Tags: FATCA | offshore | US | tax

Offshore Financial Centers Reject US Foreign Account Information Reporting Regime

Monday, 24 Jun 2013 08:11 AM

By Denis Kleinfeld

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Switzerland, Bermuda and some nine other so-called offshore financial centers have rejected being subservient to the U.S. foreign account tax compliance regime.

The Swiss political establishment had negotiated a deal with the United States to allow its famed Swiss financial privacy law to end and allow the United States to control the future of Swiss banking.

In 2010, Congress passed the Foreign Account Tax Compliance Act (FATCA) intending to assert that the global financial industry will be required to report to the Internal Revenue Service.

Congress claimed that $100 billion in tax was lost to offshore evasion over 10 years. With the passage of FATCA, Congress unilaterally declared that the IRS would now regulate every financial institution anywhere in the world capable of directly or indirectly having an account held by a "U.S. person."

UBS, Switzerland's biggest bank, paid a $780 million dollar fine and delivered the names of some 4,000 clients to avoid indictment. Wegelin Bank, the oldest private Swiss bank, was indicted, paid a fine and closed its doors. The United States reportedly has a dozen banks under investigation.

The Swiss government tried to fast-track legislation making it legal for Swiss banks to cooperate with the United States in spite of bank privacy law and the heated disputes over which bank has responsibility to pay fines to the United States.

The Swiss National Council rejected the highly secretive proposed new law over worries that it would do serious damage to Switzerland's banking system.

The bill, Lex USA, will likely now be tied up for years in negotiation.

Currently, it is unlikely that China, Hong Kong and Macau, among other Asian-Pacific countries, will accept FATCA.

Bermuda Prime Minister Bob Richards has stated that he would not sign onto the G8's proposed multi-lateral agreement to share tax information. As reported in the insurancejournal.com, the PM stated:

"The issue here is the tax laws of the G5, G8 (groups of big economies). It's not the tax laws of Bermuda. ... It's easy to blame dots on the map."

Richards said that countries such as the United States and the United Kingdom should get their own house in order before criticizing Bermuda.

"Those in glass houses should not throw stones. One of the biggest tax havens in the world is the state of Delaware. Everybody knows that. Some people would even call the city of London a tax haven," he noted.

Congressional hearings in the United States exposes to the world that the U.S. income tax system is corrupt and is actually being used to persecute political opponents and even other countries. One of the first categories of groups targeted by the IRS was those who were supportive of Israel.

Information is far more valuable for political power than taxes.

Without question the United States thinks it has the ability to punish non-complying foreign financial institutions that reject being regulated by the United States.

Then again, other counties see two other consequences: compliance with the United States results in committing financial suicide, and the United States, in reality, has an even greater exposure to being punished in return.

© 2014 Moneynews. All rights reserved.

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