FATCA: Why New Tax Haven Laws are a Disaster in the Making

by Robert Morris

Here's a guest post with some further insight on a controversial piece of legislation called FATCA. Robert Morris explains why this law on tax havens is a really really bad idea. 

First off, I would like to thank Nomad Politics for bringing up this issue, and also for reaching out to seek an opposing viewpoint to its FATCA coverage. This is the kind of open-mindedness that we could all use more of.

In that spirit, let's start by laying out a positive aspect of FATCA, the Foreign Account Tax Compliance Act.

Some Facts about FATCA

This US law was largely introduced in response to a Swiss banking scandal. A significant number of Swiss banks were revealed to have been colluding with US citizens to hide their earnings from the US government. FATCA has, in fact, severely disrupted the Swiss banking industry. Switzerland’s “too big too fail” banks, like UBS, have settled with the US government for sums that are eye-watering, but will not severely disrupt their business. Medium-size and smaller Swiss banks are being forced to pay proportionally much larger sums, whether or not they knew their clients were from the US. Many are going out of business. The small Swiss banks that survive this reckoning will certainly think twice before they ever deal with US clients again.

Judging from the fact that my anti-FATCA video has been viewed by about a 50th of the entire population of the Cayman Islands, the legislation has been having the desired effect in other tax haven jurisdictions as well. We should admit that in this one respect, FATCA has been having the desired consequence. Tax avoidance by Americans has become more difficult, and that is a good thing.

This one positive result, however should not distract the public from FATCA’s truly mind-boggling scope. FATCA is a sledgehammer that is being used where a toothpick was necessary. FATCA does not just go after Switzerland and Cayman. It fundamentally re-orders the business of banking for every country, and in every country.

FATCA Repeal : Tax-Avoiding Super Wealthy with Secret Bank Accounts Find a Friend in GOP

by Nomad

Once again, the Republican Party has demonstrated which side it supports. Between the average taxpayer or the 1%, its call for a repeal of Obama's anti-tax haven law of 2009- before it has even had a chance to be put into effect- provides us with a clear answer.  

Some Facts on FATCA

Reuters is reporting that the Republican Party is expected to approve a resolution this week, calling for repeal of an Obama administration law that is designed to crack down on offshore tax dodging.

The law, Foreign Account Tax Compliance Act (FATCA) requires foreign banks to find any American account holders and disclose their balances, receipts, and withdrawals to the US Internal Revenue Service (IRS), or be subject to a 30-percent withholding tax on income from US financial assets held by the banks. Owners of these foreign-held assets must report them on US tax returns if they are worth more than $50,000.

It was always going to be controversial and not beloved by banks, libertarians and some Americans living abroad. Another example of Big Government overreach, they howled. Lobbyists have been successful at delaying the law in operation. Its effective date has been pushed back repeatedly, with enforcement now set to start on July 1. 

If the Republicans have their way- and there doesn't seem to be much chance they will- FATCA would never start at all.

Swiss Bank Pleads Guilty to Felony Conspiracy with American Tax Dodgers

Syndicated news with introduction by Nomad 

Swiss banking giant Credit Suisse has admitted that it conspired to help some US clients avoid paying taxes. It has agreed to pay over $2.5 billion and to cooperate with investigations. 

This would make the Swiss company the largest bank in 20 years to plead guilty to criminal charges.

  

As much as I think this is a good- and long overdue- step, imposing a fine on Swiss banks for helping Americans hide their wealth is a little like punishing dogs for peeing on fire hydrants. It's what they do. There's nothing very "brazen" about either case. 

Perhaps the only surprising aspect of this news is that the US government found the wherewithal to actually do anything about it. As Forbes describes the news, the IRS took on Swiss banking and it won. According to that article, IRS is the big winner in this plea bargain arrangement.

Plus, the IRS earns dividends in the form of account holders applying for amnesty. And for the IRS, it isn’t just Switzerland, but everywhere now that FATCA has expanded U.S. tentacles almost worldwide. Attorney General Eric Holder wins big too, getting the benefit of a guilty plea. He can’t be accused of letting another big bank off the hook for being too big to fail.

