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“FATCATS” RENOUNCING THEIR USA CITIZENSHIP TO EVADE PAYING TAXES

 7 Aug 2014

In the USA, the Foreign Account Tax Compliance Act (FATCA), prompted the number of Americans renouncing USA citizenship to a near all-time high in the first half of 2014; just before the new rules that make it harder to hide assets from tax authorities came into force. Some 1,577 people gave up their nationality at USA embassies in the six months through Jun 2014, according to the Federal Register data published 6 Aug 2014. It is only the second time there’s been more than 500 “renouncers”(Tax evaders) based on records starting in 1998. The FATCA asset-disclosure rules became effective on 1 Jan 2014, and prompted 576 of the estimated 6 million Americans living overseas to give up their passports in the second quarter of 2014. The appeal of USA citizenship for such renouncers faded, as more than 100 Swiss banks turn over data on USA clients to avoid prosecution for helping tax evaders.

IN 2010 THE USA ESTABLISHED THE FATCA LAW. Congress and Pres. Obama in effect threatened to cut off banks and other companies from easy access to the USA market if they didn’t pass along such information. It was projected to generate $8.7 billion over 10 years, according to the USA congressional Joint Committee on Taxation; However, The start of FATCA was delayed by 18 months to give foreign banks time to comply with the law, after financial institutions including ; CanadaToronto-Dominion Bank and Allianz SE of Germany, complained that it was too complex. Even so, June 30, 2014 was the deadline for turning over information on Americans considered in breach of USA tax rules, while July 31,2014 marked the end of the second wave of deliveries and includes documents that show which American clients were compliant.

Matthew Ledvina, a USA tax lawyer at Anaford (Antigua and Barbuda-AG) in Zurich said: “FATCA and the Swiss bank disclosure program has intensified the search for USA nationals beyond all measure…It’s shocking the levels of due diligence they are going through to ensure they have cleaned house…Swiss banks are trawling through records going back to the 1990s to find clients with USA addresses and telephone numbers, and those who received schooling in the country…Those identified as USA persons are either being asked to leave or be placed in special USA-only sections of the institution” Ledvina added that as many as 106 Swiss banks entered a USA Justice Department program to volunteer information on how they helped clients hide money from the Internal Revenue Service – Yeah! we remember, and they got away by paying cents on the Dollar.

The USA is the only “Organization for Economic Cooperation and Development” nation that taxes citizens wherever they reside, stepped up the search for tax evaders after UBS.AG paid a $780 million penalty in 2009 and handed over data on about 4,700 accounts. Shunned by Swiss and German banks and with FATCA looming, almost 9,000 Americans living overseas gave up their passports over the past five (5) years.

FATCA LAW requires USA financial institutions to impose a 30% withholding tax on payments made to foreign banks that don’t agree to identify and provide information on USA account holders. It allows the USA to seek/obtain data from more than 77,000 institutions and 80 governments about USA citizens’ overseas financial activities.

SWISS BANK ACCOUNTS NOT SO SECRET ANYMORE. Julius Baer Group Ltd. HSBC Holdings Plc’s Swiss unit, are excluded from the program as they are already under investigation in the USA, the second-biggest Swiss bank that was part of the probe, was fined $2.6 billion in May 2014 after it pleaded guilty to aiding tax evasion. Americans with a net worth exceeding $2 million, and an average income tax of at least $157,000 over the previous five years, must pay an exit tax on unrealized capital gains when they renounce USA citizenship. USA citizens aren’t the only ones giving up their ties to America. The Treasury Department is also trying to limit the benefits from corporations adopting foreign addresses to avoid taxes, a process known as “an inversion”.

Thanks to Bloomberg for Their 7 Aug 2014 Story.

OUR TAKE AND COMMENT

FATCA – a “BIG DEAL”, Hardly! At first, we were surprised, and pleased about the application of the FATCA Law (we make the “FATCAT” analogy because in the USA, a “fatcat” is an extremely wealthy person). The fact that such law is in effect (since Jan 2014), provides some hope that at least some of the International tax-loopholes may begin to be closed; However, let us do the numbers: FATCA is projected to generate $8.7 billion in owed taxes over 10 years…but, that, is less than a billion per year. Folks that is a minuscule amount given that Switzerland alone (there are many other “tax heavens”) holds $2,300 billion in assets. One might say FATCA represents a Band-aid on a bleeding tax artery. And then, there is an even bigger tax-dodge: The Treasury Department is also trying to limit the benefits from corporations adopting foreign addresses to avoid taxes, a process known as “an inversion”. Yeah! Things are “inverted” all right! The wealthy pay little or no taxes, then complain about how “liberal”, and wasteful” those of us who do pay taxes are. In my book, a person who renounces their citizenship is a non-descript scoundrel who has no flag, allegiance, or shame! There have been over 9,000 such greedy “renouncers” in the past five (5) years. They probably vacation in our country under their new citizenship- No shame!

THEN THERE ARE THOSE WHO PROFIT FROM FATCA. Mathew Ledvina, a USA tax lawyer at Anaford (Antigua and Barbuda-AG) in Zurich (talk about an elusive group), speaks very optimistically about FATCA (par 3). In our opinion, he only wishes to make the new law sound very threatening to tax evaders, but not to worry, because he is there to show them how to avoid tax liabilities – at a low price. In our opinion he is just advertising his services. He could care less about the ethics of tax dodging, and specializes in how to do it legally. Notice he too lives, and practices outside the USA. His USA Law license and citizenship should be revoked ASAP as a “Persona non-grata”.

Edward Oliver Gonzalez (gonzedo)

e-mail; gonzedo@yahoo.com

Related articles: INDIA TAX EVADERS IN THE CROSSHAIRS OF P.M. MODI VS THE SWISS CONNECTION; http://energymaters.com/?p=1574


August 8, 2014 at 9:30 PM
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