Unless you are a tax lawyer or involved in the expat community, there is little reason for you to have heard of FATCA. Yet.
FATCA, at its heart, is a law designed to make people obey a law that is already in place. In my view, a reasonable response to this situation would be to concentrate on finding the offenders and prosecuting them.
Instead, the US Government decided to hunt chipmunks with a howitzer.
FATCA is so monumentally ill-conceived that it is difficult to pick just one of its potentially horrific consequences. What bothers me most about the law, however, is how it is making my country appear to the rest of the world. This is not exactly a hearts and minds initiative.
Consequently, I am offering my take on FATCA; I want to get it out before someone else thinks of it:
Paying a Visit
A sovereign nation sits at his desk looking over the latest reports. He is cautiously optimistic. An economic upturn appears to be imminent, one that could improve the lives of his people, but it is too early to tell. Still, if nothing goes wrong…
There is a knock at the door.
Sovereign Nation: Come in.
The door opens and the USA walks in, wearing a trench coat, fedora and leather gloves. Two others, similarly dressed, enter as well. Their eyes are narrow. They do not smile.
Sovereign Nation: Greetings. To what do I owe this honor?
USA: Well, me and my boys here—IRS and Treasury Department—thought we’d stop by to give you a heads up about a law we just passed.
Sovereign Nation: That’s very nice or you, but I don’t see what it has to do with…
USA: This law, you see, it says that you have to hand over all the financial information from all your financial institutions for everyone in your country. To us. Now.
Sovereign Nation: That’s preposterous! How can YOUR law tell US what to do?
USA: Yeah, I hear you; it’s a real bitch, isn’t it? But, hey, the law’s the law. Now hand over the data.
Sovereign Nation: No, absolutely not! It would not only violate our own laws on depositor confidentiality, but also—and I cannot stress this enough—we don’t want to. That data is none of your business!
USA: Look, let me lay it on the line for you. We’re tired of our citizens moving to your country, earning money here and not paying any taxes to us.
Sovereign Nation: But…but they’re working in our businesses, earning our money, shopping in our stores, contributing to our economy, not yours. Why should they pay taxes to you?
Hey! You handle your citizens your way; we’ll handle ours our way! Capish?
|Relax! We\’re from the Government; we\’re here to help.
Sovereign Nation: Well, then why don’t you just pass a law saying they have to pay taxes to you on any money they earn abroad.
USA: We already have that law. See, the thing is, we don’t trust our citizens. We figure they’re fiddling the books, so, what we’re asking for is your help in assisting our citizens to comply with the law.
Sovereign Nation: Then why not just take the data for US citizens?
USA: We thought about that, but it turns out we don’t trust you either. You might let a few fish slip through the net. Not on purpose, mind, but we think we’re better equipped to find what we’re looking for than you are.
Sovereign Nation: Well, that’s totally unacceptable. We will not comply.
USA: Hey, your choice. We’re not here to force you into anything.
The USA clasps his hands behind his back and begins to wander around the office, whistling to himself, looking casually here and there.
USA: Nice economy you have here.
Sovereign Nation: Thanks, we’re rather pleased…
USA: Be a shame if something happened to it.
(Nervously) Like what?
|The US as Enforcer.
USA: Like, say, a 30 percent withholding tax on every transaction that travels through a US bank.
Sovereign Nation: That would ruin us! Our economy would crumble. There’d be widespread unemployment, riots in the streets, people would die! How can you…
USA: What? You’re thinking of blaming this on us? All we’re asking you to do is obey the law. You do, and your economy bumps along unhindered and everybody wins.
Sovereign Nation: And what do we get out of this?
USA: You get to keep your economy from going into the toilet.
Sovereign Nation: But we have that now.
USA: Look, I’m not asking again. I’m making you an offer you can’t refuse. You play ball with us, nothing unpleasant happens. You don’t, and, well, as I said, the law’s the law. It’s out of my hands. Really, I’m just trying to help you here.
Sovereign Nation: (Sighs) Well, since you’ve got us against a wall, okay, we’ll do it.
USA: Now you’re being smart. I like it when you’re smart. Stay smart and nothing bad will happen. So, we’ll have that data now and be on our way.
Formerly Sovereign Nation: Now? It’s going to take months to collect and collate and…
USA: Okay, okay. I’ll give you an extension. Four o’clock. Data on my desk, or my boys come pay you a visit. Capish?
Formerly Sovereign Nation: Capish.
For more FATCA: