FATCA: first step towards capital controls
02 July, 2012
The recently enacted Foreign Account Tax Compliance Act (FATCA) threatens to isolate the United States by treating every American citizen as a suspected tax evader.
Under FATCA, any bank anywhere in the world serving US citizens will be required to report on US account holders and disclose their balances, receipts, and withdrawals to the US tax authorities or face a 30% withholding tax on financial assets held in the US by said bank.
Apart from the arrogance of trying to regulate abroad, the law places a huge administrative burden on foreign banks. It will have severe repercussions for American businesses, as many smaller foreign banks will refuse American customers altogether.
Many countries have vowed to enact law changes necessary to comply with the demands made by US tax authorities. Even Switzerland has effectively abolished its banking secrecy law for American citizens. Ironically this law was enacted in 1934 to protect German citizens from their tyrannical government.
Foreign Financial Institutions (FFI) will have to enter into an agreement with the US tax authorities prior to June 30 2013 or risk 30% withholding tax by 2014.
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