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Tuesday, March 24, 2015

FATCA: Silence, Supplicants, and Scaffolds

The American Diaspora Tax War continues.  Nearly five years after President Obama signed the HIRE Act and the now infamous Foreign Account Tax Compliance Act (FATCA) into law, Americans abroad still struggle to be heard in the homeland and still suffer the negative unintended consequences of this nasty little piece of extra-territorial legislation.  The most serious repercussion is discrimination on the basis of national origin.  Banks outside the US are denying basic banking services to individuals for no other reason than their US nationality or some connection to the United States .

Americans in the homeland argue that Americans abroad ought to be paying taxes to the land of the free because we are said to be under the protection of the mighty United States in our host countries.   We are still waiting to see what that "protection" consists of.  When banks can post notes on the Internet that say "We do not offer our services to US citizens"  and the US government does not respond, how are we to interpret the silence?  Without descending into utter paranoia, one conclusion is that we are citizens not worth defending.  This conjecture does not inspire us to that unflinching loyalty we are expected to demonstrate in our words and by our conduct living abroad.

But conjecture is all we have.  We read tea-leaves and consult oracles. If this goes on much longer we'll be sacrificing small animals and making predictions from the entrails.

A few weeks ago yet another group of supplicants went forth and walked the halls of Washington.  This annual pilgrimage by Americans abroad organizations is called Overseas Americans Week - a Je vous ai compris affair where the politicians make polite noises and get to feel all international meeting people who live (imagine that!) outside the United States.  What do we get out of it? More cryptic messages from the heart of the beast,  Something about how they can't do anything until they have more information?  How interesting.  That's what they said last year.

At least Senator Elizabeth Warren was more forthcoming in her reply to Donna Lane Nelson.  She gets points for honesty.  Yes, the letter says, it is a pity that FATCA is causing problems for US Persons, but it's worth it.  For her a potential 100 billion in tax revenue trumps 7 million Americans abroad hands down.  And that should be all any American abroad who votes in her state needs to know.

And if that elusive 100 billion in lost tax revenue turns out to be a chimera?  A wild ass guess thrown out in a meeting in Washington, D.C. years ago that has been repeated so many times it has become gospel truth?   We must admit that it makes for a fabulous sound bite, but where are the studies that prove that this number is true?  Where is the hard data that makes this number credible?  And yet Warren takes them at their word (Treasury says so, so it must be true) and pronounces FATCA a necessary tool in the fight against overseas tax evasion.

But Warren won't take the word of her constituents abroad in this matter and the US government wants Americans abroad to get cracking and prove they are being discriminated against with hard data:  something that it absolves itself from providing to citizens.   Frankly all anyone needs to do to find "No US citizens need apply" banks around the world is Google.  

What happens next if the coffers are still empty and all the US government has managed to do with their revolutionary system of information exchange is to alienate millions of American citizens around the world and lose many of them to other countries?    That is just as likely a scenario as the one that giddily promises homeland Americans that America's fiscal future and way of life will be saved if some unknown unquantifiable population out there in the world gets frisked by foreign financial institutions.

Or, put more eloquently by Edgar Quinet:  "How long will you go repeating this strange nonsense that all the scaffolds were necessary to save the Revolution, which was not saved?"

And here is Mark Twain over at the Isaac Brock Society with a link that traces the provenance of that 70/100/150 billion figure that everyone's throwing around:  The Source of the Standard Offshore Lie.  A must read.


Steve K said...

As an American living abroad for almost 20 years in Asia, I completely agree with you. I know it is difficult and painful for many, but I would encourage you to take the time to write a submission to the Senate Finance Committee who is seeking input on these issues for tax reform. The deadline in, no joke, 15 April.

Unknown said...

I received the same letter from Senator Warren. I am not happy with her response but, hey! that is much more than I have received from any other congress-person.

I guess we can consider this (very small) progress. We have to get past her staff and get the message to her.

Lea said...

I think this posting is a 'must read' for anyone impacted by FATCA. If ever we needed proof that we are 'citizens non-gratas' I think that Senator Warren's letter clearly sets the tone for our worth to our 'home' country.

