FATCA just makes life difficult for US expats
17
Feb
FATCA just hasn’t been thought through properly by the US Government.
Really I’d love to know what it achieves apart from expense to Worldwide banks (who can’t afford it) and aggravation to US expats. If anyone knows the pupose please leave a comment below.
The US government says its to stop expats hiding money and not paying tax on it. Who believes them, I don’t
There are a number of issues here, firstly should US citizens abroad have to pay tax anyway. No other country taxes its citizens in this way.
Secondly, why should banks pay billions to set up a system to help the US Government.
Thirdly, FATCA isn’t going to be effective anyway. Countries like China and Taiwan will refuse FATCA.
Fourly, there are ways to reduce the tax anyway in most countries. Switzerland this week agreed FATCA but gave exemptions to pensions. At deVere Group we can advise on reducing the tax in a correct manner.
So who loses, well as I see it, the only people who lose are genuine US citizens who maybe don’t want to return to the US. Banks lose as they are hit by costs. US expats lose as they are refused bank accounts and mortgages by banks who can’t cope with or don’t want to cope with FATCA.
What positive does FATCA achieve? I really have no idea maybe someone can tell me!
Nigel Green deVere Group
Blog wriiten 17th of February
Sorry I can’t help you with telling you what FATCA achieves. I am a former US citizen who IRS wants to reclaim as a “US person” as I am just entering retirement.
I hope someone will take you up on your invitation to comment on what FATCA will really achieve. I know you won’t be surprised if you don’t get any responses!
There is nothing positive to be derieved. The U.S. will refuse to answer that question because it calls for a rational response and the U.S. position on citizenship based taxation is not at all rational. You make a good point when you say that, “no other country taxes its citizens that way”. The truth is that the U.S. cares naught for what any other country does but it always wants other countries to care about what the U.S. does.
The U.S. uses citizenship based taxation because the U.S. has no leaders who actually understand the principles of taxation. That is the sad truth of the whole matter. The U.S. equates citizenship with tax liability, which is incorrect. Tax liabilities on the part of individuals do not arise out of citizenship but out of one’s relationship with the treasury of the taxing authority. That is why the U.S. can tax non-citizens as well as citizens who are resident in the U.S. and who are also account holders with the U.S. Treasury.
In the end it is a matter of people who have been given more power than they have taxation sense.
You forget to mention the biggest loser in all this: the US itself, whose trade deficit is going to increase even more because of its misguided policies.
The number of Americans selling US made products abroad will decrease drastically.
Anti-Americanism will increase.
All that to catch a few millionaires hiding money abroad?
The IRS has shown with all the prosecutions in Switzerland that they did not need FATCA to find and prosecute people hiding money in Swiss banks. John Doe summonses work just fine. They could have done that in all the main known tax heaven jurisdictions.
When treasury started to understand the implications and consequences of FATCA when they started working on it, they should have gone back to congress and expressed concerns, instead of stupidly trying to implement the law that was passed without questioning it. Treasury and the IRS are the ones who can best estimate how much revenue this would bring and realize that is it totally out of proportion with the implementation costs. Why this blindness and determination to implement something that does not make sense? Why wasn’t there more dialog between treasury and congress about this?
Sorry, I don’t have an answer either as to what the positives of FATCA are. I guess the possibility of catching those real tax cheats and having people follow rules better. Being able to increase the number of tax compliant people, an area in which the US is already pretty good? Creating demand for FATCA lawyers? Ironically, this is likely to add many more jobs abroad than at home.
It is sad to see the US shooting themselves in the foot like that.
Nice article Nigel, I too would love to see the Pro’s about FATCA, not just for the US, but for all the other countries signing up to it or creating their own version