FATCA—the Foreign Account Tax Compliance Act—generally takes effect in 2013 and the IRS will start penalizing foreign banks in 2014 for failing to comply. The law was enacted in 2010 but remains in the ramp-up phase. Yet foreign banks and governments are on board and more of the law is being applied right now. See 5 nations joining U.S. in tax evasion crackdown.
Institutional Reporting. FATCA requires foreign banks to report U.S. account holders to the IRS. After identifying them, institutions must impose a 30% tax on payments or transfers to any who refuse to step up. Foreign financial institutions (FFIs) must file IRS reports by September 30, 2014.
Foreign financial institutions must do something?
And what if they don't?
This is an amusing law, really. The United States has no means of compulsion to enforce an order (other than by deciding to engage in armed invasion, obviously) across a national boundary. So exactly who has the right of complaint here?
Let's look at the facts shall we? Foreign nations are no more "freedom havens" than is the United States. These financial institutions in allegedly-sovereign lands are voluntarily complying with the IRS and its US-centric and US-limited laws, since the IRS cannot compel performance across a national boundary.
If you think otherwise then talk with me about the kid who is abducted by his or her parent that flees to another nation. Oh sure, there's an alleged treaty on that. But if you think the nations that stick up their middle finger are limited to those such as Saudi Arabia (which does, by the way), you'd be wrong. In point of fact Germany, one of our alleged "best friends", is one of the worst offenders in this regard!
Their argument? "The kid will have a better life here -- so screw you."
So let's cut the crap, shall we? Freedom isn't free and there is no solace to be found in trying to run away from the jackboot of government. The fact of the matter is that it has long been the law that you had to report foreign investment and property holdings and it has been illegal to transport more than $10,000 in negotiable anything in or out of the US without declaring it for quite some time. The US Government holds that it has the right to tax income no matter where earned and held if you are a US Citizen, but it lacks the ability to enforce that law without the voluntary cooperation of other nations and their institutions.
It's all fine and well to argue against FATCA, but that misses the point. The real question is much simpler: What leads you to believe that you will find freedom -- whether financial or otherwise -- in a nation and/or institution that voluntarily disrespects your financial privacy?
Perhaps -- just perhaps -- this will wake you up to the fact that trying to run is a futile gesture, and that so-called "more-free" foreign lands really aren't.
And that, perhaps -- just perhaps -- might lead you to the conclusion that the only real options for change, assuming self-delusion isn't part of your agenda, are to put your effort toward making that change stick here instead of running away.
Where We Are, Where We're Heading (2013) - The annual 2013 Ticker
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