July 31, 2013
By: Kelly Diamond, Publisher
I’ve been operating in a fog. I honestly thought FATCA was only meant for American CITIZENS. Turns out it’s meant for “U.S. Persons”.
With the net casting far wider than many realize, the IRS is essentially fiscally persecuting anyone who’s even tied to the U.S. … and by extension their non-U.S. family, businesses and/or organizations!
As Paul Seymour has pointed out numerous times (but still not enough, in my opinion), the US is the ONLY country that taxes its citizens no matter where they earn. You want to earn in Japan? Great! Work there, pay Japanese taxes, and then pay Uncle Sam his fair share too… Taxation in general has become more like membership dues rather than the common notion of “paying for basic services that everyone uses”.
In a local article today, for example, I’m reading about this measure in the tiny town of Marble Falls, TX where they want to tax residents for projects. Not fixing lamp posts or fire hydrants… which the average person could get behind. Building shopping centers! Evidently, they don’t want private developers to come in and invest in building shopping centers. This is now a city function: building shopping centers?
Likewise, what we have here with FATCA measures is no longer about residents paying for services they receive… it’s about paying for the privilege of touting some sort of affiliation with the United States.
So, under FATCA, and starting in 2015, the U.S. IRS will force banks to submit information on total assets, account balances, transactions, account numbers and other personal identifying information. Ever see a 1099? Yeah, it’s nowhere near this detailed. In fact, if it were, you’d have a rather reluctant group of individuals on your hands when it came time to collect.
IF we are really going to pursue “U.S. Persons” and their foreign accounts, then you might find it interesting to know who falls into that category: the King of Thailand, the Mayor of London (England), and the Premier of New Brunswick (Canada). I’m curious if the IRS will seek their personal banking records… and how well that would go over…
Okay, let’s assume that royalty gets immunity. What about people who are married to non-US persons? Is the United States prepared to take the wealth of individuals who have no tax obligation to it simply because of their association with someone who does?
What about individuals who are simply authorized signatories to a foreign account on behalf of a business or organization? Is the United States prepared to take the wealth of a foreign institution simply because they authorized a US Person to access that account for operational purposes?
What about those who hold dual citizenship, do not reside in the United States, do not receive any benefits from the United States, and do their living and earning outside the United States? They should also pay into our system? For what?
How much will it cost to pursue this revenue? I mean, we can make all sorts of estimations as to what the revenues will ultimately be… and that’s all well and good for the smoke and mirror show. But what will it cost to do so? I mean, telling me that there’s a billion dollars’ worth of gold in a mine is fabulous, until you tell me it will cost two billion dollars to excavate it.
Let’s just see what we can expect in the proper execution of the FATCA measures:
- Over 500 pages in new complex regulations
- BILLIONS of dollars in costs to financial institutions around the world
- 800 new IRS agents
- Present and future closure of bank accounts of “U.S. Persons” living in other countries
- Demands that banks in other countries VIOLATE their own countries’ laws and constitutions
- Strained international relations, due to the strong-arming tactics of the U.S. to get this information
- Arbitrary “negotiations” with allies and enemies for Intergovernmental Agreements (or IGAs)
- Promises to foreign governments from U.S. Treasury for U.S. banks and IRS to provide information to home governments on U.S. assets and income for non-U.S. residents
- Potential lawsuits
The reciprocity deals with other countries will trigger capital flight faster than you can say “fair share”! Trust and privacy are kind of a big deal… especially to those with a lot to gain or lose.
I don’t see the cost-benefit-analysis amounting to much more than chump change on a good day…
The desperation of the US government to get money has become both obvious and crazed. With little or no regard for cost-benefit realities, and grasping at anything that remotely looks profitable. The FBI recently seized over $840,000 from a used car salesman in New Mexico. For what? Don’t know. No charges have been leveled against him yet. But hey! They got nearly a million bucks!
Our tax code is over 73,000 pages long. We just slapped on another 500 with FATCA. Americans spend approximately 6.1 BILLION HOURS trying to comply with our tax code. That ALONE constitutes such a huge economic loss. “That’s the equivalent of more than 3 million workers toiling away full time, all year. By way of comparison, the Federal government employs the equivalent of 2.1 million full-time civilian workers,” writes Janet Novak of Forbes.
A little hat-tip to Somalia (since this is where all libertarians are told to go if they don’t like it here in the US): the most dangerous job in Mogadishu is………………… get this……………….. TAX COLLECTOR! I nearly spit my coffee out reading that the other day! (I didn’t, of course, because it’s COFFEE!) Turns out, the people of Somalia don’t trust them. (Crazy right?) They are only too aware of the corruption of the government and are used to bribing their way around as needed, as opposed to paying for services they don’t receive through taxation (Wow. I feel like I should be calling it Moga-de-troit!)
“They consider me to be a bandit. They don’t want to get taxed,” said Mohamed Nor, a tax collector for Mogadishu’s municipal government.
If you hear the government side of things, they will say that “people don’t want law and order”. Of course, they have law and order… what they don’t want is another bully posing as an institution of law and order stealing their money.
I highly doubt we will ever pull off such a feat here in the United States. Still, I think there is a general connection to be made between the likes of Somalia, Detroit, and the United States as a whole. People who are loyal to the concept of taxes will argue that a more simplified version of our tax code would only offer a greater level of compliance, less wasted hours, and even with a revenue neutral goal in mind, revenues will likely go up.
I made this very cases to some greeniac environmentalist who came soliciting at my door a while back. He was advocating a 5 cent redemption value on all recyclables. I said, “Why? It’s easier for me to sort my trash in two bins, recyclable or not, than it is to have to drive 10 miles for 5 cents.” Make it EASY for people to comply and they will… or at least MORE people will.
Clearly, all this sense and logic falls on deaf political ears… So in the interim, before all the FATCA nonsense takes full hold in 2015, think about researching some safe-havens. Look at globalizing your assets in various stores of wealth. A simple consultation can be a very eye-opening experience. If you’re used to hiring a CPA to navigate your tax obligations, then it only stands to reason that you would hire an expert to navigate the waters of tax PLANNING, and taking the figurative sign off your back that says, “HEY, TAX ME!”
For more information on what you can do NOW, contact us today for a consultation!