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For US Expatriates, FATCA is Punishment

September 22, 2014 | by Steve McCurdy

The Foreign Account Tax Compliance Act, better known as FATCA, became law on July 1, 2014. Prior to its implementation, we wrote about FATCA here and speculated upon whether the law would be a financial wrecking ball for international banking and business. At last count 102 countries had signed agreements in place with the US Treasury, and more than 77,000 foreign financial institutions (FFIs) were working to comply. 

Impact of FATCA on FFIs

 

 

FATCA requires FFIs to annually report the names, addresses, and transaction histories for all customer accounts owned by US citizens. In addition, a bank official must personally sign a statement guaranteeing compliance with FATCA. It is estimated that for the larger FFIs with many US customers, the cost of compliance could easily exceed $100,000 annually. So, as was anticipated, FFIs are weighing the value of their relationships with US customers against the increased compliance costs and additional liability associated with FATCA. Many of them are closing the accounts of existing customers and declining to open new accounts. Others are raising account minimums for Americans to levels that are beyond the reach of all but the very wealthiest expatriates. Others are reacting by raising transaction fees to exorbitant levels to offset compliance costs. Most expats use wire transfers to move money back and forth from their US to their foreign banks, and the charge for wires has been increased to $50 at many banks. 

Impact of FATCA on US Expatriates

 
In any discussion of FATCA it should first be noted that the United States is the only industrialized country in the world that taxes the income of its citizens based upon their nationality instead of their residency.
 
For the estimated 7.6 million Americans living abroad life is already challenging, as they must learn new languages and cultures and make new friends. With the advent of FATCA their own government is purposely complicating their lives.
 
An e-commerce analyst from North Carolina living in Berlin was rejected for an online Uncle Sam Wants His Moneybrokerage account by Deutsche Bank even though he had a checking account there and once actually worked at the same Bank as an intern. He was also turned down by a smaller Berlin bank for a checking account and Wells Fargo, his US bank, closed his brokerage account when they learned he lived in Germany.
 
Another 15-year American expat living in Dubai has always paid fees to wire money to and from her US account in Pennsylvania, but the Pennsylvania Bank no longer accepts wire requests from overseas. She has now developed a complicated workaround. She first wires money from the US bank that accepts her direct deposits to a US credit union which still permits overseas wires. Then she wires her money from the credit union to a bank in Brussels upon which she can so far still write checks.
 
These are but two of thousands of examples of how the US Government has needlessly complicated the daily lives of 7 million of its own citizens. 

The Real Purpose for FATCA
 

Here He Comes AgainThe US Government describes FATCA as a policy designed to prevent money laundering and tax evasion. As we wrote here and here, however, and as three months of actual experience have proved, the real purpose of FATCA is to make it more difficult for US citizens to diversify their holdings by moving their money offshore. FATCA is really nothing but a thinly disguised capital control.
 
In 1776 Thomas Jefferson wrote in the Declaration of Independence that

Governments are instituted among men to secure their rights to Life, Liberty, and the Pursuit of Happiness, and that the Government’s just powers are derived from the consent of the governed

This government has veered far off from the course outlined so brilliantly for it by the Founding Fathers.
 
FATCA is one more example of an obvious abuse of power and a perversion of our founding documents by an arrogant, tyrannical, out-of-control government. Jefferson continued

Whenever any government becomes destructive of these ends, it is the right of the people to alter or abolish it, and to institute a new government, laying its foundations on such principles and organizing its powers in such form, as to them shall seem most likely to effect their Safety and Happiness…
 
I believe that most of our 7 million plus expatriates would agree that the time has come to act on Jefferson’s words, and I am confident their feelings will be expressed very clearly on their absentee ballots in upcoming elections.  

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