US expats face dark days as FATCA is finally introduced

Published:  1 Jul at 6 PM
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The US Foreign Account Tax Compliance Act, known and derided worldwide as FATCA, has finally arrived.

The introduction of the controversial global tax law is the worst news for all seven million US expats living overseas as well as countless American-owned overseas businesses. All non-US financial institutions must now breach their US clients’ confidentiality by disclosing full details of their assets and holdings to the US tax authorities.

Should any overseas financial institution refuse on privacy or any other grounds, the financial consequences will be serious. FATCA was intended to flush out tax avoidance by US residents, as well as expats living overseas, all of whom must pay tax on their offshore earnings or dividends via an annual tax return.

Many financial experts consider that FATCA’s dragnet approach is likely to do more damage than it hopes to prevent. Already, unforeseen consequences such as the forced closure of US expat accounts in banks worldwide and refusals to open accounts for newly arrived immigrants has hit media worldwide.

Most Asian banks, for example, don’t want to be involved in the complicated returns they would be forced to make, preferring to lose the revenue from their American clients in their country of residence. Many American expats and professionals working overseas fear they are about to become financial pariahs unable to manage their finances or transfer wages, pensions and other funds from the USA.

Industry professionals believe that FATCA will become a useless, chaotic, costly mess without much effect on the tax avoidance it’s intended to control. In the meantime, uncertainties will continue and life will become more difficult for American citizens overseas, tempting a good number to revoke their citizenship in favour of less repressive regimes.
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