Wall Street Journal, Washington’s Assault on American Expats, by William McGurn:
The U.S. is the only developed nation in the world that taxes its citizens on income they earn abroad.
This new year, spare a thought for that most underappreciated class of citizen: American expatriates.
[N]ew changes in tax law regard foreign financial institutions (banks, pension funds, etc.) as colonial subjects who must be dragooned into enforcing ill-thought-out U.S. regulations, or face huge fines. Indeed our tax code appears to rest on the assumption that the American expat is a criminal and must be treated that way.
This assumption is embodied in the IRS’s new Form 8938, which requires Americans who live abroad to report any foreign financial assets from stocks to partnerships to derivatives above a designated threshold. It comes on top of another form (the FBAR, or Foreign Bank Account Report) already required if a citizen has any foreign accounts that add up to more than $10,000. In some cases, you can be fined for failing to file even if you don’t owe the IRS any money.
As bad as this is, the burden will fall more heavily on foreign financial institutions. Within the next two years, these companies will be required to register with the IRS and to report information about their U.S. customers to the IRS—or face a 30% withholding tax on securities transactions that originate in the U.S. It’s all part of the Foreign Account Tax Compliance Act (Fatca), which Mr. Obama signed into law in March 2010 as part of one of his larger “jobs bills.” …
Financial associations on several continents are screaming foul, and some foreign banks have responded the way you would expect them to respond to something that makes dealing with American customers more costly and burdensome: They’re dropping their American customers. …
[H]ere’s a New Year’s resolution for the IRS and its allies inside the Beltway: Maybe it’s time we treated these Americans as economic assets instead of criminal liabilities.
8 responses to “Washington’s Tax Assault on American Expats”
Except for the $95,000 in foreign wages that the expatriates can exclude off the top, its like a human rights violation.
Foreign financial institution dropping U.S. expats as customers is only a small part of the problem. The 30% withholding tax will cause foreign financial institutions to dump U.S. securities at at time when it will likely become more difficult to float U.S. debt. This should result in a spike in borrowing costs.
FATCA is a massively stupid piece of legislation, because:
+ it will significantly discourage foreign investment in the United States.
+ it will negatively impact U.S. businesses operating in global markets.
+ it is not sufficient; it will not achieve its stated purpose – in fact it is largely is self-defeating.
+ it is not necessary; the IRS already has many other tools to go after tax evaders using illegal offshore shelters.
+ it turns American citizens into pariahs in the international world of finance. Many banks have closed the accounts of all their American customers rather than deal with FACTA’s insanities.
+ it manifestly discriminates against American citizens residing overseas, by presuming their guilt. Consider how you would react if you were required to list all of your assets in detail, in addition to your income, every year. That is precisely what form 8398 demands. Once the IRS establishes the precedent for reporting foreign assets, it will be a short step to demand it for domestic ones.
+ it creates a costly administrative nightmare for foreign financial institutions, for the IRS and for U.S. taxpayers which far exceeds any potential additional tax revenue.
+ most importantly, it is an arrogant example of U.S. financial imperialism, which in many cases forces foreign countries to choose between observing their own laws and acceding to U.S. demands.
Wall Street Journal coverage of the great IRS jaywalker hunt
The unrelenting efforts of Congress and Commissioner Shulman to clobber Americans abroad for foot-fault violations of tax reporting requirements –…
Wall Street Journal coverage of the great IRS jaywalker hunt
The unrelenting efforts of Congress and Commissioner Shulman to clobber Americans abroad for foot-fault violations of tax reporting requirements –…
Wall Street Journal coverage of the great IRS jaywalker hunt
The unrelenting efforts of Congress and Commissioner Shulman to clobber Americans abroad for foot-fault violations of tax reporting requirements –…
Wall Street Journal coverage of the great IRS jaywalker hunt
The unrelenting efforts of Congress and Commissioner Shulman to clobber Americans abroad for foot-fault violations of tax reporting requirements –…
Wall Street Journal coverage of the great IRS jaywalker hunt
The unrelenting efforts of Congress and Commissioner Shulman to clobber Americans abroad for foot-fault violations of tax reporting requirements –…
Wall Street Journal coverage of the great IRS jaywalker hunt
The unrelenting efforts of Congress and Commissioner Shulman to clobber Americans abroad for foot-fault violations of tax reporting requirements –…
Wall Street Journal coverage of the great IRS jaywalker hunt
The unrelenting efforts of Congress and Commissioner Shulman to clobber Americans abroad for foot-fault violations of tax reporting requirements –…
Wall Street Journal coverage of the great IRS jaywalker hunt
The unrelenting efforts of Congress and Commissioner Shulman to clobber Americans abroad for foot-fault violations of tax reporting requirements –…
Wall Street Journal coverage of the great IRS jaywalker hunt
The unrelenting efforts of Congress and Commissioner Shulman to clobber Americans abroad for foot-fault violations of tax reporting requirements –…
jimharper:
Why not tell the whole story. First, you have to be living outside the US for the entire calandar year – 1 Jan to 31 Dec – to claim the exemption. Start on 2 Jan or leave on 30 Dec and it’s no exclusion for you.
Second, you can only be on US soil for something like 35 days – and you should read the restrictions: stopover in the US or a territory en route to anywhere else and that counts. Means plane crosses US airspace – even for an hour, andit counts as a full day.
Try living with the rules and see how YOU like it.
I am just curious if there is something analogous to FACTA for European countries. Is the US setting a precedent or has this been in practice by other countries anyway?