World’s banks are starting to wake up to the administrative nightmare it could pose
GENEVA, SWITZERLAND – American Citizens Abroad (ACA), with InterNations, a global expats social network, will be holding a fourth Town Hall meeting in Geneva Wednesday evening (16 November, 18:30-21:30, Webster University, Bellevue/GE) to address tax issues for US citizens, in particular to bring them up to date on Fatca and FBar obligations and the reported heavy penalties for non-filers. Democrats Abroad and Republicans Abroad are supporting the town hall meeting.
Ed. note: see GenevaLunch feature articles on previous town hall meetings and US overseas citizens’ tax obligations.
Fatca is the Foreign Account Tax Compliance Act. Financial institutions around the world will be obliged starting in 2014 to comply with Fatca or refuse to accept US citizens as clients. US citizens will be required to file a new, additional form that is part of the Fatca legislation starting with their 2011 fiscal returns.
Financial industry fears heavy impact of US legislation comes at a bad time
Banks around the world are starting to wake up to what Ernst & Young calls the “completely new and extended information and reporting systems” that will be required by Fatca. RiskNet recently wrote that “If the US’s proposed wide-ranging tax law comes into force, financial institutions across the globe could experience operational upheaval and enormous compliance costs, alongside potential reputational and systemic issues.”
Wednesday, the Swiss Private Bankers Association referred to “a Kafkaesque tax reform being drawn up by the USA, known as Fatca”, reflecting opinions voiced by other, non-Swiss bank groups.
CPIFinancial warned 16 November that “ll banks and life insurance companies which have US source income or handle US source income will be affected since all US source income might be subject to 30 per cent US withholding tax if they are not Fatca compliant.”
ACA goes public with campaign to repeal Fatca
ACA has launched a public campaign to have Fatca appealed. “Starting in 2014 (moved from 2013), foreign financial institutions will be required by the US government under the Foreign Account Tax Compliance Act (Fatca) to report information regarding accounts of US citizens to the IRS. This law requires foreign financial institutions (FFI) such as your local bank, stock brokers, hedge funds, pension funds, insurance companies, trusts, etc. – to report directly to the IRS all their clients who are “US persons” (citizens and green card holders living in the USA or abroad). The penalties for the institutions that do not cooperate are steep.”
Rami Schandall says in the text with a public online petition to scrap Fatca:
“IRS efforts to chase tax cheats are netting another group entirely. Americans, green card holders, and dual citizens living abroad, face the threat of prohibitive fines for simply failing to file with the IRS, when many are unaware they were required to do so. This aggressive cash grab can devastate the lives of law-abiding citizens who already pay high taxes in their country of residence.
“The fines for not reporting are as high as 50% of any unannounced holdings, year over year. This can add up to more than 100% of assets, even if no tax is owed! Retirement funds and education funds for families who may never have even lived in the US would be wiped out. This is disproportionate and harsh punishment, and anti‐constitutional under the 8th Amendment of the Constitution.”
Canada, but also US citizens elsewhere, fight to be exempted from FBar
The FBar obligation requires US citizens and green card holders to annually declare to the US government the highest amount at any point in the year in all of their financial accounts. This is separate from income tax filing obligations and the information is filed with an office separate from the IRS, the US tax service. ACA 1 November wrote to Douglas Shuman, the IRS commissioner, to argue for repeal of the heavy penalties issued to some Americans who had not filed the forms; it published a paper called “The FBar scam” in September to lay out its objections to Americans overseas being required to file