The Foreign Account Tax Compliance Act (“FATCA”) has gone into effect, and now we are seeing the results. In theory the intention of the law was to deny US citizens and permanent residents financial safe havens abroad where they could illegally hide their income. However, it is proving even more disastrous. Particularly for US citizens and permanent residents who are not resident in the USA.
Under FATCA US citizens and permanent residents are required to report a broad range of foreign holdings including bank accounts, company ownership, etc. However, it also places a huge burden on foreign financial institutions to report directly to the US government concerning these evil US citizens and permanent residents who dare to open foreign bank accounts, companies, affiliates, etc. The net result: foreign banks and financial institutions have in most cases decided to abandon US clients rather than try to comply with FATCA.
What does that mean to you? It means if you walk into a bank or brokerage house outside the USA and try to open an account with your US passport you will be refused service. It is easier than complying with FATCA, and reduces the liabilities of the bank as well since the USA has been filing lawsuits left and right against banks who have supposedly cooperated with US tax evaders.
Of course the average American Sheeple is not going to care. Because they cannot imagine ever needing a foreign bank account. However, I can tell you from first hand experience that it is going to be disastrous for a lot of small US businesses. Let’s say you did some business in Europe and had a bank account in Europe to receive funds from your clients. More than likely that bank is going to be under extreme pressure to close your accounts. But even if the bank does not close your account the reporting requirements of the regulations may make keeping a foreign bank account simply too complicated for most small businesses to comply with, regardless of how useful it might be in regards to receiving payments from foreign clients. And another problem: if you comply with the various confusing and complicated reporting requirements of FATCA and other US government reporting regimes, will that result in an increased risk of IRS audits?
Some people claim that these are “unintended consequences” of the regulations, but I wonder. Essentially it insures that only large multinational businesses will be able to do business outside the USA (in fact it will be almost impossible for US citizens and permanent residents do anything outside the USA other than the occasional tourism). The large multinational companies are already subject to extreme government oversight and supervision. Removing millions of pesky small businesses from the scene will make it much easier for the US government to further regulate and control international commerce.
Time to get a foreign passport.