FATCA good or bad, you decide

05 Jan

This week Switzerland’s oldest bank closed. Last week Taiwan refused to give the US information. Ireland said it will comply with US rules. The World is spending billions on complying with US legalization. Is FATCA good or bad? 

Here’s an update on the latest.
Switzerland’s oldest bank, Wegelin & Co., was founded in 1741 and embarked on a storied history. But in 2013, it admitted helping hide $1.2 billion for American tax cheats.It’s the first foreign bank to plead guilty to U.S. tax charges, and now it’s closing.
With branches only in Switzerland, Wegelin claimed it was bound only by Swiss banking laws. Yet it capitulated and pleaded guilty. Even Wegelin’s plea and death knell leaves loose ends, though, including former executives Michael Berlinka, Urs Frei and Roger Keller who failed to appear in U.S. court and were labeled fugitives.
Taiwan is currently refusing to supply the US information.  A government official last week said Taiwan’s government has no obligation to meet tax-reporting requirements under Washington’s 2010 Foreign Account Tax Compliance Act (FATCA) until it has signed a tax information exchange agreement with the United States.
They added,  it is not necessary for the local government to help Washington to facilitate the enforcement of the FATCA. It is a matter of sovereignty.
Ireland signed a deal last week with the US to implement its Foreign Account Tax Compliance Act , an agreement Irish Finance Minister Michael Noonan says will significantly increase the amount of tax information automatically exchanged between the two countries.
Www.iexpats.com this week reported thatJames Jatras, a former US Diplomat and US Senate staffer, who now runs a legal firm in Washington D.C which specialises in foreign affairs and human rights, has launched a worldwide campaign for FATCA to be repealed.
Personally I agree if tax is due it must be paid. I do however think that this act which is costing the world far more than the tax it will generate is a stage too far. US expats are suffering as a result, not because they will have to pay tax, but rather because FATCA implementation is so expensive to implement that most financial institutions will simply refuse to deal with Americans. There certainly are some Swiss banks that wish they had avoided Americans already.
Should the US force FATCA on the world? I’d love to hear your comments?
Nigel Green deVere Group
blog written 5th of January


  1. I would be on the side of a firm NO although in full disclosure I am in contact and work closely with Jim and others on this issue.

    There was an ANTI FATCA Forum that was held in Toronto that is now posted on YouTube. Anyone interested in FATCA should definately watch. Presentations were given by Jim Jatras, the Canadian Civil Liberties Association, and Allison Christians the tax law chair at McGill University in Montreal.


    The Toronto FATCA Forum now ranks as the highest results on YouTube when you search for FATCA

  2. I am with Tim on this one. FATCA is a disaster for the world economy to say nothing about the unintended collateral damage on Americans Abroad. There are real systemic Risks that FATCA injects into an already shaky financial industry around the globe.

    I too recommend those FATCA Forum videos, as a counterbalance to all the “you must comply” messages that are promulgated by The FATCA Compliance Complex co-enablers of the IRS marketing efforts. There is BIG money to be made in consulting advice and services solutions by the BIG Four Accounting Firms plus legions of CPAs and Tax attorneys which pile on in the regulatory equivalent of the War Profiteers. So, the HIRE ACT which created this Monster is indeed creating jobs, just the wrong, non productive, ones.

    BTW, for those Tax lawyers that might be reading this, I would highly recommend the lecture by International Tax Attorney, Allison Christians: http://bit.ly/WhOdIg She has had her own personal epiphany on the road to FATCAmascus.

  3. I totally agree with Tim and Just Me.
    With such a low reporting threshold at $50,000 and only $10,000 on the FBAR, FATCA is not about catching only tax evaders, it is about strictly enforcing citizenship based taxation that the US is denouncing in the case of Erithrea. How ironic.
    It is also forcing the world to adhere to a international tax data exchange.
    Politicians don’t seem to care about the cost of FATCA, and that it would cost much more than what it brings in revenue. For the FATCAnatics, The principle that every “US Person”, even living abroad and not benefiting of any services, needs to pay every penny of “its fair share” of taxes under the current laws is worth all the money spent on it – even if it doesn’t make sense financially.
    Citizenship based taxation is costing US jobs. Here is a link that describes some of its negative consequences:

    The other side of the FATCA story, not reported by the media, is the current treatment by the IRS of foreign account holders who are not in compliance. They have a one size fit all approach where they force people in a Voluntary Disclosure Program, where they have to pay tens of thousands of dollars in accountant and lawyer fees to file 8 years of back taxes, pay what they owe, interest and a 20% penalty fee AND a 27.5% fine on the high balance of their foreign accounts, regardless how small the amount of taxes they owe might be. They coerce people pay by threatening them of even higher FBAR fines ($10,000 per account per year for a non willful violation on 6 years of statute of limitation – if the IRS considers you willfull, the fine is 50% of the account per year).
    This may be how the people whose name are transfered will be treated.

