The recently enacted Foreign Account Tax Compliance Act (FATCA)
threatens to isolate the United States by treating every American
citizen as a suspected tax evader.
Under FATCA, any bank anywhere in the world serving US citizens
will be required to report on US account holders and disclose their
balances, receipts, and withdrawals to the US tax authorities or
face a 30% withholding tax on financial assets held in the US by
said bank.
Apart from the arrogance of trying to regulate abroad, the law
places a huge administrative burden on foreign banks. It will have
severe repercussions for American businesses, as many smaller
foreign banks will refuse American customers altogether.
Many countries have vowed to enact law changes necessary to comply
with the demands made by US tax authorities. Even Switzerland has
effectively abolished its banking secrecy law for American
citizens. Ironically this law was enacted in 1934 to protect
German citizens from their tyrannical government.
Foreign Financial Institutions (FFI) will have to enter into an
agreement with the US tax authorities prior to June 30 2013 or risk
30% withholding tax by 2014.
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