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FATCA: The Dumbest Law In History Just Went To The Next Level
Submitted by Simon Black via SovereignMan.com,
The Road to Ruin, as they say, is paved in good intentions.
So I suppose the road to hell is paved in the best of intentions.
And that’s how most laws often start: with the BEST of intentions. That was certainly the case when Barack Obama signed the HIRE Act into law in 2011.
It was intended to spur job growth in the Land of the Free while the wounds of the financial crisis were still fresh.
But always remember the rule of thumb with legislation: the more noble-sounding the name of a law, the more destructive its consequences. The HIRE Act did not disappoint.
Deep within its bowels fell the Foreign Account Tax Compliance Act, or FATCA for short. It was a sort of ‘law within a law’, and one of the dumbest in US history.
FATCA effectively commanded every single bank on the planet to enter into an information-sharing agreement with the IRS.
(Well, not so much ‘information sharing’. More like ‘information giving’. Because the US government doesn’t share anything with anyone.)
It all started based on a phony assumption that millions of Americans were hiding trillions of dollars in secret offshore accounts. And given how broke the US government is, they wanted every penny they were entitled to.
So the plan was to turn every bank in the world into a global spy network.
Any bank that didn’t comply was threatened with a crippling 30% withholding tax on every dollar that went in, out, and through the Land of the Free.
Banks complied. And FATCA was rolled across the world.
Eventually foreign governments stepped in and negotiated government-to-government information sharing agreements.
The idea was that, instead of banks sharing information directly with the IRS, they would give all the information to their national governments, which would then hand everything over to the United States.
Essentially it created another layer of bureaucracy, with ‘FATCA departments’ now within finance ministries around the world.
The first of these government-to-government information sharing agreements, or IGAs as they are known, went into effect on the first of this month.
So FATCA truly has graduated to the next level of stupidity.
Here’s why:
Remember, the entire law was passed based on a premise that it would quickly fill the government’s empty coffers with oodles of cash.
But that hasn’t happened.
The government itself admits that over the last 5-6 years, government programs to eliminate offshore tax evasion have brought in $6.5 billion, or roughly $1 to $1.3 billion per year.
That’s not even enough to fund the annual budget for the government’s obscure ‘Corporation for National and Community Service’.
And according to the Association of Certified Financial Crime Specialists (ACFCS), an organization specializing in tax evasion, FATCA will continue to generate roughly $800 million per year in tax revenue.
Yet $800 million doesn’t even constitute a drop in the bucket anymore; it’s enough to pay about 17 hours worth of interest on the national debt.
Even if ACFCS is way off and the real amount is 10x their estimate, the funds still won’t come anywhere close to what FATCA was supposed to bring in for Uncle Sam.
But it certainly raises the question—isn’t SOME money better than NO money?
No. Not when the cost is this high.
It’s not like implementing FATCA around the world is free. Banks and governments have had to incur substantial costs to comply. And those costs are ongoing.
Think about it—dozens upon dozens of nations across the world have to go through the trouble to change their banking laws and privacy regulations. In some cases they might even have needed to amend their Constitutions or hold a referendum.
Thousands of banks have had to suffer increased costs of compliance as well.
The British government alone estimated that the cost of compliance for UK businesses would be $80 to $150 million per year. Just in one country. It’s unreal.
Now imagine those same costs in France. Spain. Germany. Japan. Etc.
The costs to foreign banks and governments start to exceed the benefit to Uncle Sam very quickly.
This basically qualifies as extortion. The US government made a bunch of threats, forcing banks and foreign governments to comply with its stupid law.
It would be a hell of a lot easier if they had just blackmailed them all into making a donation to reduce the US federal debt, instead of creating yet another bureaucracy.
Even former IRS commissioner Steven Miller stated last year to the Securities Industry and Financial Markets Association:
“I can’t even say with conviction that I’m sure, looking strictly on a cost-benefit basis, that FATCA’s. . . benefits are going to outweigh the cost.”
FATCA constitutes theft. The US government is generating a little bit of revenue and the great expense of foreign banks and governments.
(not to mention the thousands of Americans who have had to renounce their citizenship because of FATCA’s idiotic rules.)
