Law to prevent tax evasion, FATCA, likened to a nuclear weapon
A new law went into effect July 1, 2014 in the United States that requires all foreign banks to report to the US information on their customers that are US citizens.
This will create a huge amount of paperwork.
It is quite unpopular. Many perceive it as yet one more example of extraterritoriality, the US forcing everyone outside the US to comply with US law or else.
The or else is a required 30% withholding on all funds received from inside the US.
The law is called Foreign Account Tax Compliance Act, or FATCA. I’m just starting to understand the law. Yes, I know. I’m late to the party.
The Economist has some good background: Dropping the bomb: America’s fierce campaign against tax cheats is doing more harm that good. Amongst other concerns, the article questions whether the law will raise more taxes than it costs US banks to comply. That estimate excludes the costs to foreign banks.
The article opens with a banker addressing a conference in Geneva. He said that the United States had a weapon in reserve to attack the Islamist rebels in Iraq who are threatening the government. The President might drop FATCA on them. Would likely stop them dead in their tracks. The nuclear option, he asserted, would be for the US to treat ISIS as if they were Swiss.
I think the law is unpopular.