U.S. FATCA – Tax evasion

Written by Diana Thebaud Nicholson // June 24, 2015 // U.S. // Comments Off on U.S. FATCA – Tax evasion

Sen. Rand Paul to sue IRS, U.S. Treasury
The Kentucky senator will take legal action against the U.S. Treasury and the Internal Revenue Service for what he says is the denial of his constitutional right to vote on more than 100 tax-information treaties that the Obama administration unilaterally negotiated with foreign governments, The Washington Times has learned.
They require foreign banks to gather and share private financial information about millions of Americans living and working outside the U.S. — information they would not have to disclose to the U.S. government if they lived and worked in the U.S.
“The issue is inescapably partisan for that reason and for the fact that no Republican [in the U.S. House] supported the passage of FATCA,” Mr. Bopp said. “The U.S. government didn’t start enforcing it until Obama started to target U.S. citizens overseas in the belief that they had a lot of money but not a lot of political clout sufficient to fight back.”
The Republican National Committee and the recently formed Republican Overseas Action aim to get as many of those Americans living or working outside their country to register in one or another of the swing states that decide the presidency in close elections. Republicans Overseas Action is paying for the lawsuit Mr. Paul has joined as plaintiff.
The driving force behind the suit is a longtime conservative activist on the Republican National Committee, Solomon Yue of Oregon.
“The best way to defend 8.7 million overseas Americans’ right to privacy and constitutional protections is to cripple the IRS, FATCA and enforcement tools through legal action on constitutional grounds all the way to the U.S. Supreme Court,” said Mr. Yue, founder and vice chairman of Republicans Overseas Action Inc.

2014

7 December
Why I’m Giving Up My Passport
By Jonathan Tepper
(NYT) My “in-person final loss of citizenship appointment” is scheduled for Jan. 14 at the United States Consulate here. My British passport, acquired in 2012, will be my only one.
Some 3,000 Americans gave up their citizenship last year, a tiny number that’s nevertheless been soaring. Yes, a few expatriates may be trying to avoid future taxes, as Senator Charles E. Schumer accused the Facebook co-founder Eduardo Saverin of doing two years ago, when Mr. Saverin, who lives in Singapore, surrendered his passport ahead of the company’s initial public offering.
But most, like me, are not tycoons. We’re responding to the burden and cost of onerous financial reporting and tax filing requirements that are neither fair nor just. (Living and working in London, I pay higher taxes, to Britain, than I would in New York.)
Some 7.6 million Americans live abroad — expats would be the 13th most populous state, if we were a state.
4 December
London Mayor Is Poster Boy for Expat Tax Woes
Mr. Johnson’s case is a perfect illustration of the dilemmas faced by many of the 7.6 million U.S. citizens living abroad as a result of U.S. authorities’ five-year campaign against secret offshore accounts. It began after disclosures that Americans were being encouraged to hide money in Switzerland.
Most of these expats have never had a numbered Swiss account, but many of them, like Mr. Johnson, are finding they haven’t complied with U.S. tax laws that seem to them highly unfair. “It’s a clear example of the harm befalling citizens caught in the maw of multiple tax systems–a status imposed on every American citizen abroad,” says Jackie Bugnion, a director of American Citizens Abroad, an expat group.
The root cause, experts say, is that both the U.S.’s definition of citizenship and its tax system are broad.
20 November
New York-born London mayor Boris Johnson refuses to pay US tax bill
Politician says he is ignoring US demand for capital gains tax, despite row with country’s UK embassy over unpaid charges
(The Guardian) Boris Johnson has revealed that he is refusing to pay a tax demand issued to him by US authorities – despite previously lambasting the US embassy in London over its failure to pay the congestion charge.
The mayor of London, who was born in New York and holds a US passport as well as a British one, visited the country last week to promote his book and said during an interview with NPR (National Public Radio) that he had been hit with a demand for capital gains tax.
He said the US demand related to his first home in the UK, which was not subject to capital gains tax in England.
All US citizens, including those with dual citizenship, are legally obliged to file a tax return and liable to pay US taxes, wherever they are living, even if the income is earned abroad.
Asked whether he would pay the bill, Johnson initially avoided the question. But when it was put to him a second time, he replied: “No is the answer. I think it’s absolutely outrageous. Why should I? I think, you know, I’m not a … I, you know, I haven’t lived in the United States for, you know, well, since I was five years old … I pay the lion’s share of my tax, I pay my taxes to the full in the United Kingdom where I live and work.”
19 November
Alliance for the Defence of Canadian Sovereignty‎
Naomi Wolf: “The End of America”: The Eleventh Step
If the USA no longer believes in the basic premise of “no taxation without representation” and no longer believes that her people should have the right to freely leave at any time to live/work/study beyond the US borders, then America is already dead; she has been assassinated by her own government. But … she can be revived by the simple act of Congress taking up its pen and altering the FATCA legislation as well as the tax code so that America can look herself in the mirror and see a country that not only talks the freedom talk but walks the freedom walk.
On November 9, 2014 the world marked the 25th Anniversary of the fall of the Berlin Wall, that infamous symbol of world tyranny and subjugation. At the same time, and with stunning irony, the government of the so-called “leader of the free world” has been building a financial “Berlin Wall” around the United States of America and her people. Due to recent legislation, US citizens can no longer financially survive if they choose to live outside the borders of the United States.
Under the rules of FATCA (the Foreign Account Tax Compliance Act passed into law by Congress in 2010 and implemented this past July), coupled with previously unenforced and largely unknown US tax policies including CBT (citizenship-based taxation), nations and financial institutions throughout the world are being extorted with the threat of a 30% non-refundable withholding on all transactions going through the US banking system if they fail to identify and report to the IRS their accounts of clients discovered to have US indicia.
(http://online.wsj.com/…/expats-left-frustrated-as-banks-cut…). (WSJ Online) Expats Left Frustrated as Banks Cut Services Abroad — Americans Overseas Struggle With Implications of Crackdown on Money Laundering and Tax Evasion

