Other • Re: THE DESPICABLE TRUTH EMERGES ABOUT FATCA
People in every country of the world need to know what FATCA and other US extraterritorial legislation mean for personal privacy and local-country sovereignty.
The reality is, US policies especially crush middle class USPs (US Persons = Green Card or US Citizenship) Abroad whether they are tax compliant to the US or not. The reporting requirements of FATCA and FBAR (FATCA having apparently been passed as a rider to the HIRE act without much real open Congressional debate on the issue) are causing US Persons abroad, many of whom are dual nationals of their country of residence or a third country, to lose their jobs, be refused even basic bank accounts, and be shunned by prospective non-USP business partners who don’t want to deal with dual-reporting and taxation requirements to the IRS.
Most working and middle-class “minnows” abroad pay local, regional, and national taxes in the countries where they live, as well as VAT, excise and other taxes and fees. Whether these taxes are lower or higher that what they would pay as “homelanders” (USPs resident in the US) is immaterial. They all pay their fair share where they live according to the local system negotiated through whatever political means extant. They have to deal with the advantages and the drawbacks of their local countries’ system and do not need and often cannot survive with the additional variables imposed by the IRS.
US extraterritorial taxation policy does not take into account the disparities caused by the shift in exchange rates (thanks perhaps largely to US “quantitative easing”) that pushes people into higher US tax brackets despite no increased local purchasing power, the cost of living in each foreign country, as well as the tax structure in the foreign countries (for example, some countries have a much higher VAT than the US sales tax, but VAT paid outside the US is not eligible for a Foreign Tax Credit in the US).
US Double Taxation also takes money rightfully earned in a foreign country out of the local economy, where USPs should be free to spend or invest their money. Non-USP family members of USPs are also adversely affected, despite having no allegiance to the US.
Working and middle-class USPs have recently reached retirement age to discover that they have outstanding US tax liability, or while having no US tax liability due to the (limited) Foreign Earned Income Exclusion (FEIE) and Foreign Tax Credit (FTC), might owe confiscatory penalties on foreign tax-deferred or tax-exempt retirement plans that were not reported to the US (see FBAR). Many USPs abroad renounce nationality because their pensions would not count as “Earned Income” and they could not survive if they paid US double taxes. Nonetheless, the renouncement process is time consuming and costly.
There are a number of websites now dedicated in whole or in part to discussions of tax problems that US Persons abroad face (this list is not exhaustive, on many of the sites you will find links to many others):
Disclaimer: In the case of the sites run by lawyers, this present post is not an advertisement for their services, only an indication to the reader who might want to read their blogs and participate by posting comments.
I feel it is primordial that people in the US get the complete story about what is going on with US extraterritorial and taxation requirements. It appears that many people in the US are not aware of the issues, or think that the issues have only to do with very rich people who move money out of the US into offshore banks in order to avoid taxes. The story is much more complicated than that, and I hope that American voters will become more informed.
Statistics: Posted by stopdoubletaxation — Sun May 13, 2012 6:11 am
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