A lot of Americans in the U.S. think that all Americans who live abroad get a free ride on taxes. They couldn’t be more wrong. The United States is the only country in the world that believes in citizenship-based taxation, and taxes its citizens on their worldwide income no matter where they reside. Oh, no . . . excuse me. There are two countries with citizenship-based taxation: the United States and Eritrea. Eritrea? Go figure. So American citizens all over the world must pay income tax to the country in which they are residing, as well as to the U.S., unless the countries share a tax treaty, but that’s not even totally true since the tax treaty regulations are complicated. Everyone has to figure out their own obligations, and the great majority of American citizens abroad do just that.
|I get it . . . FATCA, fatcat . . . hmmm|
In an unprecedented instance of bullying, the U.S. is manipulating foreign financial institutions into become policemen for the IRS. Under threat of penalty, these institutions will now have to turn all data and information about their American clients over to the IRS. In doing so, the foreign institutions will end up breaking constitutional law in their own countries. But the U.S. sees no problem there, because it has utter contempt for other countries’ traditions, values, and Constitutions. In addition, there’s going to be a tit for that tat. If you’re a non-American resident of the U.S., listen up. In order to convince, let’s say, some German financial institution to hand over the information that the IRS wants about that institution’s American clients, the IRS will hand over to the German authorities whatever financial information it has on German citizens residing in the U.S. That is outright creepy.
Well, that’s the Truth of the new law, and here are the Consequences: FATCA is affecting the very foundations of the lives of Americans residing abroad. It is turning innocent people, some of whom are "American" only because one or both parents are, but who may never even have set foot in the U.S., into tax criminals. It is turning Americans living and working abroad into pariahs. Why? Because the cost to foreign financial institutions of complying with FATCA is staggeringly high. More and more companies are reluctant to hire Americans, to deal with Americans, to open bank accounts for Americans. On the one hand the American government wants its full share of global economic influence, but on the other hand it has shot itself in the proverbial foot with FATCA. Is nobody capable of thinking these things through anymore?