It’s a sad to realize that the only way the US government can generate revenue is to chase boogeymen across the world and hold foreign banks and government hostage at the point of a gun.
If tax evasion in the US really were such a massive problem (which, by the way, the data shows that’s it’s not), why don’t they just attack the root cause?
The US tax code is embarrassingly antiquated. The last major revision was from the 1980s, and it doesn’t take into account globalization, the digital revolution, or anything else that’s happened in the last three decades.
Instead of violence and intimidation, why not just work to streamline the tax code and make America more competitive?
Sadly, this no longer enters the government psyche in the Land of the Free.
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No tax dollar left behind - even if we have to shake your arse down and ramp capital controls...
"The Dumbest Law In History"
Is ObamaCare. Actually it's probably the most unconstitutional and corrupt as well. It has thrown millions off of their insurance plans, doubled, or more, their premiums, and skyrocketed many deductibles up to $10K/year or more. And to top it off the IRS enforces it. Nothing like a law telling you what you must purchase - or go to jail.
If you live in Amerika, the dumbest law is Obamacare..........for everyone else, it's FACTA hands down.
Gotta love those politicians selling hope who managed to dust off that fustercluck of a law and start enforcing it worldwide.
Why would this author assume their intentions were good? I assume their intentuions are evil as humanly possible. I am generally right.
How many times must it be said? The solution to all the sicknesses and short comings of the IRS is to simply get rid of it, and to condemn the notion of chasing ANY tax based upon INCOME!
How do you get people to pay attention to an alternative to the Income Tax that is well sponsored in both the House and Senate?
The FairTax: Simple. Fair. Preserves the Fourth and Fifth Amendments.
When is it going to be recognized? What will it take to make a dialog to develop? You'd think everyone is so inured to being surrounded with filth, corruption and insanity that no one notices what the IRS actually IS!
The FairTax is House Resolution 25 and is still before Ways and Means.
It will never happen for two reasons.
1. The rich and elite, as well as the corporate oligarchy, have the best tax law money can buy. They have spent billions for it and they are in charge- not you or common sense.
2. They know that someone is going to have to pay that 19T to 150T debt (depending on the figures you use) and they are not about to step up now.
Our tax code, which could be changed in one hour on Congress's floor, is the proof that the rich and elite- which most of Congress are- will never change it. They are all a bunch of bought and paid for selfish cocksuckers that represent themselves first- everyone else gets a different slot.
My wife is a US Citizen and I feel sorry for her on a daily basis.
That aside I know Canada has complied. Were I Prime Minister of Canada I would have told Barak to Fuck himself. And watched the dominoes fall.
Obama is the worst thing that has ever happened to this country. He makes Bush look like a piker.
@lunaticfringe: your comment begs the question of why no one discusses the FairTax.
Why is there no dialog?
Just gotta say- This is the best thread-within-a-thread I've run across in some time, maybe ever.
WTF is a tax, anyway? It is an imposition placed upon you by your 'betters' and enforced by the kids you wouldn'ta pissed up their ass if their guts were on fire in high school. Never mind that- kindergarten!
Our politicians aren't inherently evil, says me. They're ignorant. They've lived their entire lives inside a coccoon where they're constantly reminded how special they are- regardless of the destruction, err... redistribution of actual wealth they've caused. They are in fact- minor sociopaths who simply think they know better. Kinda like a homeowner's association president, an actual idiot.
Never mind the mildly sociopathic idiots who pretend to run things. Learn who backs these idiots and shun them.
For real.
B B B B But the tax code is such a good jobs program. All those accountants, IRS agents, banking activity, postal employees. Who cares if it produces nothing? Besides what else could you possibly do with your time that is as rewarding as doing paper work for the gov. without compensation?
See how much fun slavery and mental anguish can be!
Tax on wages is an immoral tax. The human condition dictates that man must work to provide home for him/herself and family. To tax the income generated from that labor is insidious, inefficient and immoral. Property tax on a primary residence is the next immoral tax. Property tax means you never own your property the government will force you from it at gunpoint if you do not pay them the tax to live on it. Both of these taxes should be abolished. Consumption tax, sales tax, transactional tax (except for basic food items meats bread veggies fruits) are all preferable ideas to these two immoral taxes.