Blaze said...

For three years I have called FATCA foreign Attack To Control All. Enough said.

bubblebustin said...

My prediction is that FATCA will generate increased revenue for the US - but only for a short period as people get their US tax house in order in preparation to renounce US citizenship or to remain US citizens without future tax exposure. I hope for change, but the US appears to be stuck on stupid - I have only myself to blame if I am too.

Unknown said...

By the IRS's own statistics as of 2012, only 60% of those expats who file have any tax obligation. I surmise that most who haven't been filing have mid to lower incomes and an even greater percentage of them owe no taxes. Surely the IRS is into the diminishing returns area.

Maybe the are counting on people to fall into the penalty traps.

Unknown said...

By the IRS's own statistics as of 2012, only 60% of those expats who file have any tax obligation. I surmise that most who haven't been filing have mid to lower incomes and an even greater percentage of them owe no taxes. Surely the IRS is into the diminishing returns area.

Maybe the are counting on people to fall into the penalty traps.

Anonymous said...

US government is playing the game of forcing the onus on to the victims to prove that they have been harmed beyond a shadow of a doubt No justice for you until you satisfy any and all of our unreasonable demands. And no proof will ever be enough.

Reminds me of the tobacco companies demanding that anti-smoking advocates, doctors and scientists demonstrate that cigarettes/tobacco caused cancer, and the gas and auto companies demanding that public health advocates against leaded gas prove that lead in gas was harmful. They took advantage of the delay in order to profit as long as possible.

Richard J. said...

I strongly advise every "US Person" to submit their feedback and suggestions to the Senate Committee on Bipartisan Tax Reform (see link below). Not that I expect them to change things overnight, but it is a way to be heard directly by the deciders. However, they are being very strict on the form of your submittal, so to avoid having it thrown out directly, carefully follow the instructions given at:
Senate Committee on Bipartisan Tax Reform

Victoria FERAUGE said...

@Steve, Thanks for pointing that out. There are a couple of other initiatives and I will try to get a post up in the next few days with places where people can put their efforts.

@James, I'm impressed you got a reply. I didn't. I'm not sure Warren would change her mind if she met any of us. But it's worth a try. Did Ellen meet with Warren in Washington?

@Lea, Thank you for the comment. I was not very happy with Warren's letter but at least she's honest and we know where we stand.

@Blaze, When I was in Washington 2 years ago and we mentioned the FBAR. The reply was that it was very important for law enforcement. And I said Huh? If FATCA doesn't bring in money then perhaps it will serve to put Americans under more surveillance then they already are. It is an indication of how things are now in the US that I doubt anyone would be shocked by this.

@bubblebustin, "I hope for change, but the US appears to be stuck on stupid - I have only myself to blame if I am too." That is just wonderful! Yep. :-)

@anonymous, I interpret it as stalling tactics. And I agree that no proof will ever be enough. That's why I'm putting my faith in the lawsuits.

@Richard, thanks for the link. I'll try to get it up in a post.

Michael Putman said...

With the Yemen non-evacuation incident, we now know what US protection abroad is worth. The State Dept. actually tells hapless US nationals to consider bumming a ride off some other government that cares:

"Additionally, some foreign governments may arrange transportation for their nationals and may be willing to offer assistance to others. There is no guarantee that foreign governments will assist U.S. citizens in leaving Yemen. U.S. citizens who choose to seek foreign government assistance in leaving Yemen should only do so if they can safely make their way to the point of embarkation and have received confirmation that there is space available. Even if assured there is space aboard transportation, U.S. citizens should be aware that there is no guarantee that they will be permitted to board the transport, or may have to wait an indefinite period until they can do so. There is also no guarantee of where travelers will go."

Victoria FERAUGE said...

@Michael, Wow. Not a confidence builder.

The funny thing is that over 80% of Americans abroad who file pay nothing. And now we see that the "protection" is nothing as well.

So let me get this straight, we pay nothing for nothing. So explain to me again why CBT is such a hot idea and so darn good for America?