It’s a very small world when it comes to money and banking, as we all learned in 2007. Now the Internal Revenue Service is extending its reach to financial activities of U.S. citizens who have money in foreign financial institutions.
On July 1, 2014, FATCA goes into effect — the Foreign Account Tax Compliance Act, which is an effort by the IRS to “improve reporting compliance of U.S. taxpayers who have foreign financial assets and earn income outside the country.” The United States is one of the few developed countries that taxes income earned by its citizens, regardless of where they are residents. So U.S. citizens living and working abroad often must pay taxes to two countries!
FATCA is designed to make sure financial institutions report not only income but assets of U.S. citizens held in foreign countries. In other words, there will be no easy way to hide money offshore from IRS scrutiny — unless, of course, you are a major U.S. corporation that has earned money abroad, paid taxes there, and chosen not to bring those profits back to the U.S. to be taxed again. But that’s another story.
Now U. S. citizens not only must report the existence of foreign bank accounts (as is currently the case) but, under FATCA, those foreign institutions that hold accounts for U.S. citizens must go through onerous reporting obligations to the IRS. They must report the owner’s name, address, Social Security or tax ID number, and the combined balances if the amount is over $50,000. The reporting is so complex that many foreign banks are simply turning American clients away — even if they are ex-pats, living and being paid in that foreign country by their U.S. employers.
The IRS has entered into intergovernmental agreements with these foreign countries, and they in turn are putting the pressure on the financial institutions. Not only financial institutions abroad are subject to FATCA, but also corporations that pay dividends, interest, or capital gains. Big Brother is truly watching your money worldwide.
A Dollar Collapse?
Some are calling this a critical moment in government overreach and are predicting some sort of global financial collapse will ensue. But that’s not the likely result. Instead, the burden of financial reporting will close off certain aspects of global finance to all but the largest corporations.
Pessimists say this is the first step toward government extending control over your right to move money out of the United States, much as South Africa and other countries imposed currency controls on their citizens as they attempted to flee repressive or changing regimes.
Of course, as the markets have demonstrated so far, the U.S. dollar is still viewed as the “safest” global currency, despite our debt problems. And that is likely to remain the case, even after FATCA takes effect on July 1.
And it is doubtful that Americans will flee, although there have been a significant increase in the number of Americans voluntarily giving up their citizenship. A record 1780 Americans gave up their passports in the most recent year reported. But that pales beside the numbers of foreigners who seek to come to America.
The views expressed in this opinion article are solely those of their author and are not necessarily either shared or endorsed by WesternJournalism.com.
This post originally appeared on Western Journalism – Informing And Equipping Americans Who Love Freedom