Boner and the other POS Repugnicans in Congress should resign; they should have stopped another bit of O'Bama's idiocy, just like Obamacare Tax Bill.
If Barry were serious about tax revenue he should reign in the Big Corp that have trillions overseas tax free.
They have billions overseas tax free because they earned it overseas. Why should they pay taxes in the US after having paid taxes on it in whatever country the transactions took place?
They WOULD have to pay taxes on it when it's repatriated ... and since we have the single highest corporate tax rate on the planet (or 2nd, depending on where Japan is these days) why should they?
Do they owe it to you or something?
Self-interested corrupt liars always ignore the effective tax rate because it favors their personal interests to do so.
And that's why Panama is telling all but the super wealthiest of Americans to go fuck themselves should they wish to open even a modest $50-$100K account. And many other nations are following suit. Bank of Sealy looks better by the day...
Effective tax rate = nominal tax rate = 35% on corporate repatriations (of large amounts and for large companies).
The taxes have already been paid in the foreign jurisdiction. Adding another 35% is just plain stupid.
Every one should execute an inversion.
The answer is for the US to become competitive - not get a bigger gun to facilitate coercive confiscation so self-interested parasites that think they're entitled to someone else's property can be satiated.
I nearly fell out of my chair at the "home of the free" part, and that was before they explained anything. There is no right you think you have that cannot be taken away if the government can exercise any power by simply calling it a tax.
Well actually, the corporations lobbied congress for things like CAFTA, NAFTA, and offshoring in general and all of it incentivized with my tax dollars so yeah, they do fucking owe it to me. They didn't earn it. They stole it.
To the extent they obtained what they have by "rent seeking" I agree with you. To the extent they didn't, I don't.
Didn't we sell the income tax stream to China?
FATCA is not so much about collecting taxes as spying on all financial transactions. Unreported income (Just like terrorism) is only a bogeyman they use to collect as much info as they can.
I agree that the worst law I have ever seen is ObamaCare. It is a tax on being alive with enough ability to make enough money that the insurance companies (using the government as their enforcer) are interested in stealing from you. There is no other requirement to be stolen from than being alive and having income or assets. That is a truly sick idea.
As to the tax code. Any tax more complex than a flat tax is written for one purpose only: to be complex enough that those not connected pay, while those connected do not. The idea that a government is going to write tax structures in order to increase "fairness" is on its face absurd.
Are you trying to say the game is rigged?
Eventually the world is going to tell America to fuck off, that will be a great day in history.....
Getting closer every day.
I think Putin just did a pretty good job of it last week.
FATCA requires Putin to put $10 in a swear jar every time he says something naughty about Uncle Scam.
at some point the rest of the world is either gonna isolate/shun us or nuke us just to get us out of the way
Revenue was never the point. It was always understood that FATCA would reduce revenue, both in the US and in other countries. The purpose was more surveillance, the war on cash, and impoverishment of people all over the world, since middle class folks can get uppity.
Not stupid. But possibly overreach.
No tax dollar left behind - even if we have to shake your arse down and ramp capital controls...
No tax dollar left behind - even if we have to shake your arse down and ramp capital controls...
You can say that three times...
'shake down capital controls and ramp it up your arse.'
There. Fixed it for ya.
Good thing the international banks don't know of my off shore account in the Adirondacks.
I hear the Chairs are nice this time of year.
FATCA is not a failure if viewed from the right angle. FATCA provided a useful distraction tool and plenty of room for scapegoating. It also filled the various types of leftists with the pride of getting their way. Must have been worth a vote or two for the Kenyan asswipe.
Yes, but am I the only one feeling the warm embrace of "fairness" here? I mean maybe it doesn't bring in more money than it costs to run the program, but knowing that they're really sticking it to the rich makes it all worth it, don't you think? It's for the children, after all.
No. Rich people have ways around it, so do big corps. Fatca screws the average Joe who happens to live overseas, causes all Americans to never get a job overseas (no foreign company will hire someone who can't have a bank account), and small business entrepreneurs are SOL now if they want to do anything overseas.
It's the same thing when politicians tell you we are going to raise taxes on the rich, convienently forgetting to tell you that rich is anyone making over minimum wage as set by them.
