On Friday the US and Germany signed an interesting agreement. The German government will supply the bank account information of Americans living there to the US government. The banking details of those Americans will be electronically transferred to the IRS so that they can determine if the individuals are cheating on their taxes. The probable cause for such a search is apparently the fact that these individuals live in Germany.
The following article from USA Today quotes the German government as referring to the outrageous agreement as another step in the ongoing "war" against tax cheats. Of course, like most not so well thought out laws, there are unintended consequences. One being that record numbers of Americans are forced into renouncing their citizenship in order to function financially. That's because the local banks don't want to deal with the reporting and accounting requirements of American held accounts. Meanwhile, back in the US, we're considering offering American citizenship to known lawbreakers. And in both situations the constitution is being ignored. And there's more.
Charles McPhedran, Special for USA TODAY7:03 p.m. EDT May 30, 2013
The deal is part of a move by the U.S. government in the past three years to tighten up on reporting requirements of financial assets abroad belonging to Americans living overseas, as well as U.S. nationals residing domestically with foreign accounts.
"This is an important step on the path to a united war against tax evasion," said the German government after reaching a consensus Wednesday to sign the agreement.
The clamping down on tax evasion has led to serious problems for American expatriates whose numbers are estimated at more than 6 million. It is difficult for Americans in Germany, Switzerland and elsewhere in Europe to get brokerage or retirement accounts, mortgages or to hold joint accounts with their spouses because it's too costly and complicated for the banks to meet the reporting requirements.
"Deutsche Bank has turned me down twice for brokerage accounts in the past year, and my 16-year-old daughter's college savings account was closed," said Genevieve Besser, who has lived in Germany for decades with her German husband and daughters. She says she has no access to her husband's German retirement account, because if she did, the bank would close it. Meanwhile, she owes no taxes to the U.S. "It feels like we are being persecuted," she added.
The new crackdown has also caused issues for American executives abroad with signing authority on company accounts, whether they work for American multinationals or foreign ones. Attorneys who advise multinationals say there has been hesitation about hiring Americans for high-level positions.
As a result, Americans have been renouncing their citizenship in record numbers. Almost 1,800 individuals did so in 2012 — six times more than in 2008, according to the U.S. Treasury Department.
Meanwhile, the cost of complying with the rules, as well as the penalties for unknowing violations, has cost millions of dollars for businesses and individuals, says Sen. Rand Paul, R-Ky., who introduced legislation to repeal the Foreign Account Tax Compliance Act, which took effect in January. It requires foreign banks to report to the IRS (sometimes via their governments) or face penalties.
FATCA, as well as other rules, require the disclosure of financial assets overseas after the amount reaches $10,000 for bank accounts and $250,000 dollars for other assets.
"FATCA is a textbook example of bad law that doesn't achieve its stated purpose but does manage to unleash a host of unanticipated destructive consequences," said Paul, calling it a "a violation of Americans' constitutional protections. Tax evasion is a problem that should be addressed but not in such an egregious way," he said. "FATCA violates important privacy protections and will cost the U.S. economy hundreds of billions of dollars in compliance costs, and discourage overseas investment in the United States."
Even so, the move by the U.S. government to root out tax cheats, one of President Obama's campaign promises in 2008, is inspiring European governments to do the same by sharing banking data with each other.
Earlier this month, European Union officials said they would create a law allowing for the automatic information transfer among the 27-member states, as well as those outside the bloc but on the continent, such as known tax-havens Switzerland, Liechtenstein and Monaco.
Meanwhile, round two against tax evasion will go after foreign multinationals such as Google and Facebook.
"At a time of fiscal pressure and social tension, fighting tax evasion is a matter of fairness and credibility," said European Council President Herman van Rompuy. "The amounts are staggering; hundreds of
No comments:
Post a Comment