Financial centres around the world are bemoaning the fact that new tax avoidance laws are ruining their banking and investments sectors.
A new era of transparency and co-operation between nations has squeezed out the financial centres making big profits from exploiting loopholes in international tax laws.
The US Foreign Account Tax Compliance Act (FATCA) has led the way by drawing back the veil of secrecy tightly pulled across banking, tax and investment advice offered in some quarters.
The biggest head has just been served up on a platter to the US.
The lower house of the Swiss parliament has agreed to sign up for FATCA and to report details of US customer accounts to the Internal Revenue Service each year.
Swiss concerns
The ruling, which uncoincidentally comes just a few days after Swiss bankers made a grovelling apology about past wrongdoings and offered billions of dollars in compensation to avoid prosecution.
Queuing behind the Americans are the British, Germans and other European states who are also aggrieved that the Swiss have collaborated with individuals and companies to evade tax for so long.
Bankers and tax lawyers in Switzerland are concerned for the future of financial services in the country.
After standing for so long as a bastion of secrecy for the wealthy, now the gates are breached, some fear the industry may collapse.
Although this may be a big worry for the Swiss gnomes who have to pay bills and put food on the table, the day of reckoning has taken too long to come for many.
The simple fact is that wealthy investors could buy their way out of paying the taxes that everyone else had to pay by going to Switzerland and similar tax havens.
Non-negotiable deal
From the outside, it’s not hard to see that the US, Britain and other leading nations are picking off tax havens and multinational corporations like snipers.
The worry for former tax havens like Switzerland is the banks have more European clients than those from the US.
The Swiss Bankers Association (SBA) is unclear how banks would weather the financial storm wreaking havoc across the industry.
“The banks not only kept their dealings confidential for their customers, but from each other, so no one knows what exposure the industry has to FATCA and other tax agreements,” said a spokesman.
“The deal with the US was really non-negotiable and had to be accepted to put the past behind us.”
it is strange that so many Americans accuse other countries of being “tax havens” instead of being critical of their own “tax haven”. Currently, America is likely the largest and most secret tax haven, ranking #1 on the financial secrecy index.
Exactly. With its Florida, Texas and Delaware tax havens, the U.S. is hardly a model of transparency when it comes to offshore banking practices. Such hypocrisy shall not go unchallenged and the result will be a massive flight of foreign capital from the U.S. market – in fact, it’s already begun. How do you like them apples, FATCAnatics? Your misguided efforts to find spare change under the sofa cushions may well be the final straw for the shaky U.S. economy.
Only the US sees this tax jihad with any kind of enthusiasm. Other kinds are playing ‘lip service’ to FATCA mainly because the financial benefits to them are miniscule and ironically for the US as well.
Burdening other countries financial systems with $100Bs so the US can reclaim a puny $8B per annum doesn’t make sense.
Upcoming issues for FATCA
Integrity of the data
Discrimination legal challenges for resident citizens
Providing banks with false documentation (fake CLNs)
Bank officials entering wrong citizenships (who’s going to catch that mistake after how many years)
Legal challenges in the US with US FFIs refusing to provide reciprocal data for foreign use
FATCA still is work in progress and not a ‘done deal.’
Prediction – It will not end up working like the US Government expects or have the coverage it desires. Different countries will provide different levels of data.
I’m waiting to see what happens if the US puts the 30% withholding trigger instantly making the US financial markets unattractive vis-à-vis other markets.
No matter how good US markets are handicapping your own financial markets with a 30% withholding tax isn’t going to help. Unless of course the US can convince other countries to use a withholding tax as well. I suspect they’re wait and see if the US has shot itself in the foot first.
This writer obviously celebrates the accomplishments of the IRS forcing their regulations onto other countries to the detriment of American investors and every American expat. Her bias in favor of FATCA is crystal clear, and certainly does not represent how most American expats or investors feel about the issue. FATCA may attack wealthy people with money abroad which obviously offends this writer, but also the regulations stifle the livelihood of many honest hardworking expats that are not in the elite classes. It is sad that a website claiming to give good information to investing expats does not serve to rally opposition to these oppressive regulations, and instead provides a venue where these thug supporters can crow about their accomplishments. How about looking more at the efforts to fight FATCA, iExpat?
Thank you for your comments. Would we be doing these types of interviews if we supported FATCA?
https://www.iexpats.com/rolled-back-deadline-of-fatca-gives-critics-hope/
That’s a start. There are efforts outside and within the US to get rid of these oppressive regulations, so how about featuring these? Promoting the idea how the fat cats with bank accounts in Switzerland are going to have to pay their fair share as in this article gives a distorted view of the results of FATCA. The truth is that this situation is going to create a lot of hardship for hard working regular folk living in that country that will no longer be able to have a bank account, a mortgage or other bank services. What the IRS is doing in other countries is evil and we as expats should be doing our best to stop it. This website should be doing much more if they truly want to represent the best interests of the American expat.
Thanks for your comments Greg. I’m sure if you browse the FATCA articles on this site will help you to see where we stand on this. Thank you for the suggestions for content.
Message means more than content.
No offence Lisa, but the title of your article ‘FATCA’s ruining our business, moan tax havens’, kind of sounds pro-FATCA.