The U.S. Treasury and New York State both make out well. Credit Suisse will pay nearly $1.8 billion to the Justice Department, $100 to the Federal Reserve, and a whopping $715 million to New York’s Department of Financial Services.

With FATCA approaching its launching date, some would see this in a little less cheery light. The US, they'd say, is simply attempting to assert its control over all international banks. 

Amid all this back slapping, and at a time when Putin is threatening to renew a Cold War, what is left unsaid is that the long-term consequences may be hard to calculate.

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Credit Suisse guilty on US felony charge, pays $2.6 bn (via AFP)

Credit Suisse pleaded guilty and was fined $2.6 billion for helping Americans avoid taxes, the first time in 20 years a major bank has been punished on US criminal charges. US authorities said the "brazen" Swiss bank, one of the world's largest wealth…

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Your Front Teeth and a Civil Tongue: Some Musings on Internet Trolls and Bullies

by Nomad

Some idle observations on trolls and other discontents and the pursuit of civility in divisive times. Spoiler alert: It's not easy.

Like Toilet Paper

For bloggers, the appearance of an occasional troll is a sign you must be doing something right. It used to bother me but not anymore.

That kind of reactive abuse is a kind of rite of passage and a validation that the information in the post annoys the very people it is supposed to annoy.

Like toilet paper, there are a variety of troll types. However, the main difference is that toilet paper at least performs a valuable service. 

When it comes to trolls the most common are the illiterate ones who read the headlines and skim the rest. They definitely clearly spend more time with their comments than reading. They explode on the scene, leaving their dung as a marker and then never return. 

There are the ones who direct their personal attacks at me (or other commenters.) "You MORAN!" is the standard salutation and represents the beginning and ending of their wisdom.
I call them snowflakes because they are sharp and cold but so tiny and unimportant. And like snowflakes, at this blog they disappear almost as soon as you notice them.
Think yourself lucky, that you never get a chance to read their comments. Your life would not be enriched, take from me.

Bottomline, I treat such remarks with the same respect as I would picnic trash left in a public park.

Rising and Falling Fortunes: Rothschild Empire Faces Criminal Investigation in US and France

by Nomad

It might be a name long associated with fabulous wealth and enormous political influence, but the Rothschild Empire has been had its share of humiliations of late.

Hard Times for Billionaire Dynasty

As pioneers of international banking (as well as probably the wealthiest family in the history of the world,) the Rothschilds have been the subject of many a conspiracy theory. The exact amount of their family fortune is undisclosed, but by one conservative estimate, the Rothschild family controls assets worth more than $350 billion when each of their personal fortunes is combined.

The Rothschild dynasty is the el supreme of all family dynasties and went thing go bad there are plenty of people to gloat and plenty more to send their condolences. Ah, the way of the world is such like. 

The family business has apparently been hit hard by the worldwide economic slump. That's not all the problems they have been facing. 

In June of last year, Baron David de Rothschild, chairman of the Rothschild Financial Services Group since 2003, was indicted by French police for his role in a fraud case. The independent investment banking organization which offers financial services to governments, corporations, and individuals worldwide. was charged with "falsely advertising an equity release loan scheme, bought into by more than 130 pensioners between 2005 and 2008."

More than 20 British pensioners in Spain took up legal action against Rothschild’s company after losing their dream properties and thousands of euros.

French investigators claimed that Rothschild’s product, the Credit Select Series Mortgage Loan, was sold to retirees as a legal tax haven, specifically as a mean to reduce the apparent value of their homes for inheritance tax mitigation purposes.

The problem is that it wasn't as legal as Rothschild executives had claimed. The French tax agency ruled that such a scheme was a nothing more than fraud and that Rothschild should be held accountable. Said one of the French prosecutors:

“In short, independently of what happened to the investment, Rothschild advertised a loan aimed at reducing inheritance tax, which is a breach of tax law."

The victims who now stand to lose their homes told the courts that they felt confident of the financial packages, having put their faith in the Rothschild name. In its defense, the investment banking company pointed out that its involvement was limited. It had only provided the loan, and "was not involved in the investment side of the deal, which was carried out by financial intermediaries based in Spain, most of whom were British."