    FATCA impacts a lot more people than they initially thought about. Many US immigrants are unaware that they have to declare their bank account left open in their country of origin, and pay taxes on the interests. Few accountants even ask the question.
    Immigration attorneys and US immigration services don’t mention a word about these obligations when they give them their visa or green card.
    They will be netted by FATCA as well. This negative experience will make them want to go home.

    The consequences for the US will be extremely negative on all fronts – not to mention the anti-american sentiment abroad, because of their imperialism and disrespect of foreign privacy laws, and lack of investment in the US as a result.
    Will China accept only 70% of the interest on the money they lend us if they decide not to comply?

    How sad that our politicians are not realizing that and going full steam with FATCA.

  4. FATCA is one of the dumbest laws that ever came out of the legislative system of the U.S. federal government. It validity is based on coerecion and not cooperation. It tramples on the sovereignty of other nations and destroys the privacy rights of individuals. FATCA will make America the great repository of the world’s personal financial information and therefore a one stop shop for the world’s identity theft criminals.
    U.S. citizenship based taxation, which FATCA supports, is an illegal abomination that has been tolerated up until now only because it has never been enforced. It is time for this injustice to be taken out, shot and buried in the back 40. Citizenship based taxation is an act of outright robbery of the treasuries of other nations. Taxes are not paid on the individual but on his/her economic activity as conducted in the currency of the given tax authority. Therefore taxes are all territorial.

  5. FATCA is bad, very bad. As a expat minnow caught in this wave, I can barely afford to get tax help to submit forms that show I owe NO tax. Once FATCA is fully in place, I will have no privacy. I shall have to renounce or pay a fortune in fees again to file forms to show I owe NO tax. I’m also concerened about my privacy. Can the IRS really safeguard it?

  6. The US’s unique citizenship based taxation and draconian filing penalties enforced by FATCA will serve to put an end to American global migration of any significant scale. The reason this hasn’t happened any earlier is because the majority of Americans believe that they are as free as any other citizen in the world and should only pay taxes where they earn their incomes and where they profit from investments. US persons will always pay the higher of their resident country’s and US tax rates, and receive the lower of either country’s deductions, making them second-class citizens while abroad. The annual cost of filing, inability of being able to take advantage of tax deferring investments like the natives do, and the complete loss of financial privacy will either send Americans packing back to the US, renouncing US citizenship or send USP’s of moderate means whose lives will be devastated by FATCA into permanent hiding. Bottom line, the US punishes its own when they have the audacity to leave its warm bosom, FATCA will ensure that many, many will curse it for the rest of their miserable days.

  7. The US has simply gone out of its mind. FATCA will eventually unite the world against the US. As others have pointed out FATCA is really about attempting to enforce citizenship-based taxation – which is the immoral practice of the US taxing residents of other countries. US citizens living in other countries are often dual citizens and residents of their country of second citizenship. Therefore, FATCA is really about enforcing the taxation of the residents of other countries on money earned in those other countries. Once other countries understand this they will oppose FATCA, refuse to allow any new US citizens to immigrate and quite possibly remove US citizens from their countries. While other countries see value in having their citizens abroad, the good ole USA has turned US citizens abroad in toxic liabilities anywhere they go.

    Furthermore, (watch the videos of the Toronto FATCA forum) you will see that through the FATCA IGAs, the US is attempting to lower the standard of human rights and freedoms to the low standard in the US.

    FATCA is exposing the US for what it is: a spiritually, morally and financially bankrupt country that is completely unaware of and out of touch with the global world. After all their noise they have made about their IGAs only 4 countries singed on.

    It’s time for the rest of the world to simply create an alternative financial system that runs independently of the US.

    So, if you don’t get my point: FATCA is stupid. But, it will expose US citizenship-based taxation for the fraud that it is.

