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:
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.