Guest Post by Mark Nestmann
FATCA, otherwise known as the Foreign Account Tax Compliance Act, is one of the most arrogant and one-sided laws ever passed by Congress. I first wrote about it in this essay.
The idea behind FATCA, which Congress enacted in 2010, is simple: Demand that other countries enforce America’s imperialistic tax laws. And do so by the confiscation of foreign assets, if necessary.
Spearheaded by President Obama, who has promised to shut down “offshore tax havens,” FATCA arrogantly presumes that “foreign financial institutions” will enforce US tax laws. And if they fail to do so? Any US-source income they have in the form of interest, dividends, rents, and similar payments are subject to a 30% withholding tax.
The definition of a “foreign financial institution,” or FFI, is very broad and includes banks, broker/dealers, insurance companies, hedge funds, and private equity funds.
The only way that foreign banks and other international financial institutions can avoid this tax is to act as unpaid IRS informants. Non-US persons investing in the US are affected, too. If their foreign bank isn’t FATCA-compliant, their US income gets whacked 30%.
This withholding was supposed to start in July 2013. It turned out that implementing FATCA was far more expensive and time-consuming than Congress expected it would be. (Sound familiar?) The IRS extended the deadline to July 1, 2014. And shortly before that deadline, the IRS extended the deadline again for any FFI (or in some cases, all FFIs in a country) that had committed to a good faith effort to implement this highly complex law.
Continue reading “Why FATCA Is a Train Wreck Waiting to Happen”
