On FATCA, FatCats, And Eritrea – Er, Where?

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After all the bad things I’ve written about America you’d think they’d be only too glad to see me go.

“Have you heard, Adams is leaving?”

“No! Well, good riddance. He’s hardly been an asset to our fine Capitalist society, now has he?”

I mean, I don’t expect the red carpet, or a marching band at the airport playing, “Will Ye No Come Back Again?” But I never thought they’d make it hard for me to leave. But they have.

Don’t get me wrong, I’m going anyway. September 2nd will see me and mine winging our way out of Detroit Airport for the last time bound for Paris, France, and then on to a new life in Brittany.

So, you’re asking, why don’t they want me to leave?

Ah, there’s the rub, as the Bard once proffered. You see, it’s not so much me as my money. It’s easy to bring money into the US, but try and take it out again and all sorts of petty regulations rise up to thwart one. For example, to move the financial proceeds of our house sale out of the US I’ve had to nominate my daughter, who lives in Britain, to handle it for me. The US government doesn’t allow the exchange company to ‘do deals’ on US soil.

Not that I’ve got a lot of money, you understand, and that’s really the problem. Or rather, the problem is FATCA.

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Now most Americans have never heard of FATCA, and why should they, it doesn’t affect them in the slightest. Until, that is, they decide to up sticks and live outside the US.

It may have escaped your notice but FATCA is only a ‘T’ away from being ‘FATCAT’, and FatCats are exactly the people the IRS say FATCA is designed to trap.

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Sadly, that’s far from being the case.

Anyone with even half an eye on the Republican skirmishings over who’s going to be the next President will have noticed that the richest of them all, Donald Trump, is hardly losing sleep over FATCA, or dealings with the IRS. People like him can always find ways to circumvent tax laws, or pay experts to do it for them.

What, then, is FATCA?

The Foreign Account Tax Compliance Act was signed into law by President Obama in 2010, and is now having a serious impact on 7.6 million US expats. It basically allows the US government in general, and the IRS in particular, to blackmail all the world’s financial institutions into declaring the held assets of any American expat (citizen or PRA) with an account in a foreign country containing in excess of $50,000.

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The refusal to do so by any bank or financial institution anywhere in the world will mean the IRS will impose a 30% taxation demand on all that institution’s financial dealings within the United States. Given the global economy, that would result in a colossal loss of revenue to most financial institutions, and the US government knows it.

The original reason for FATCA was to prevent tax evasion, by the very wealthy, or high-powered corporates, stashing monies away in foreign bank accounts. And, why not, you might ask? It doesn’t seem unreasonable, given the wealthy in the US hardly pay their share anyway, even on declared income.

Unfortunately, FATCA isn’t just causing problems for the FatCats. Supplying all this information to the IRS is not just a major headache for foreign banks, it’s also a costly exercise. They’ve decided it’s much easier, and makes more economic sense, just to close the accounts of US expats, to save on all the extra time and paperwork.

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Thousands of ordinary working, or retired, American expats have suddenly found themselves unable to obtain a bank account in Europe, or almost anywhere outside America, entirely due to FATCA. It’s caused huge hardship and distress for many, but the US government couldn’t care less. After all, most expats don’t bother to vote in US elections.

All this has been possible because the United States is the ONLY NATION ON EARTH that legally requires its expatriate citizens (and PRAs) to submit annual tax returns to the IRS, wherever in the world they happen to be living.

Yes, that’s right. Not only do they make it financially difficult to leave America, but if you do manage to get out the IRS keeps a tight line on you, demanding their pound of flesh every year in the form of US tax returns.

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Sure, there’s tax agreements with many nations to avoid ‘double taxation’, but having to declare income to the United States AND the tax authority of the country you’ve chosen to live in, is complex and costly as it almost certainly requires the services of an international tax accountant.

Despite all this hassle, or perhaps because of it, I’d rather live somewhere where the words ‘fairness’ and ‘justice’ still mean something; where I can walk into a supermarket or shopping mall without wondering if the guy in front of me is toting a firearm; where the police don’t routinely kill people for the fun of it; where distorted religious ideals aren’t allowed to influence the politics of the land (and I’m NOT talking ISIS or al Qaeda!); where the media reports actual news, rather than national propaganda; where politics hasn’t yet become controlled by big corporations; where the highest judiciary in the land isn’t regularly swayed by political influence or corporate money, or where one nation, just because it’s sufficiently powerful, doesn’t blackmail the rest of humanity in order to grasp its pound of financial flesh from those of its citizens who dare to leave its shores.

But, oh dear, after all that it appears I owe America an apology. I stated that the US was the only country in the world demanding tax returns from its expats.

I was wrong. There is actually one other.

To quote Bloomberg…

…[it’s] a small and vicious African dictatorship..”

eritrea

Eritrea – you may, or may not – have heard of it.[2]

[1] “End the American Expat Tax” Bloomberg View, April 24th 2015

[2] “World Report 2014: Eritrea” Human Rights Watch, 2014.

6 Replies to “On FATCA, FatCats, And Eritrea – Er, Where?”

  1. Good article.

    But it’s EXPATRIATE, not “EX-PATRIOT”. To expatriate is to live outside one’s country of origin. An ex-patriot is not a word, but would imply someone who is no longer loyal to their country. True, FATCA is turning many expatriates into ex-patriots. But I do hope you’ll watch your spelling, as the rest of us welcome you to the world of expatriate living!

  2. Great article! Just a query – aren’t bank reporting “requirements” for FATCA(T) on account “excess” of $50,000?
    $10,000 is FBAR.

  3. Jonathan – thanks for the ‘safe journeys’, and yes, Sparrow Chat will live on, though in what form it develops, writing from France, is still to be decided. However, I promise it won’t be written in French!

    BBQ – You’re quite right about the spelling, of course. I don’t know how that one slipped past me. I’ve since corrected it. Now, if you can just tell me how I can acquire a bank account in France….?

    Emilia – with all the bureaucracy associated with moving overseas I haven’t yet studied the implications of FBAR, but you could well be right. As for FATCA, it seems the threshold varies depending on where you look. Apparently, expats don’t need to file anything under FATCA unless their accounts run into hundreds of dollars (the exact amount dependent on various factors) but further research verifies what you say, namely that foreign banks must declare all accounts in excess of $50,000, not $10,000. I’ve now amended the text to take that into account. Thanks for your input.

  4. Wow there RJA, though I’ll say I can hardly blame you for abandoning your USian life. In my past I had to file US taxes for many ex-USian clients while they frothed at the mouth at the sheer injustice of the boots on their throats.

    Brittany. Yes, sounds lovely. Be sure to keep writing, I’ve always enjoyed your style and insight. And spread the wealth into various banks though the mattress might be your best bet these days.
    XO
    WWW

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