The US Foreign Account Tax Compliance Act (FATCA) has helped grab £5.17 billion in lost tax held in secret offshore bank accounts.
The Internal Revenue Service (IRS) has revealed the figures in a FATCA update.
The IRS says the controversial law has made identifying offshore cash and investments that taxpayers have failed to declare easier.
The US tax service has also warned that anyone avoiding tax should take the opportunity to put their financial affairs in order as disclosure schemes offering reduced penalties will shortly come to an end.
IRS commissioner John Koskinen said: “FATCA has changed the landscape for anyone with undisclosed foreign accounts.
Fight against tax avoidance
“FATCA is helping the fight against tax avoidance and taxpayers who have not told the IRS about their true financial standing should consider their options. If I was them, I would make sure I was fully tax compliant and up to date with what I should have paid the IRS.”
The FATCA network demands financial institutions outside the US should volunteer information about any accounts or investments controlled by US taxpayers.
For US residents, the reporting threshold is $50,000 of cash or investments, while the limit is raised to $200,000 for expats.
The FATCA network comprises more than 100 countries and almost 200,000 financial institutions.
The automatic exchange of FATCA financial data started in September, although US taxpayers have had much longer to declare their offshore assets in return for reduced penalties from the IRS.
FATCA uncovers tax cheats worldwide
“FATCA has made the job of cross checking who owns foreign accounts against tax filings,” said Koskinen.
“The IRS is also collecting a lot of new information from Swiss banks co-operating with the US Justice Department in return for giving tax avoidance advice to US clients in past years.”
He also revealed more than 30,000 US taxpayers had come forward to declare their offshore holdings since 2012.
“The IRS is dedicated to detecting offshore tax evasion worldwide and is also helping other tax authorities identify their citizens who hold undeclared accounts in the US,” said Koskinen.
“Even though the IRS has suffered budget cuts, we have significant resources working on uncovering tax avoidance all over the world.”
FATCA does not uncover tax cheats. It steals money from people who speak no English and are “descendants” of Americans. It’s stealing. It’s discrimination. And it’s evil. I don’t understand how compliance specialists and so-called tax experts don’t understand that robbing non-Americans at gunpoint is evil. And as for the American “tax-cheats.” These are women married to foreign men who can no longer hold a job, have had their mortgages and retirements cancelled and their marriages fail due to the law. Their children have to pay off the US when they turn 18 so that they won’t be tormented and harassed by the US government, that is hunting them like animals, plotting to destroy their lives. What is the difference between what the US is doing and holding someone up at gunpoint at the ATM? No wonder people hate us and want to kill us. With laws like this we deserve all the hatred and s**t we get as a country!
FATCA and it’s older brother CBT (citizenship based taxation) are just examples of fiscal imperialism, blackmail and bullying. Foreign banks are being blackmailed into bearing the cost of acting as policemen for the IRS. If they don’t hand over the bank account details of any U.S. citizens, even if they are dual citizens who live and work in that country, they will be charged a 30% tax on any U.S. income. In other words they are being blackmailed into doing something which would be a breach of privacy laws if the same rules were applied the citizens living in America.
Many very ordinary, working class and even poor people living outside of the U.S. now have trouble finding banks to take their money. Others are taxed twice because they already pay taxes where they live. Some can’t even vote having never lived in the U.S. and yet they are required to spend large amounts of money paying accountants to fill out complicated tax forms for the IRS just to prove they don’t owe any tax. It’s wrong.
By the way, I think the amount for expats is not $200,000 where reporting kicks in. One needs only to have as little as $10,000 before the IRS requires you to relinquish all rights to financial privacy. The foreign banks must hand over that same information at $50000. Should someone have $200000, they just get to fill out more forms.
1. “….lost tax held in secret offshore bank accounts…”
Most of these accounts are neither secret or offshore. They are local accounts held where US deemed persons live and work, they are used to pay the rent. They are reported to the local governments in which the person resides, where taxes are paid and from which benefits are received. The US, unlike every other nation on this planet, cannot discern the difference between residents off-shoring funds for tax evasion purposes and US deemed citizens living and working abroad.
2. “…institutions outside the US should volunteer information…”
This information is NOT volunteered. It is being extorted under a non-refundable 30% withholding threat on all US transactions. Because of this threat and fear of mistakes banks are increasingly closing/not opening accounts for anyone with a US indicia.
Americans are no longer free to leave the US borders if they cannot bank. It would behoove the US to comprehend the long term consequences of CBT/FATCA if they wish to dance in the global economy. Isolationism can have its consequences. Expats are very angry, renouncing in droves and quitting as US mini-ambassadors. US exporters are returning home, Americans are being shunned from joining businesses and not being hired/fired.
3. “….automatic exchange of FATCA financial data…”
There is NO exchange of data, this is a one way street going into the US. The promised reciprocity will never happen, congress has never voted on allowing this, the US financial institutions would be screaming.