  8. FATCA, though announced as a method to catch people earning money in the US and stashing it abroad, has the effect of enforcing double taxation on bone fide résidents and dual nationals abroad, who may have legal, moral, and practical financial reasons to not comply with US reporting and double taxation requirements, many of whom wish to remain behind their foreign nationality and not comply. The abuses of the internal revenue code that tax foreign dwellings in US dollars without any regard for what the local taxation system is, the taxation of foreign unemployment, welfare and pension benefits without the benefit of the FEIE, and the double taxation of pension plans abroad that negates the advantages of these mandated by the local governments where people live are intolerable acts of discrimination and violation of the sovereignty.

    What is horrible about FATCA, is that even if one is compliant, the cost increases to the taxpayer in terms of reporting, and banks, employers and potential business partners refuse to do business with Americans, even if they also hold the nationality of the country in question.

  9. The elefant in the room is extraterritorial taxation.
    There is no real justification for this which is why no other country in the world (besides Eritrea) does this.
    It is obvious to all that nobody wants people to hide their money offshore. What is strangely not obvious because America deems it to be so, is that people who live and earn in another country should not be doubly taxed.
    FATCA is therefore an american instrument placed unilaterally on other countries to serve America due to another injustice: abuse of economic power.
    But the only thing that will sway America to rethink it`s policies and laws is not fairness or justice, but self-benefit. FATCA will not benefit but harm America in the long run because in the future, people will avoid America in the world of business. Any company which has an american on its board of directors or in any signatory position has to pay taxes to America. They will chose to hire a person of another nationality instead. America will become increasingly isolated in a global market.

  10. Citizenship based taxation must end. For those of us that have no income or assets in the U.S., we owe nothing to them. FATCA is an abuse of power and hurts all U.S. persons living abroad. I attended the Toronto Fatca Forum at the University of Toronto. Check it out on YouTube. It is a must see for all “US Persons”

  11. FATCA seemed like a grade B movie plot when I first heard about it. It’s difficult to believe that the United States actually thinks that it can dictate that every other country in the world must conform to US laws. But, the saddest part about it is not that it’s real, it’s that countries are actually buying into it.
    FATCA – Foreign Apathy Toward Coerced Assimilation.
    My vote is an emphatic, definite NO. One country, no matter which country that is, should not being attempting to force their laws down the throats of other countries. FATCA is not going to severely harm just the personal finances of present and former US persons, but also the countries where those funds were earned, and are held. Add in the cost of banks to comply, and FATCA has a large negative economic impact. Ridiculous.

  12. Americans living in foreign countries pay taxes to the governments of those countries. Along with FBAR, most were unaware they were required to file/pay US taxes as well. This is in no way, equivalent to Homelanders who purposely seek out places “offshore” to avoid tax. However, IRS has gone after honest Americans abroad who had no knowledge of their obligations. Instead of encouraging them to come forward in a reasonable way, the IRS has engaged in a vicious cycle of fines, penalties, interest and whatever else they can think of to persecute those who are simply presumed to be guilty.The stories of those who have tried to comply by entering the Offshore Voluntary Disclosure Initiative are truly horrifying, many enduring 2 years of confusion, being threatened with penalties equivalent to their entire retirements. These are people who by and large, owe no tax to the US.

    Some of the reporting requirements defy any level of reasonable logic. A US citizen, stay-at-home mother for instance, who likely has no income and is signed onto her non-US citizen husband’s accounts, is required to report HIS bank account numbers, balances and so on. I doubt any US Homelander would be willing to do the same if living in the US, married to a foreigner with a government who demanded the same, or else be prepared to lose a considerable portion of savings, retirement plans, etc.

    Now FATCA promises to be even more punishing. Financial institutions across the globe will be required to report their American clients’ personal banking information. The US government will coerce this by reporting by withholding 30% of an institution’s entire US holdings if they do not comply. Banks in Switzerland have begun to close those client’s accounts without notice, including the renewal of mortgages. Congress and the IRS are fully aware of this and do nothing to mitigate this truly destructive practice. There is no excuse whatever, for this gross misapplication of power. A recent article pointed out that terrorists will be able to pinpoint identification and location of Americans living abroad, thus putting them in harm’s way. I cannot imagine any American, abroad or not, feeling that this is the way a government should act toward it’s own citizens.

    The numbers of Americans abroad renouncing is higher than the government will admit. The “Name-and-Shame List’ published in the Federal Register is hardly an accurate representation of how many are doing just that. Look to the long waits at European embassies and consulates, the number of expatriates banding together in Canada and Switzerland trying to get their message out via online forums and you’ll get a much better sense of how widespread this “trend” is.

