Fatca: The Menace You'll Hear About in 2012

This week both the New York Times and the Wall Street Journal had reports on the hubbub being created worldwide by a new U.S. law that is virtually unnoticed within our borders. It is the Foreign Account Tax Compliance Act of 2010, or Fatca.

The problem originates in U.S. government efforts to prevent future offshore-banking tax scams like the UBS one in 2009. To keep better track of the flow of assets owned by U.S. citizens, Fatca requires bankers in other countries to send the IRS information about transactions by any of their customers who are Americans. Similarly, U.S. banks have to report to the IRS info on their non-U.S.-citizen customers, so the IRS can send it on to their home countries.

You can understand the motivation behind the rule. It's a big connected world economy, huge sums can be transferred anywhere in an instant, and much as INTERPOL or the World Health Organization have a legitimate interest in sharing data, so too might taxing authorities. In principle, everyone should pay his or her fair share, somewhere.

But in practical terms, Fatca seems to be turning into a nightmare and disaster. Banks around the world are suddenly rejecting Americans as clients or customers, because they don't want the reporting and bureaucratic hassles, plus the potential exposure to draconian penalties. Non-Americans are pulling their assets out of U.S. banks. I get emails every day from American expats who say they are facing all kinds of problems bringing their long-standing foreign-based banking life into compliance with this new law. Some of them say they're getting ready to renounce their citizenship. That's silly: the real reason to do so is in protest of U.S. tolerance of leafblowers.* Over the years I've had accounts with banks in England, Japan, Malaysia, China, and now Australia when living or working in those places, and I'm wondering what I have to worry about to make sure the remaining ones "comply."

When I have the energy, I'll pull together some of the hundreds of links I've gotten from newspapers in Asia, Latin America, the Middle East, and Europe about people and institutions going crazy over this law. Here's a sample, a few weeks ago from Spiegel:

SpiegelFatca.png


For now, Happy New Year! Get ready to follow this news in 2012. And thanks to all expats who have been pouring in this info, the most indefatigable of whom has been MVH of New Zealand.
___
* Just a joke. Sort of.

Presented by

James Fallows is a national correspondent for The Atlantic and has written for the magazine since the late 1970s. He has reported extensively from outside the United States and once worked as President Carter's chief speechwriter. His latest book is China Airborne. More

James Fallows is based in Washington as a national correspondent for The Atlantic. He has worked for the magazine for nearly 30 years and in that time has also lived in Seattle, Berkeley, Austin, Tokyo, Kuala Lumpur, Shanghai, and Beijing. He was raised in Redlands, California, received his undergraduate degree in American history and literature from Harvard, and received a graduate degree in economics from Oxford as a Rhodes scholar. In addition to working for The Atlantic, he has spent two years as chief White House speechwriter for Jimmy Carter, two years as the editor of US News & World Report, and six months as a program designer at Microsoft. He is an instrument-rated private pilot. He is also now the chair in U.S. media at the U.S. Studies Centre at the University of Sydney, in Australia.

Fallows has been a finalist for the National Magazine Award five times and has won once; he has also won the American Book Award for nonfiction and a N.Y. Emmy award for the documentary series Doing Business in China. He was the founding chairman of the New America Foundation. His recent books Blind Into Baghdad (2006) and Postcards From Tomorrow Square (2009) are based on his writings for The Atlantic. His latest book is China Airborne. He is married to Deborah Fallows, author of the recent book Dreaming in Chinese. They have two married sons.

Fallows welcomes and frequently quotes from reader mail sent via the "Email" button below. Unless you specify otherwise, we consider any incoming mail available for possible quotation -- but not with the sender's real name unless you explicitly state that it may be used. If you are wondering why Fallows does not use a "Comments" field below his posts, please see previous explanations here and here.

Google Street View, Transformed Into a Tiny Planet

A 360-degree tour of our world, made entirely from Google's panoramas

Video

Google Street View, Transformed Into a Tiny Planet

A 360-degree tour of our world, made entirely from Google's panoramas

Video

The 86-Year-Old Farmer Who Won't Quit

A filmmaker returns to his hometown to profile the patriarch of a family farm

Video

Riding Unicycles in a Cave

"If you fall down and break your leg, there's no way out."

Video

Carrot: A Pitch-Perfect Satire of Tech

"It's not just a vegetable. It's what a vegetable should be."

Video

The Benefits of Living Alone on a Mountain

"You really have to love solitary time by yourself."

More in National

From This Author

Just In