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.
