It's Official - America Now Enforces Capital Controls (The Obama Fascists destroy Investing)

Zero Hedge ^ | 3/28/2010 | Tyler Durden

[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)

[Kay Ludlow]

But they forget a few things...

... We're armed to the teeth ;-)

[spaced]

“Does this mean that the money in my Canadian savings account, which was taxed by the IRS when I earned it, is now subject to an additional 30% tax when I withdraw funds?”

Probably not. Canada does not have banking privacy laws. Although US citizens with funds out of the country are required to report if the total is over $10k, this is an attempt to make foreign banks report that information as well. It’s really about control and will affect middle class expats as well as the jet-setters.

[luvie]

The mattress is sounding like the better alternative for my money every day.
November can’t come too soon!

[Son House]

Yep, that’s what I say, hold your ground! The truth will bear out, along with a few more folks finding out how miserable Socialism is. We’re the ones best prepared and informed.

[Bruinator]

It appears as if it is just on the earnings of that money.

[tsmith130]

By tax treaty. We have reciprocal enforcement treaties with most nations except a very few.

Ah...thanks. I googled 'Tax Treaties' and the first hit is an IRS page that lists of all the countries.

[Candor7]

Yep!

You got it.

Its called “witholding”

[riri]

That source link is excellent, thanks for posting the link.

[orinoco]

Good summary! I like your optimism. We must defeat tyranny here in the U.S.A.. We must continue to organize, fight hard and be patient.

The Progressive/socialists took a hundred years to get to where they are now. We are on to them now and we can turn back to our Constitution in a short time. It can be done quickly first by electing Constitutional conservatives to federal and state Congresses and then by appointing judges and Justices to the Courts who will interpret the Constitution and not legislate from the bench.

[wiggen]

I doubt it but they will hold onto your cash if you attempt to move it until they’re sure its not subject to further taxes.
What i get out of this is the daily flow of American capital held by individuals will,on a daily basis,be subject to 30% withholding which may or may not be kept by the govt depending on its tax liability if any. The results are twofold (though with many many ramifications).
First,the govt will show way more cash on their books thus hiding their own poor finances. It will cycle through on a daily basis and we’re probably talking significant funds.
Second they will be discouraging Americans from having funds in foreign banks which is tantamount to a trade war. If Americans pull their cash from these banks then those banks will see their tier one or equivalent measure fall.
How would our government react if measure like these were enacted overseas? If the Saudis decided on special taxes for holdings in foreign countries so all those princes started dumping American stocks? This feels extremely isolationist to me.

[BP2]

Obama's Redistribution of Wealth Checklist:

✔ Get Swiss to divulge secret bank accounts in 2009
✔ Bring back Estate Tax to all Americans in 2011
✔ Pass ObamaCare to Socialize the Health Industry in 2014
✔ Prohibit the of movement of American assets in 2014
__ Pass Cap & Trade (via Congress or Executive Order)
__ Pass Amnesty ...

[dcgst4]

Peter Schiff has been warning about this stuff for years. Damn sad. But even more sad is that you can bet the Republicans won’t do anything about it when they get in. Below is Peter’s latest vlog. Tell me it’s not scary that people are leaving the U.S. to FIND opportunity!!!

http://www.youtube.com/watch?v=KR8CLPUS5Y0

[Ghost of Philip Marlowe]

Who would ever have thought that tyranny would be implemented with such high-sounding, super-educated, legalistic language.

[ecomcon]

The Secretary can issue waivers to certain favored fatcats. The government chooses the winners from now on.

Fascism.

[GILTN1stborn]

Thanks for the pep talk

[ecomcon]

The prohibition of the movement of assets.

Next comes prohibition of movement through cap and tax.

[narses]

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[Tigerized]

Good summary! I like your optimism.

Thanks. Optimism, nothing! We simply don't have a choice! Are we gonna turn our country over to a bunch of leftists without a whimper? And where will the freedom seeking people of the world go in search of liberty, if America fails?

Americans have never stood still for being bullied and pushed around. By anyone. Hopefully, there's still a few of us left who appreciate our birthright of liberty, bought and paid for with the blood and lives of our forefathers.

We owe it to them, and future generations, to preserve it for ourselves and our heirs. Anything less is a sure path to slavery, as many of the oppressed in others countries have discovered.

[raybbr]

The results are twofold (though with many many ramifications). First,the govt will show way more cash on their books thus hiding their own poor finances. It will cycle through on a daily basis and we’re probably talking significant funds.

Exactly. There is absolutely nothing different about this compared to what Enron did. Cooking the books to make it look better to prop up bond sales. After these taxed kick in look for them to shout, "Look the deficit is going down." without any explanation. Or, at least, they will try to hide what they are doing. It's designed to show fiscal improvement by November.

These people are criminals in every sense of the word.

[Oldexpat]

Capital controls always work in disfavor of the banana republic who imposes them. Capital stays away. There are still many ways to secret money overseas. Risky, but identifying the beneficial owner of many assets is difficult. Once in place, they effectively block the flow of capital into the country.