“Tax havens” vs. “Bank Secrecy” and a world of residence based taxation
Governments in general and the U.S. government in particular, have become more concerned that U.S. citizens either move their capital from the United States or hide their capital from the United States. People who would move their capital from the United States so that they could generate a better “after tax” rate of return. People who would hide their money from the United States so that their capital and income would escape U.S. Taxation. Any country with tax rates lower than U.S. tax rates would be considered to be (from a U.S. perspective) a “tax haven”. Any country that does not disclose the identity of its customers to the United States would be considered to be engaged in “Bank Secrecy”. As more and more income is generated from capital, governments the world over, have become concerned about capital escaping taxation. This concern has culminated in the OECD “Common Reporting Standard” which will “keep the capital of a country’s residents” in that “person’s country of residence”. In other words, countries are concerned that the residents of a given country, pay tax to that country. This principle reflects the principle that all countries (save one) impose taxation based on the fact of “residence” in the country.
FATCA and U.S. citizenship aka “place of birth taxation” or how to impose U.S. taxation on the world
In 2010 the U.S. Congress passed and President Barack Obama signed into law the U.S. “Foreign Account Tax Compliance Act” which is known as FATCA. It was aimed at resident U.S. citizens, green card holders, etc. President Obama, Senator Carl Levin and others claimed that the purpose of FATCA was to combat tax evasion, tax havens and bank secrecy. That may be a partial truth.The truth is that FATCA attacks “middle class” Americans abroad AND expands the U.S. tax base into other nations.
President Obama signed FATCA into law on March 18, 2010. Senator Carl Levin, a co-sponsor of the FATCA legislation, declared that “offshore tax abuses [targeted by FATCA]cost the federal treasury an estimated $100 billion in lost tax revenues annually” 156 Cong. Rec. 5 S1745-01 (2010). FATCA became law as the IRS began its Offshore Voluntary Disclosure Program (OVDP), which since 2009 has allowed U.S. taxpayers with undisclosed overseas assets to disclose them and pay reduced penalties. By 2014, the OVDP collected $6.5 billion through voluntary disclosures from 45,000 participants. “IRS Makes Changes to Offshore Programs; Revisions Ease Burden and Help More Taxpayers Come into Compliance,”
http://www.irs.gov/uac/Newsroom/IRS-Makes-Changes-to-Offshore-Programs;-Revisions-Ease- Burden-and-Help-More-Taxpayers-Come-into-Compliance (last visited Sept. 15, 2015). The success of the voluntary program has likely been enhanced by the existence of FATCA.
Continue reading University of Windsor – Faculty of Law – Special Program Thursday, October 8, 2015