FATCA: America Now Taxes Its Citizens on Everything They Earn Anywhere in the World The Economist
go to original July 2, 2014

FATCA: The new tax law for US citizens abroad (HypoVereinsbank)

In the depths of recession in 2010, a jobs-obsessed Congress passed the Hiring Incentives to Restore Employment Act. Bolted on to it was the arcane-sounding Foreign Account Tax Compliance Act. There was scant debate about FATCA, as it is more commonly known, because it was touted as a way to bring in money by curbing offshore tax evasion. In tough times, such “revenue-generators” are no-brainers.

Going after tax dodgers is understandable. But FATCA, which took effect on July 1st, is overkill.

America is the only large economy to tax its citizens on everything they earn anywhere in the world. FATCA’s purpose is to ensure that not a centime or rouble that a “US person” has stashed away goes undetected by the IRS. In a piece of extraterritoriality stunning even by Washington’s standards, the new law requires banks, funds and other financial institutions around the world to report assets held by American clients or face a ruinous 30% withholding tax. America is, in essence, using threats to outsource its financial policing. This is working: so far, more than 77,000 financial institutions have agreed to pass information to the IRS.

The costs of complying with FATCA are likely to dwarf the extra revenue it raises (see article). The law is also having unfortunate unintended consequences. The 7m Americans living abroad now wear a scarlet letter (presumably an “F”), thanks to FATCA. Many have been rejected by foreign providers of banking services, insurance and mortgages because, given the amount of paperwork needed to satisfy Uncle Sam, American clients are simply too much hassle. Foreign firms are less keen to hire Americans because of the extra tax complications. Not surprisingly, the number of Americans renouncing their citizenship has quadrupled since FATCA was hatched.

Read the rest at The Economist

FATCA Explained in 4 Minutes... (MoFreedomFoundation)

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