That about sums it up. Most banks overseas just don't allow U.S.Citizens to open an account. Not terribly hard in countries that are still primarily cash based, but a nightmare in others. Either way though, restricts and limits the ability to generate revenue and just makes more countries posed and more U.S.Citizens happily dump their citizenship.
To the rich? You must mean those border babies. You know. Living in Canada, near the US border. Mom goes into labor, nearest available doctor is in the US.
So now the kid is 6 months old. What part of rich are you targeting? The diaper?
Theres hundreds of thousands of border babies in Canada and each one has to be compliant. At a cost of $1000 ea thats $100 million. Per year. One country.
There arent enough rich people to cover the cost.
But hey, you got a pacifier. Must be worth it. Right?
Fukcing moron
It's a rich something in those diapers.
Nice sarcasm...
Due to fatca, all banks overseas refuse to have American clients. So if you live anywhere outside USA you can't get a bank account. They even close the accounts of Americans who have lived overseas for years. And you could be born in USA but left as an infant, lived your entire life overseas (an "accidental American") now you can't have a bank account either. Sound unbelievable? It's true. Plus if you are just an enterprising American who wants to expand overseas, you CAN NOT DO IT because the first thing in setting up shop is to have a bank account.
There were very well reasoned and compassionate pleas to stop fatca but politicians did nothing. The effects of this fatca, the worst Act ever, will be enormous.
That is simply not true. Perhaps if you have a checking account with a very, very low balance (no revenue to the bank) they might tell you to look elsewhere - but we have no problems. In fact we were more concerned a year ago than we are today.
All foreign banks, with very little exception, refuse to open an account for Americans. Well documented and I speak from experience. Go to the American Expatriates Facebook page managed by Keith Redmond and read endless personal stories of the nightmare fatca caused to Americans overseas, and all about the so-called accidental Americans who have had their lives turned upside down. As far as I recall, Australia was a quick country to make all the compliance so Americans in that one country have less burden. Where are you?
We have numerous accounts with several financial institutions. We have a brokerage account and checking/savings accounts with two banks.
I no longer pay any attention the the info posted on the web regarding expat experiences. If they don't outright lie, they like to see their own words in print. If someone is stupid enough to make life decisions based on what someone on the internet says - they deserve what they get. As I said earlier - those expats bitching and mowning probably have less balance than a month social security check. They are nothing but work for the foreign institutions.
Every insitution we deal with has W-9s on file for us.
Edit : What is true for us is - the Boston based brokerage house where we held our retirment account for more than 30 years - no longer cared to continue the relationship because we were honest and said our residency is now outside the US. Which is kind of silly because another San Francisco based brokerage has zero problem in our transfered accounts.
Life decisions? The stories are endless and don't reflect any personal decisions. Nobody decides to disallow themselves from being able to have a bank account.
http://money.cnn.com/2013/09/15/news/banks-americans-lockout/
I haven't heard of anyone saying fatca caused no inconvenience but based on your comment, maybe everyone is making up stories and I hallucinated. I'll check myself. Thanks ddd.
Consider, for example, all the surplus labor in the US that's effectively tied to the land and mostly unable to emigrate thanks to FATCA. You've simply managed to fund your way out of the serf classification, and your situation is not reproducible.
I don't think FATCA itself is keeping anyone from emigrating. Most people are simply afraid to try something new. Perhaps they do a little research and come to the conclusion that the world outside the US is a dangerous place. If they get up the nerve to consider a move often times they seek out expat communities where they can speak their native language - and eat like they are back in the US. What probably does prevent emmigration is family ties.
It plays a major part when you can't have an account when you move and may thusly be limited in work, and all your spending money must be held add cash our you can't pay hosing our food.
I live in Panamá and there isn't a bank here that well allow you to open an account if you are a U.S.Citizens, and they forced everyone I know to close their accounts, some in the hundreds of thousands for balances.
