The precious metal barter tax and IRS mission creep!
Welcome to Capital Account. Last night, Barack Obama and Mitt Romney faced off in a debate on foreign policy, but foreign tax policy was not brought up once. Today, we speak with The Daily Reckoning’s Joel Bowman to examine the unintended consequences of attempts to control foreign tax evasion. He explains why the Foreign Account Tax Compliance Act (FATCA), slated to go into effect in 2013, may prompt some investors to renounce their US citizenship. An aide to Sen. Max Baucus (D-MT), the Senate Finance Committee chairman who sponsored the 2009 FATCA bill, said, "Foreign tax evasion is a drain on the federal budget worth tens of billions of dollars, and it puts an unfair burden on law-abiding American taxpayers to fill that gap."
On the other hand, FATCA arguably puts a costly compliance burden on banks all over the world. Forbes reports compliance with the act could cost financial institutions $100 million and according to the Wall Street Journal, a bank risks a penalty equivalent to 30 percent of its US income if even one account is overlooked. Of course, the smaller the bank, the harder it's hit. The unintended consequence of FATCA is that many foreign banks are now reluctant to deal with US citizens; according to recent reports, expats are finding themselves unable to open accounts or having their accounts closed. We talk to Daily Reckoning Managing Editor Joel Bowman about the impact of global IRS mission creep.