any depository account maintained by such financial institution if— ‘‘(i) each holder of such account is a natural person,and ‘‘(ii) with respect to each holder of such account, the aggregate value of all depository accounts held (in whole or in part) by such holder and maintained by the same financial institution which maintains such account does not exceed $50,000.
And, while we are on the topic of definitions, here is how "financial account" is defined by the US:
‘‘(2) FINANCIAL ACCOUNT.—Except as otherwise provided by the Secretary, the term ‘financial account’ means, with respect to any financial institution— ‘‘(A) any depository account maintained by such financial institution, ‘‘(B) any custodial account maintained by such financial institution, and ‘‘(C) any equity or debt interest in such financial institution (other than interests which are regularly traded on an established securities market). Any equity or debt interest which constitutes a financial account under subparagraph (C) with respect to any financial institution shall be treated for purposes of this section as maintained by such financial institution.
In case you find you do not like to be subject to capital controls, you are now deemed a "Recalcitrant Account Holder."
‘‘(6) RECALCITRANT ACCOUNT HOLDER.—The term ‘recalcitrant account holder’ means any account holder which— ‘‘(A) fails to comply with reasonable requests for the information referred to in subsection (b)(1)(A) or (c)(1)(A), or ‘‘(B) fails to provide a waiver described in subsection (b)(1)(F) upon request.
But guess what - if you are a foreign Central Bank, or if the Secretary determined that you are "a low risk for tax evasion" (unlike the Secretary himself) you still can do whatever the hell you want:
‘‘(f) EXCEPTION FOR CERTAIN PAYMENTS.—Subsection (a) shall not apply to any payment to the extent that the beneficial owner of such payment is— ‘‘(1) any foreign government, any political subdivision of a foreign government, or any wholly owned agency or instrumentality of any one or more of the foregoing, ‘‘(2) any international organization or any wholly owned agency or instrumentality thereof, ‘‘(3) any foreign central bank of issue, or ‘‘(4) any other class of persons identified by the Secretary for purposes of this subsection as posing a low risk of tax evasion.
One thing we are confused about is whether this law is a preamble, or already incorporates, the flow of non-cash assets, such as commodities, and, thus, gold. If an account transfers, via physical or paper delivery, gold from a domestic account to a foreign one, we are not sure if the language deems this a 30% taxable transaction, although preliminary discussions with lawyers indicates this is likely the case.
And so the noose on capital mobility tightens, as very soon the only option US citizens have when it comes to investing their money, will be in government mandated retirement annuities, which will likely be the next step in the capital control escalation, which will culminate with every single free dollar required to be reinvested into the US, likely in the form of purchasing US Treasury emissions such as Treasuries, TIPS and other worthless pieces of paper.
Congratulations bankrupt America - you are now one step closer to a thoroughly non-free market.
Full HIRE Act text: ( at link)
Scary legal ping!
Then they get to create more jobs by hiring more security goons. What a deal!!
I have a better idea, get rid of the IRS and the income tax and they won't have to worry.
All it takes is one low-level employee at a foreign bank to get hold of a list of account holders and be rewarded by the IRS for (illegally) revealing it. Didn’t that happen last year at a Swiss bank?
The IRS will tell you that you pay US Taxes wherever you are, unless they have a tax treaty whereby enforcement is exchanged with the treaty nation then the tax is paid where you are resident for 6 plus months a year.
The chances of them catching you? well it depends on how you do it.
You got it. HBC, Shanghai branch.
I have read the excerpt above, and it is confusing. Are they saying that if you deposit some money and it earns interest, that the interest income is subject to IRS withholding? I thought that was already the case. Or is it that they now demand the closure of all accounts where people refuse to allow withholding?
He really likes this plan and govt subsidized high speed rail. What do you think?
When you withdraw money from the account , 20% of the sum withdrawn for international transfer is witheld by your institution.
Witholding by treaty nation banks is supposed to be mandatory.
This is actually not witholding,its confiscation.
Ping.
I never thought that I would see our country under attack by its government. But here we are.
Melancholy wrote: Many Americans left other countries to come here and be free of tyranny. Those are the people who won’t run again, guaranteed!
Yes! That's exactly the reason I co-authored "Pursuing Liberty." People often don't recognize tyranny when it's overtaking your country within the system. But the people who left tyranny for personal liberty, who came to the United States, hear that same song and know what follows. That's why their stories, in their own words, are so powerful and immediate. And that's why it's so important for people of all political stripes (and students!) to read what they have to say. Many people don't realize what we're all about to lose if we don't act in the best interest of liberty.
Gee, I wonder what Obama and his Commie crew are going to sneak by the public in other turd legislation coming down the pike?
Next thing you know, it will be exit visas necessary for Americans making over a certain amount of annual salary, or in certain professions such as doctors and nurses and firefighters and the like.
On second thought, maybe Bush was right when he dragged his feet about putting up that fence along our southern border. I hope the American government stays as lax about border crossings once the human traffic starts going south.
When will it stop????
Well there is alway...
When in the Course of human events it becomes necessary for one people to dissolve the political bands which have connected them with another and to assume among the powers of the earth, the separate and equal station to which the Laws of Nature and of Nature's God entitle them, a decent respect to the opinions of mankind requires that they should declare the causes which impel them to the separation.
“I wrote a few months ago that we were, historically speaking, reaching a time when the next logical step was violence against those who resist.”
Friedrik Hayek, in “The Road to Serfdom”, wrote that it is inevitable that any social democracy will evolve into a totalitarian state, because of resistance and foot dragging by the vested interests that would be affected.
Come to think of it, a couple of years ago, one of our more leftist Chief Justices (Brier?) commented in front of the press that government should do “whatever it takes” to enforce “social justice” issues. Scalia, who happened to be present, sarcastically remarked “whatever it takes, eh?”
How would our gov. know about the accounts?
To your #15; AMEN!
Sounds fascist to me.
PING!
OK, this is the first I have heard of this and excuse me of my lack of experience, but I am only 24. I do agree that if you give the government an inch, they will try to take a mile and this act could be laying the groundwork for the government to take more control. But from what I understand of this bill right here, it is designed to stop tax cheats like mafia bosses, gamblers, drug dealers and other money launderers. If you have properly paid your taxes, the government shouldn’t be able to stop you from investing abroad. Not only would that be un-Constitutional, but it would be a Protectionist move that should be illegal under the WTO.
With that said, I don’t like the idea of withholding 30% just in case someone is a tax cheat. That seems to me like they are treating someone like they are guilty without any reason to be suspicious.
I like the idea of greater transparency. If someone is deemed a tax cheat after making a foreign investment, that is when the government should pursue them. Then again, with banks in places like Switzerland being willing holders of illegitimate funds in secret accounts, that may not be an effective policy.
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