We opened our first foreign account (HSBC) from a branch in the US - in Dec 2012 (FATCA was around then). It was only a checking account but it was enough for us to get our feet on the ground. The minimum balance in the US (for Premier) was a little steep - but when we left the US we made our new home the base with the bank - and the minimum balance was cut in half.
https://m.facebook.com/groups/AmericanExpatriates/
I'm subject to FATCA and I comply. There are some interesting aspects. They seem concerned with finnancial assets held in banks. No one has ever asked how much I paid for our house - or any other real estate holdings. No mention of precious metals. As the author correctly points out - the foreign bank reports to the foreign IRS like institutions which communicates with the IRS. However, unlike in the US where you get tax forms from your bank / earnings - we get nothing. We have to go through monthly statements and do our best to answer the question.
I have no intention of renouncing but I suppose the IRS could turn to someone's FATCA filings to determine if an 'exit-tax' was due.
The way around it is that nobody will except anyone that's from the U.S.You wondered why Frankfurt and London got so big?that's where the money is going,everywhere else,but with one exception,no Americans allowed.
That's exactly what happened. Foreign banks around the globe immediately stopped opening any accounts for Americans, then set about sending letters out to purge Americans from their system. Well documented and I personally was denied for one reason only -- no accounts for Americans. There are estimated 7 million US citizens overseas. But politicians do nothing to help them.
Yup, and I was involved in a project in London to do just that.
It's risk. The foreign banks have no way to confirm that an American customer is conforming with American legislation, and they fear that if their customer is not, they will be blamed and fined excessively. They saw what happened to BP, and now there is an expectation that if you work with America you are open to being bullied by the American state - no matter which party is in power.
America is gradually cutting itself off from world trade by its actions...
Most recently we opened an account in January 2015. That includes investing, checking and a credit/debit card. Just wanted to diversify and have another choice. We have never received any letters.
To be honest - we don't really need foreign accounts. With a Schwab debit card - which reimburses all ATM fees - and provides an excellent (Visa based) exchange rate (and no foreign transaction fees) - As well as our BofA Visa travel rewards card which offers the same fee structure (none). But I do like to be a little diversified and have some of our funds close to home (and capital control free).
I appreciate that your experience differs, and thus you base your perspective upon that, but just understand, you are the first person I've experienced who's had any level of success with this. I live in an expat community in Panamá, and everyone here got screwed.
I've never been to Panama - so take my advice with a pound of salt. But after a brief google search I came across this link.
https://online.citi.com/US/JRS/pands/detail.do?ID=LeavingUS
By no means am I endorsing Citi. We met with a guy from Miami in perhaps February. It took 2-3 months to get vetted - and that included my resume etc. When they finally said we were approved, I said - oh never mind - and went with Schwab. Someone mentioned risk earlier. That is exactly what it comes down to.
"That was certainly the case when Barack Obama signed the HIRE Act into law in 2011."
Weren't therepublicans in charge of the House in 2011?
"Deep within its bowels fell the Foreign Account Tax Compliance Act, or FATCA for short. It was a sort of ‘law within a law’, and one of the dumbest in US history."
Weren't the republicans in charge of the House in 2011?
Aren't the republicans in charge of the House and Senate in 2015? I haven't heard any republican Presidential candidate say they will repeal FATCA.
But that's why they put in the black guy in charge....no one not even a Cheeto can say anything about the black guy or you're fried, everyone knows that.
Rand Paul has been active in trying to stop fatca but to no avail.
Romney would have gotten rid of it. I think everyone kinda missed that part of his election platform.
Also I'm going to bet he's looking pretty good right about now.
"President Obama signed the Hiring Incentives to Restore Employment (HIRE) Act on March 18, 2010."
http://hireact.org/
https://www.irs.gov/Businesses/Small-Businesses-&-Self-Employed/HIRE-Act...
don't be naive. there are no best intentions. this is not a dumb law.
this is foundation and basic for new currency or revaluation of USD just few years from now.
after all in "land of free and home of brave" except 0,1% become taxed to the bone
It's not the Dumbest Law In History.
It's capital controls Bitchez!
FATCA by the FATCATS. Geez, that IS dumb.
Their pretext was some Facebook founder moving to Singapore or something. You need only say "bad, bad Other" in a condescending parental tone and Democratic™ faithful will catfight to be the first in line behind you.
"It was intended to spur job growth in the Land of the Free"... No, no it wasn't.
"FATCA constitutes theft."