    Not about tax, nor political discontent, the larger issue is the complete betrayal by one’s country in an attempt to gauge for money to make up for the horrific debt the US has. Add the cliches of “tax cheat,” “traitor,” and the guaranteed reaction such labels produce, and those who expatriated for reasons such as marriage, education or employment can count on being treated in the same manner as those who may leave the US for tax purposes.

  13. Canada, Prime Minister Harper, and Finance Minister Flaherty should JUST SAY NO to any type of agreement or IGA or other FATCA law or plan!

    We already report and pay taxes where we actually live and work. Our bank accounts and assets aren’t ‘foreign’, or ‘offshore’ – they’re located where we live. And we live outside the US. We don’t live in Kansas, so we don’t bank in Kansas. We already pay taxes in full where we live – and we don’t live in the US.

    Only the internationally censured government of Eritrea taxes those abroad on the basis of citizenship alone. The US is in great moral company there.

    FATCA, and the rest of the US extraterritorial plans for world domination is just greedy self-serving arrogant extortion dressed up as some kind of faux tax justice. How many US millionaires and billionaires are really hiding out in Canada? ZERO. The US Treasury and IRS and Congress know that it is entirely disingenuous to claim that we’re all evaders hiding accounts from the IRS. We already report those accounts to the CRA. We already pay taxes, and the assets in the bank are AFTER TAX – and fully transparent to our home country tax authority. Many of us were born in Canada and other non-US countries – yet the US claims our assets, and those of our children – who’ve never set foot in the US. Did our dual citizenship children plot to evade US taxes by arranging to be born ‘abroad’? Do their Canadian RESP education savings plans really equate to the accounts the IRS says belong to money launderers and drug lords? So why are they required to be treated the same as those belonging to criminals – under the Bank Secrecy Act?

    Even the US Ambassador to Canada, Jacobson admits that Canada is not a tax haven, and Canadian dual citizens and residents are not likely to be criminal tax evaders. Then why is the IRS persecuting us? Is it because we’re easy targets? Is it because the IRS and US want to save face by pretending that what they’re doing with FATCA and FBARs is justified though we owe no US taxes? Or, is it that the US wants a piece of our non-US assets anyway – in lieu of the US tax WE DON’T OWE, and thus they can’t assess us for – since we pay often more taxes to the governments of the countries we were born in, and where we live permanently? The US is using us as scapegoats.

    Whatever happened to innocent until proven guilty? FATCA is imposing unethical and unreasonable demands on people who owe the US nothing – including minor children – born in Canada, who just happened to have a US parent – and there is absolutely no evidence that their or our accounts outside the US (where we live, and were born), are any more likely to be criminal money laundering terror funding proceeds than those inside the US – our governments oversee banks here much better than the US oversees its ‘too big to fail’ domestic banks who launder money for S.American and Mexican drug lords. The IRS doesn’t even prosecute US banks who admit to money laundering and BSA crimes – it settles out of court. Florida, Texas and other states make a big living on providing bank secrecy for non-resident aliens – and the IRS knows it.

    The US provides us abroad with NOTHING. No services, no respect, and no voice or vote.
    We shouldn’t be persecuted just so the US can service the monstrous domestic debt it has racked up. And, if US corporations aren’t required to pay US tax on the assets they hold outside the US, why should we?

    The onus should be on the US to prove that all 6 million or more of us ‘abroad’ are actually guilty of something, rather than force us to prove our innocence annually through endless labyrinthine forms, and incomprehensible filings – on pain of obliteration through the imposition of FATCA, FBAR, 3520 and other similar reporting and penalty regimes the IRS has dreamed up.
    As many as possible are renouncing US status – because the US has gone mad – and drunk with power – and apparently lost even the appearance of any ethical and rational treatment of those it claims as ‘taxable persons’ born, living. working, and paying taxes ‘abroad’.

  14. FATCA is such an absolute monster. Equally as bad, and what is even worse – and what makes FATCA is absolutely disastrous, is the unique US policy of extraterritorial taxation. That is levying and collecting taxes from persons who live in other countries because either they were born in the US (although it may have been accidental that their mother was in the US at the time of their birth), or were born either legitemately or illigtematly to a US citizen parent in a foreign country.

    Does anyone think even for one moment that any US state, say New York or California for example, has a right to collect income taxes from persons who live elsewhere just because they were born in that state? Or because that person has a parent born in that state?

