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Banking privacy is dead. Completely, totally dead. Murdered, really. The US government is the assailant, and FATCA is the murder weapon.
Weve talked about this a few times before FATCA is the heinously insidiously piece of legislation that the Honorable Barrack Hussein Obama passed into law in 2010 as part of the Hiring Incentives to Restore Employment Act.
There were no hiring incentives, and there was no restoration of employment. But any vestiges of banking privacy were destroyed.
In brief, FATCA has two key concepts. First, it requires an additional (and completely unnecessary) layer of reporting from all US taxpayers who have foreign financial accounts at foreign financial institutions. Though as we have discussed before, both of these critical terms are ridiculously and flagrantly ambiguous, putting the onus entirely on the taxpayer.
Without clarifying what constitutes foreign financial accounts and institutions, Congress has effectively created decades of debate in tax court a move that will undoubtedly ruin the lives of the unfortunate folks who get dragged into the fight.
The second key issue is that FATCA puts a burden on ALL foreign financial institutions worldwide to enter into an information-sharing agreement with the IRS; this essentially obliges every bank on the planet to submit reports and customers private data to the IRS.
Banks who dont enter into this information sharing agreement will have a 30% tax withheld on funds that originate from, or go through, the US banking system. Further, banks who enter into the information sharing agreement are obliged to withhold the 30% tax on transfers to other banks who do NOT enter into the agreement.
Such provisions are absolutely, 100% impossible. And its becoming clear that FATCA was passed with no intention of being enforceable. Its inconceivable that every institution on the planet could enter into an agreement. And its inconceivable that every institution on the planet could possibly know whether every other institution has entered into the agreement.