4. “…IRS is dedicated to detecting offshore tax evasion worldwide..”
The US/IRS is dedicated to eliminating the competition so the US can remain the largest tax haven in the world: www dot forbes.com/sites/robertwood/2015/11/03/u-s-ranks-as-top-tax-haven-refusing-to-share-tax-data-despite-fatca
5.”…the reporting threshold is $50,000..”
The reporting threshold for individuals is if the aggregate of all accounts is over $10,000. Financial institutions report on accounts over $50,000.
6.”…helped grab £5.17 billion in lost tax ..”
Most of the funds received were in penalties for form filing delinquency, for forms no one has ever heard of. FATCA is estimated to garner 800mil/yr for ten years. A cost benefit analysis has never been done and would most likely expose a loss once the IRS compliance costs are calculated. The loss of good will from US deemed citizens living abroad, the anger of foreign banks at being extorted and the inability of the US to compete in a global economy will be incalculable.
The US Federal tax system, the only system in the entire world (besides Eritrea) to use citizenship-based taxation (CBT), is a quasi-feudal institution in mentality and practice in the way it considers and treats non-resident US citizens (US expats). Indeed, out of a grand total of 244 existing tax jurisdictions in the world 242 (all but two, well over 99%) use residence as a basis for taxation (RBT). Unlike the entire rest of the world, the US taxes its non-resident citizens as if they lived in the US irrespective of their actual status. There is an estimated USD 8.7 million non-resident US citizens living in foreign countries, of which many maintain little if any contact with the US. They do not partake in any way in US society. They have no presence in the US of any kind; physical, financial, professional, etc. They do not cost US society a penny and have never asked anything from the US. Whatever services they receive from the US government is limited to consular and embassy services which they have to pay for at full cost. Many were born abroad and have never lived in the US. Many have never actually set foot on US soil in their entire lives. Many are US emigrants who long ago have left the US to settle and live their lives in foreign countries which they now call home. Many are dual (if not triple) nationals born out of mixed marriages. Such is the reality of the globalized world we live in today, which the US, so far, pig-headedly refuses to consider. Yet, the US insists on taxing these people as if they were full members of US society while giving them nothing of any objective substance in return that would justify such an exceptional treatment (as measured against the unanimously accepted standard of residence-based taxation practiced by the entire world). Furthermore, the US submits US expats to the same penalties in case of non-compliance as tax-evading US stateside residents who deliberately place their assets offshore to evade their fiscal obligations. US expats are none of two things: Fat Cats and tax evaders. The overwhelming majority of US expats are run-of-the-mill, garden-variety, middle class, law-abiding citizens who amongst other civic duties pay their taxes in the countries where they live, just like any other resident. More often than not they are taxed at rates considerably higher than what they would have to pay if they were living in the US. US expats benefit from exising double taxation treaties (if applicable) as well as certain conditional deductions that may mitigate the extent of double taxation but does not eliminate it altogether. To that one must add the grotesque complexity of US federal tax declarations worsened by the difficulty of having to match different taxation systems. This requires professional help that invariably charges exhorbitant costs. Last but not least, the US has imposed its will on the rest of the world by forcing other countries to become compliant with FATCA (under threat of 30% withholding tax on all USD payments transiting through the US financial system). This has cost the world billions so far in compliance cost with strictly no added value in return. Quite the contrary, the US has so far welched on the deal that it has imposed by not providing reciprocity in the exchange of information that is central to all Intergovernment Agreements (IGAs) it has forcibly imposed on the rest of the world. Understandably, many countries are growing resentful and wary of having any exposure to the US that could result in fiscal liabilities, and more importantly on entirely disproportionate fines and penalties arbitrarily imposed by the US. Overseas Americans living in these countries are increasingly viewed as potential vectors of such risk. Unsurprisingly, foreign businesses, in particular financial services providers (banks, brokers, insurance companies, etc.) avoid this potential sword of Damocles by refusing any clients that are considered “US Persons” in the US fiscal sense of the term. It goes without saying that Amercians who find themselves in such a situation can no longer live normal lives. In addition to which they are denied jobs and promotions for the same reasons.
expats would be much better off not investing in anything like iexpats, because of FATCA. FATCA assumes that the investors are guilty of tax evasion.
FATCA will bring less profits to iexpats. And, by praising FATCA, iexpats is advertising for the benefit of entities that are causing iexpats to make less money.
Well said Thomas and Keith for comments that clarify the true nature of FATCA. It makes my blood boil when I read articles that blindly tow the Govt line of BS and that uses a broad stroke to brand Americans Abroad as tax dodgers. Let’s call it what it is: a pitifully broke country that desperately needs money that has resorted to extortion in order to shake down their own people who live abroad. It’s on the same level as the disgusting civil forfeiture laws.