With the announcement recently from one of our major local Caribbean banks, HSBC Private Bank Bermuda that they would no longer support accounts owned by US citizens, Bermuda residents with dual-citizenship with the United States, and green card holders living in Bermuda, the concerns elucidated earlier regarding US tax compliance have come to pass.
Fortunately, Butterfield Bank Private Bank confirmed this week that they will be taking queries from clients meeting their strict know your client compliance rules. It is estimated that more than 4,000 US citizens, Bermuda residents with dual citizenship with the United States and green card holders reside permanently in Bermuda. For other US citizens in other countries there is Little to No Place Left to Turn. There are then, for thousands of ordinary people, living ordinary lives outside the United States little or no alternatives remaining to place an investment, purchase life insurance, accumulate a pension, or even deposit funds and pay every day expenses. International financial planning for these individuals is now an oxymoron.
How can you plan when you cannot invest anything for the future, but may have to live literally on cash under the mattress? Regrettably, these lonely US citizens are finding out what it truly means to be called the ugly Americans. The effect on loyal American individuals and their families, many of whom have lived abroad most of their lives, is absolutely disastrous.
FATCA legislation, which was buried in the HIRE Act passed by Congress in 2010, becomes effective in January 2013. But because its implications are so far-reaching and complex, the US Treasury Department has not yet issued regulations on how to implement it, leaving banks, insurance companies, pension funds and mutual funds around the world in limbo as to how to put into place the onerous provisions of the new law.
The goal of FATCA was to identify US citizens with undeclared assets hidden in overseas bank accounts, said Jackie Bugnion, ACA director. Although ACA applauds this goal, the way this new law is structured is totally disproportionate and unworkable - the equivalent of using a bulldozer to destroy an ant hill. If truth in advertising laws had to apply to Congress's handiwork, the term FATCA would stand for Full of Adverse Tax Consequences for Americans, said Pete Sepp, executive vice-president of NTU.
Under FATCA, any institution in the world that holds US securities must declare all US account-holders directly to the IRS, or face a punitive 30 percent penalty on any transaction in those US securities. FATCA creates an administrative nightmare for banks overseas, and a double reporting burden on both American businessmen operating abroad and overseas American residents who must have foreign bank accounts to function. The law has already had highly negative consequences for the US and its citizens overseas, even before it has gone into effect. Some banks overseas have closed the accounts of US citizens, and have sold off all US holdings, rather than comply with the heavy administrative burden of FATCA. ACA points out in the report that total foreign investment in the US currently exceeds $21 trillion. The sale of even part of these holdings would have a devastating effect on US markets, and consequently on jobs in the US, on US exports, and on the US economy overall. If even a portion of this investment is lost - as Japanese, Australian, and European banking associations have already threatened to do - it will far exceed any sum, and far less than the $100 billion fantasy, that Senator Levin expects to collect as a result of this ill-conceived legislation.
The US crippling trade imbalance and ongoing debt crisis should be a wake-up call for government officials to stop hindering America's competitiveness overseas with bills such as FATCA and the Stop Tax Haven Abuse Act and employ fair tax policies that track tax evaders without hurting law abiding citizens.
http://www.royalgazette.com/
SPECIAL NOTE: If there was ever a time or issue that stressed the need for another citizenship and passport, it is now or this one. The idea that US citizens have to become a citizen of some other country simply to invest or bank abroad is unbelievable, and yet that is exact where we are at the moment. In addition, we will surmise it can only get worse as the financially stressed US (read broke) attempts to chase money and revenue from wherever it can. But in terms of banking or investing abroad, as it effects the individual citizen, let us be clear in that in many cases, it is the bank or financial institution turning the US client away, not because it would be illegal in that jurisdiction to open an account for a foreigner (or American specifically) but rather to avoid any hassle or aggravation resulting from it. Regardless, in terms of banking options abroad, the result is to get another citizenship and passport, or otherwise get lost (as the message being conveyed by such banks).
Considering that many banks or financial firms in other countries have the ability to offer the average account holder the option of investing in Swiss Francs, Gold or whatever other asset or financial instrument that they wish, to protect themselves from those very same US politicians that are devaluing the US Dollar, the effect is to prevent the average US investor of having a safe haven from financial ruin. Of course, there are more ways to skin a cat, and the only thing this kind of draconian policy will do is force more and more US citizens to get the heck out of there. God help those that cannot leave or are afraid to do so.
The flip side of the coin of course is the estimated US$21 Trillion Dollars that foreigners have invested inside the US. In regards to these funds, we can suggest that many of those foreigners too could be using the US as a tax shelter from the tax-man back home, but that is not discussed. Regardless, the point is made that should ALL those accounts be closed or liquidated, it certainly would hurt the US economy if US$21 Trillion flew out of the United States in a hurry, and yet such economic damage done to other other smaller nations is not considered. Why is it that in terms of US policy, much of the issue is one sided? Why does the US not put into effect what they want other nations to do, and start with-holding 30 percent of all interest or gains earned by foreigners who happen to have investment or bank accounts inside the US (and send that money abroad to the government whereby the foreign account holder has citizenship)? The simply answer is 21 Trillion Dollars of investment funds that could hurt the US economy if it went away. It is always about the money, rather than fairness or thwarting evil doers (or whatever other nonsense that is invented as an excuse).
What countries or other financial jurisdictions still offer a banking secrecy and political stability at reasonable costs?
In large part, 'banking secrecy' doesn't really exist anymore. The OECD witch-hunt led by France and the United States has managed to stamp out just about every semblance of privacy that remained in the financial system.
Any capital within the conventional banking system, however, is susceptible of being monitored by governments. That's why real financial privacy lies with anonymously deposited precious metals-- gold coins locked in an anonymous vault in a place like Banker Trust in the Dominican Republic. Totally off the radar.
