Wednesday, May 05, 2010

FATCA, tax evasion and Vietnam veterans

A few years ago, attending an event at the Institute for Economic Affairs, a London think-tank closely associated with libertarian right-wing causes, this blogger found himself sitting next to a very agitated American. The subject under discussion was, of course, tax, or more specifically Britain's highly discriminatory non-dom rules which give tax haven treatment to super-rich people living in Britain. TJN favours their abolition. He, a non-dom, was vehemently in favour of their retention.

Like many on the libertarian right, the core of his argument was that he was a 'wealth-creator'. On closer examination, however, it turned out he was an investment banker, specialising in mergers and acquisitions. Far from creating wealth he did the opposite: cutting existing jobs, set up aggressive tax avoidance structures, and generally destroyed economic value. And though he probably earned a fortune doing this, he still resented paying taxes: it goes with the territory.

This attitude is deeply embedded within global business elites. Swisster, the online Swiss newsletter, reports that expat American citizens living in Switzerland are getting hot under the collar about the recently enacted Foreign Account Tax Compliance Act (FATCA) which requires non-American financial institutions, UBS, for example, to automatically disclose client information relating to US citizens to the relevant authorities, i.e. the Inland Revenue Services.

Reporting on a 'town hall' event organised in Geneva by American Citizens Abroad, Swisster suggests that measures implemented by Washington this year will "will make tax compliance an even more onerous burden for savers and their money managers." But before you get too concerned about the onerous burden issue, just reflect on two statistics from the same article.

First, while all eyes are focussed on the debt situation in Greece and southern Europe, the debt build-up in the USA is beyond eye-watering:

With a debt projection of 20 trillion dollars by the year 2015, government staffers are whacking rules on foreigners to bring more money back into their coffers from abroad.

Second, while tax compliance in Greece is exceptionally poor and has unarguably contributed to the fiscal crisis engulfing that country, American expats aren't exactly angels. As Swisster reports:

"An expert panel advised against deliberately breaking the law, but statistics show that only 6.6 percent of Americans abroad are fully compliant with tax reporting requirements, said one speaker, who cannot be identified due to the Chatham House rule."

Do the sums and you'll find that 93.4 per cent of Americans abroad are not fully tax compliant with tax reporting requirements, which is a pretty astonishing statistics for a country which is regarded as having one of the toughest tax administrations in the world.

But maybe poor compliance is not so surprising when one considers how deeply tax evasion has rooted itself in right-wing libertarian culture, and the extraordinary excuses spouted by tax cheats. On which note the following comment, reported in the Swisster article, ranks among the most idiotic:

"The crowd at the Webster ‘town hall’ event – which was held under the Chatham House rule – hissed quietly as experts listed the growing number of rules contributing to the tax burden on Americans living abroad.

"Some of these guys served in Vietnam," said one attendee, who asked not to be identified."

Served in Vietnam! WTF?

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