28 June
America’s fierce campaign against tax cheats is doing more harm than good

(The Economist) AT A recent conference for offshore wealth managers in Geneva, Basil Zirinis of Sullivan & Cromwell, a law firm, began his presentation with a discussion of events in Iraq, where Islamist fighters were advancing on Baghdad. Barack Obama, he claimed, was drawing a red line around the city and, if necessary, would “drop FATCA on them”. Worse, they would get no deadline extension. The nuclear option, he added, was to treat them as if they were Swiss.
The analogy was tasteless, but also telling. FATCA stands for Foreign Account Tax Compliance Act, an American law passed in 2010 to crack down on the use of offshore banks, particularly in Zurich and Geneva, to hide taxable assets. The law, part of which takes effect on July 1st, is the most important and controversial development in decades in the international fight against tax evasion. It is feared and loathed by moneymen because of its complexity, its global reach and the high cost of compliance. One senior banker denounces it as “breathtakingly extraterritorial”.
Transparency campaigners love it because it threatens to blow apart the old way of exchanging tax information between countries “on request”, which they view as unwieldy and soft on cheats. FATCA, they hope, will usher in “automatic” exchange of data, leaving the tax-shy with nowhere to hide.
In essence, FATCA turns foreign banks and other financial institutions into enforcement arms of America’s Internal Revenue Service (IRS). They must choose between turning over information on clients who are “US persons” or handing 30% of all payments they receive from America to Uncle Sam. The threat appears to be working. More than 77,000 financial firms have signed up. About 80 countries have struck agreements with America to allow their banks to hand over data.
The financial industry is struggling to work out which funds, trusts and other non-bank entities count as “financial institutions” under the law. There is also confusion over who is a “US person”. The definition is broad and includes not only citizens but current and former green-card holders and non-Americans with various personal and economic ties to the United States. Some Canadian “snowbirds” who travel to America for part of each year could be caught in the net, says Allison Christians, a tax professor at McGill University. As the complexities of implementation have grown apparent, the American authorities have had to extend several deadlines. Banks, for instance, will get a two-year moratorium on enforcement as long as they are striving to comply.
FATCA has already sent a chill through the 7m Americans who live abroad. Thousands have been told by their local banks and investment advisers that they no longer want their custom because it is too much hassle. Many others will now have to spend thousands of dollars to straighten out their paperwork with the IRS, even if they owe no tax (and most do not, since they will have paid a greater amount abroad, which counts as a credit against tax owed in America).
A record 2,999 of these exasperated expats renounced their citizenship or green cards in 2013. More than 1,000 did so in the first quarter of 2014. (Before FATCA the number was a few hundred a year.) Others have remained American and fought back against unfriendly banks. Using anti-discrimination laws, a Dutch-American sued a Dutch lender that had pre-emptively shut his account and 149 others; he won the case in April. To its credit, the IRS acknowledges the problem and is trying to soften the blow. It recently introduced a streamlined compliance programme for expats who inadvertently failed to fill out the right forms, for example—although this still requires refiling three years of returns.
FATCA also places a burden on the IRS, by generating an unwieldy amount of information. The agency is being given far more to do with far fewer people (thanks to budget cuts), leaving it “on the verge of collapse”, according to a former senior official.
It is not clear that the law will ensnare its quarry. Seasoned tax dodgers are not so naive as to hold money in their own names. FATCA will penetrate some of the shell companies and other structures they hide behind, but Senate investigators and other experts say loopholes remain.
Related to that is the question of whether FATCA will pay for itself. Counting only the expense for American financial firms, the answer is maybe, if it brings in at least the $800m a year estimated by Congress. (The law was passed without any formal cost-benefit analysis.) However, the overall costs of complying, borne mostly by non-American banks, are likely to far exceed the extra tax receipts.
FATCA is about “putting private-sector assets on a bonfire so that government can collect the ashes,” complains Richard Hay of Stikeman Elliott, a law firm. Mark Matthews, a former deputy commissioner of the IRS now with Caplin & Drysdale, another law firm, argues that the effort put into hunting offshore tax evaders is disproportionate: the sums they rob from the public purse “look like a pinprick” compared with other types of tax dodging, such as the under-declaration of income by small businesses.
Another question is whether FATCA might be subsumed into a scheme being promoted by the OECD, a club of mostly rich countries, whereby signatories would share data on financial accounts annually. It has won backing from around 50 countries, including big European nations, India, China and Brazil (and from big banks, which assume compliance costs will be lower under a single global standard). It differs from FATCA in an important respect: information-sharing will be based on residence, not citizenship.
As more countries are pushed to share tax information systematically, the focus will turn to America’s willingness (or lack of it) to reciprocate. Latin Americans, for instance, are big users of banks in Florida, but America remains choosy about which governments it will share data with, and how much. It also has only limited information to give on the owners of shell companies because it does not collect their names itself. In some respects, America is less upright than the tax havens it deplores.
16 June
Dire warnings from Porter Stansberry
New Obama Law (Bill “H.R. #2847”) Could Usher in Collapse of U.S. Dollar
On July 1st of this year, H.R. Bill #2847 went into effect. This bill has the potential to make millions of Americans poorer – overnight. Even some liberals have called it a “nightmare and disaster.” Get the facts to protect yourself here…