Will FATCA ever be imposed on the world? The author wishes for no more FATCA delays. He claims, as only a Homelander could that: “Foreign institutions were blatantly assisting U.S. taxpayers in hiding assets from the IRS.”
But here is the gist of it:
I’ve argued before that the original delay of FATCA was disturbing from a separation of powers perspective and that a second delay would only call into question whether Treasury and the IRS will ever start enforcing withholding. Practitioners and effected taxpayers will always be clamoring for more guidance, more clarity, more safe harbors, and more time to comply. They will never be satisfied, no matter how many thousands of pages of regulations Treasury releases on New Year’s Eve or how many sets of detailed instructions the government puts together for revised forms. The tax community is seldom completely satisfied with guidance. It always wants more or different answers.
And the reality is that the IRS will probably never be done issuing FATCA regulations or form revisions. The law is very broad, with many moving parts. It is evolving as Treasury (rightly or wrongly) changes its implementation by using IGAs. If IRPAC and the financial industry want Treasury to wait for all the significant guidance to be finalized before the withholding regime is put into force, FATCA will be waiting a very long time to become law.
As the first of two deadlines passes for Swiss banks to sign up to a United States tax declaration programme, experts have warned that the associated legal costs of complying with the treaty could “kill” some smaller banks.
Big banks, which sparked the US crackdown by knowingly or recklessly harbouring untaxed assets, have the financial clout to absorb costs and fines. But regional institutions, making up one in four of all Swiss banks, may face a harsher ultimate penalty, despite shouldering a far lesser burden of guilt than larger rivals.
In August, Switzerland agreed to US demands that force banks to come clean about their US clients. Under the terms of the deal, any bank found to have a single tax evader on their books is automatically catapulted into the same liability category as larger rivals.
The Swiss financial regulator has requested banks to come forward by December 9 if they intend to sign on to the US tax deal. By the end of the year they need to have informed the US authorities.
While eventual fines may be lower than more culpable peers, the administrative and legal costs of dealing with the US authorities could run into millions of francs.
“The outcome of this will be a reduction in dual citizenship. US citizens with dual citizenship who are not living in the US will renounce their citizenship. Countries with US residents who are not their citizens, who they want to keep, will probably speed up the citizenship pathway so those persons can renounce their US citizenship. US citizenship will become a liability like Soviet Citizenship once was; American refugees from tax-slavery to the IRS will seek (and get) political asylum. The driving force here is the NSA breaches. The other nations will see safeguarding their citizens’ and government officials’ data as a matter of survival. They will begin to find ways to quarantine the US banking system. Insisting that American dual-citizens be allowed to renounce their US citizenship and be off the IRS hunting list, even if it means they can never go home again, will become the bright red line where other nations draw their sovereignty in the sand. ‘That’s our citizen, not yours. Let him go.’ This could actually lead the world to run gratefully into the arms of a Chinese and Russian hegemony. Not that those two would work together–but they won’t have to.”
The article referenced in the above tweet, written by Guelph freelance writer Kira Vermond, is a decent well researched article. It would be good to get an article from her on the citizenship-based taxation, FATCA and the renunciation of U.S. citizenship.
As you may know, Robert Wood is a San Francisco tax lawyer who writes a blog for Forbes. I recommend both his posts and the comments to those posts which add great value to the posts.
On October 23, 2013 Mr. Wood wrote a post titled: “Beware Global IRS Reach” It is a good article with a number of very good comments. That said, here is a comment from Andrew Grossman that really stands out. I intend to build a couple of posts around it. The most interesting aspect is captured in this tweet:
The title of this post was a Google search term that led to a number of hits. A search on Bing led to an equally impressive number of hits. (Note that each search revealed results for “why we are so cruel to us citizen living abroad“.) Fascinating question. How can this be? Why is this so?