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Hot Money
A few years ago the issue of Americans with Swiss banking accounts
exploded onto the headlines. The US Justice Department held no prisoners
in its effort expose and resolve the problem. It nearly crippled UBS in
the process. It ended with changes in Swiss law.
The consequence has been that NO US PERSON can open
account outside the United States without agreeing in advance that every
aspect of the account will be reported to the IRS. The door is closed
for hot money outside the USA. That is a very positive development.
Every country should follow the shining example of the USA. We have set a
new standard for disclosure. The world would be a better place if
American standards and practices were followed around the globe.
But there is one aspect to this puzzle that has bugged me for the last few years. My question is;
“What
happened to the 2/9/2009 letter addressed to Treasury Secretary Tim
Geithner from the Mexican Finance Minster, Agustin Carstens, requesting
information from the US banks on accounts maintained by Mexican
nationals in US banks?”
Back in 09 Time magazine had a story on this titled, “Foreign Tax Cheats Find U.S. Banks a Safe Haven”. From that article:
the
U.S. effectively serves the role of Switzerland for Mexico, which
suffers from rampant tax evasion.. Much of the estimated $42 billion a
year of illicit funds flowing out of Mexico each year (not including
drug cartel money) ends up in U.S. banks
The letter from the Mexican finance minister seems straight forward enough:
"The
exchange of information on interest paid by banks will certainly provide
us with a powerful tool to detect, prevent and control tax evasion, money laundering, terrorist financing, drug trafficking and organized crime,"
Who could argue with a proposal that would accomplish all those
worthwhile goals? The language from the IRS on reporting interest income
on foreign account holders is the problem:
Interest on Deposits
Generally, no withholding (or reporting) is required on interest
paid to foreign persons on deposits if such interest is not effectively
connected with the conduct of a trade or business in the United States.
For this purpose, the term "deposits" means amounts that are on deposit
with a U.S. bank, savings and loan association, credit union, or similar
institution, and from certain deposits with an insurance company.
In May of this year Switzerland
signed tax treaties with a number of neighboring EU countries. UBS lost
$40b worth of deposits as a result. The other public and private Swiss
banks lost deposits as well. One can assume that US banks would suffer
from similar withdrawals of foreign money should America follow
Switzerland’s example.
I am left wondering what happened to the Mexican letter to Geithner. I
can’t trace a resolution to Mexico’s formal request. If anyone reading
this can point me to how this was resolved, I would appreciate it. If it
wasn’t resolved, and the US is still a safe haven for hot money I have
to ask; Why?
»
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Interesting thought, we tax U.S. citizens who reside in other countries, but NOT corporations. Why not ???
You have to ask?
Why, all money is not hot money. If I move assets outside of the US it is nobodies business but my own. The only reason the US wants to know is so the Gov. can help it self to my stuff whenever it wants too. But that is the reason to move money in the first place. So, gold or cash in a hole.
i banked with wachovia ever since my folks had me open a savings account to deposit my allowance. as a 8yr old i would ride my bank to my local branch and pull out $10 at a time for baseball cards and candy. my bank account and my bank were a source of pride. it makes the sting this all the worse.
refresh your memory on wachovia's dealings with mexican cartels < http://tinyurl.com/2925wus >
our leaders are dangerously deluded if they think our hypocrisy on these matters of terrorism goes unnoticed. i know a few folks from mexico, and each one has been touched in one way or another by the violence down there. that the US' bank friendly policies afford the cartels critical sources of funds is one of our greatest moral failings
ps: sunday morning tunes
http://www.youtube.com/view_play_list?p=BC8D4475D9DA7B4D
Casa de puta
A bit off topic but maybe the graph from Jesse's American Cafe at least helps explain a source and why the net worths' of Congress have fared so much better than YOU since the advent of the finacial crisis.
20 November 2010Congress' Median Household Net Worth: One Picture Is Worth 1000 Words
Congressional Members' Personal Wealth Expands While National Economy Sours
http://www.bloomberg.com/news/2010-06-29/banks-financing-mexico-s-drug-cartels-admitted-in-wells-fargo-s-u-s-deal.html