    Susan Rice, the US Ambassador to the United Nations “led the charge” in securing condemnation by the UN Security Council on December 5, 2011 with resolution 2083 (2011). That resolution, approved without a singe Nay vote, condemned Eritrea for subjecting its citizens resident in other countries to Eritrean income tax. Eritrea was condemned because this action is a violation of the Universal Human Rights of citizens of that country. Yet this is exactly what the US does to not only its citizens living abroad but to foreign green card holders who have gone back home where they came from.

    This identical US tax policy is no less a violation of the human rights of the persons affected than when Eritrea does it.

  15. Nigel Green and the comments already posted have certainly highlighted the disaster created by FATCA. And one of the key disasters is the destruction of the community of Americans overseas. It is based on the ignorance and arrogance of Congress t unilaterally impose its laws on the rest of the world, to couple this law with citizenship-based taxation in such a way that Americans abroad are being shut off from bank accounts, Americans can no longer get jobs of importance with signatory authority, Americans are excluded from foreign partnerships, American entrepreneurs abroad are being forced to close down their businesses, Americans spouses are being pushed off of joint bank accounts with foreign spouses, Americans cannot get mortgages, and on it goes. Many Americans abroad have not been in U.S. tax filing compliance, often because they were not aware of the requirement. Honest individuals who pay taxes where they live are not sleeping at night and find themselves cornered with no solution. The IRS threats and one size fits all policies for entering compliance are vicious, in particular because the U.S. in fact should not be taxing its citizens overseas. There is a growing wave of support for going to residence-based taxation. FATCA has increased the momentum for a push to residence-based taxation. It is time for the United States to wake up to the realities of the world and to align its tax pollicies with the rest of the world, rather than impose extremely penalizing meeasures against foreign financial institutions through FATCA.

  16. This is the worst US law in history. I am a dual and have not lived in the US for over 20 years. Now, I find that I was supposed to comply with arcane, complex filing requirements that a layman has no chance of understanding.

    All I have done is live an innocent law abiding life outside the US. I have paid all taxes owed in my country of residence. Now I find that I could be subject to fines and penalties greater than my net worth.

    Until I discovered this mess I used to be neutral or positive towards the US. Now, I have nothing but contempt for the way we are being treated. I am sure this is a feeling that most long term expats will have when this finally goes mainstream.

  17. The only ones who support FATCA are those profiting from it – often members of companies who are salivating at the lucrative forever contracts to tinker with the ‘compliance solutions’ and ‘fatca visions’ they’re marketing with fervour. Y2K had nothing on what FATCA will require. Who’ll pay the costs? The entire rest of the world. Who’ll profit? Too Big To Fail US banks – who the IRS has promised will only have to provide faux reciprocity – allowing them to keep their drug lord and money laundering customer accounts (I’m talking to you Florida, Texas, Nevada, etc.). US corporations will still be encouraged to incorporate in Delaware to avoid taxes (I’m talking to you – home State of the VP Biden). The US will continue to tax wages at a higher rate, and allow big investors and big corporations to lobby successfully for breaks. The US will continue to threaten us abroad – and invent new ways to double tax us ex.”to help fund “Obamacare”, the United States has brought in a tax – the “Net Investment Income Tax”.

    Strangely, though we abroad cannot benefit from Obamacare, or Medicare, and pay taxes for healthcare where we live, we’re expected to help pay for the health care of those inside the US. And, at least on commenter states that it is possible that those abroad may not be able to use foreign tax credits to offset it.

    That is why as many as possible want to be free of the unwanted US yoke which UScitizenship has become – imposed on us against our will. The US only claims us and our foreign born dual children as citizens – insofar as this is defined as taxpayers. No other rights of citizenship are offered. No voice is given to us. No presidential commission to hear our issues. No vote for many of us. Only extortion of penalties and taxation by force and threats.

    We don’t respect the US anymore, and have become ‘badwill’ ambassadors abroad. We vote where we live, and we’re voting for our home countries to resist US arrogance and exploitation. We’re urging our politicians to just SAY NO to FATCA and IGAs.

  18. The US is shooting itself in the foot. The US is suffering biggest trade imbalance. The US disparately needs to increase exports and resultant job growth at home. By killing dual-citizens and small business (since banks in other nations no longer wish to do business with them) that are significant contributors to the exports, resulting reduced exports and more job losses at home.

    Every one knows regulation kills businesses. FATCA is more than a complex regulation by banning all the financial dealings between US-persons/businesses and local financial institutions. The US is foolishly shooting it self in the foot, by treating 99% legitimate transactions as tax-cheats to catch 1% tax-cheats. Any person who hates the USA and wish to see the US suffer, he would be very happy for the FATCA and its effects on the US economy.

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