Government constitutes theft
There... fixed it!
OF COURSE it's both stupid and not cost effective. That's what we do!!
Let's see Apple try and move its corporate headquarters to Ireland or Cayman Islands. They need America to supply and retain their talent, but they don't want to pay their fair share to maintain America. Corporate tax in these havens is low because they are either socialist with high income tax, or they are some godforsaken island. Hold these companies feet to the fire.
Oh get over yourself. They don't need American talent. They need loyal American whipped dogs to go to work and skip home most nights. The only two US talents that company has ever had are either dead or slumming it.
Problem: who decides what's fair? Apple only has that money because people GIVE it to them. Buy an android phone. There's a boatload of good ones not being put in your face by the main carriers.
Remind me again who runs the IRS, Treasury and the FED.
Remind me again who runs the IRS, Treasury and the FED.
Not really both of them. The IRS is a PRIVATE corporation, incorporated in Puerto Rico, and is essentially the collection agency for the Federal Reserve.
Violence and intimidation. Cornerstones of the American civilization.
Instead of violence and intimidation, why not just work to streamline the tax code and make America more competitive?
Let's see . . . maybe because:
Why would you think FATCA is about raising money? Why couldn't it be about surveilance and control? They had you by the balls in the US, now you can't escape by leaving the country or sending your money out of the country.
Besides if the want more money they just borrow it. Raising money by taxes is the last thing they worry about. Excuse me, second last, before cutting spending.
Double down! Stupid^2
it has always been about control not Revenue
“And given how broke the US government is, they wanted every penny they were entitled to.”
More like every penny they can steal. FATCA was a start on establishing the communication channels that the Neo-Con world empire would eventually need to maintain control.
As long as the world remains alert and stays on guard, there will not be a Neo-Con world empire and once the dollar reaches its intrinsic value, no funds for FATCA either.
Perhaps those poorly governed nations who are in danger of signing treaties with criminals (TPP, TISA, etc…) will come to their senses and tell “Just Us” and their traitorous government minions that their heads are full of oatmeal too! ROFL!
If the US loses its reserve status with the dollar, all that stuff will go out the window. No foreign bank will do it, because they won't be trading with the dollar anymore. Good riddance.
FATCA is a disaster. I have several foreign accounts in various countries because I have lived abroad exclusively for about thirty years. I even acquired foreign citizenship. But where I live, it would be very difficult for me to open up a new bank account if I admitted I was also American. Additionally, I have been made to feel like a criminal through this process despite having always declared all my income but never sent anything back to the US (why would I?).
So if I lose my bank accounts, I am in deep shit since I cannot open US accounts (no address in the US!) and cannot open foreign accounts.
Fuck you, America!
PS. re Obama-Care, it's ranks up there with nixon's creation of HMO's. An absolutely beautiful piece of facist legislation disguised as socialized medicine. Can anyone guess why the pharma and big-med companies are not complaining about ObamaCare? They wrote it! and the right has given up even pretending to dislike it; big-Med and Pharma told them to shut up.
Open an account using a friend's address. They don't even mail statements anymore, so you can go it online. Banks don't give a shit as long as you deposit money. Also, if you ante up a few thousand (ridiculous, I know), you can get out of the game permanently by trashing US citizenship, which is now a liability, not an asset.
PPS: The price of renouncing citizenship was just increased from about $200 to over $4000 because of "extra processing costs". How can this cost more than creating a new citizen? Again, Fuck You, America. I can't even really afford to renounce any more.
Three years ago, when Mitt Romney was running for President, there was a great hoo-hah about his use of "offshore" tax havens to minimize his tax burden. In a post on my personal blog (non-profit, I assure you!) I felt obliged to defend that usage, and to place the blame where it deserved to be placed. I give the link below.
(I admit to a personal stake in this argument. Not only do I live in Grand Cayman, I am a former "offshore" professional and a former Manager and Director of the local Chamber of Commerce. Too much of a handicap to claim neutrality, I suppose! Let me take the opportunity to also admit to a very firm belief that income-tax equals theft.)
http://barlowscayman.blogspot.com/2012/08/in-defence-of-offshore-tax-havens.html
FATCA - Foolish Attempt Taking Cash Away.