Obama, Democrats Radical Plan to Curb Offshore Freedoms

As is well known, for several years offshore tax havens and Americans who dare to exercise their right to engage in legal offshore financial activity, have been under continuing attack by left wing, redistributionist Democrats, including then senator, now President Barack Obama.

Now, with Obama's personal blessing, congressional Democrats have introduced a radical legislative proposal that would give the U.S. Internal Revenue Service (IRS) new weapons to "detect, deter and discourage" the use of foreign bank and other financial accounts that might be used for avoiding U.S. taxes.

The questionable basis for this latest leftist assault on Americans' personal and financial privacy is the unproven allegation that millions of Americans are evading billions of dollars in taxes by hiding cash and activities offshore.

I have commented on these phony numbers games before. These repeated charges amount to what Josef Goebbles called "the Big Lie".

FACTA

The Foreign Account Tax Compliance Act, (FACTA)introduced in The U.S. Senate and House on October 27, blends proposals in President Obama’s 2010 budget, as well as Senator Carl Levin's (D-Mich) infamous"Stop Tax Haven Abuse Act" and legislation drafted by Senate Finance Committee chairman Max Baucus (D-MT) earlier this year.

It is co-sponsored by Sen. Baucus (D-MT) and the tax-dodging House Ways and Means Committee Chairman, Charlie "I forgot" Rangel (D-NY), (left).

Under this extremely punitive bill, all foreign financial institutions, banks, foreign trusts, private foundations and foreign corporations could be forced into providing information about U.S. account holders, trust grantors, and American owners associated with these legal entities.

As if they did not exist, the legislation totally ignores the current extensive reporting requirements of federal law that already apply to all such entities.

Go After The Rich

This week IRS Commissioner Doug Shulman also announced a stepped up campaign against high net worth individuals he thinks are engaged in interna (below) tional tax evasion. "We will take a unified look at the entire web of business entities controlled by a high wealth individual," Shulman said "The IRS high wealth unit will focus on trusts, real estate investments, privately held companies and other business entities controlled by rich individuals."

The U.S. government served subpoenas on wealthy individuals in recent days in the New York area, targeting those who may have evaded taxes using offshore accounts at Swiss bank UBS.

30% Tax on Offshore Banks

If enacted the FACTA would impose a 30% withholding tax on payments to foreign financial institutions and other entities unless they acknowledge the existence of offshore accounts to the IRS and disclose relevant information including account ownership, balances and amounts moving in and out of the accounts.

With its usual guess work, the Congressional Budget Office (CBO) claims the legislation would bring in an additional $8.5 billion in taxes over a 10-year period, (a far cry from the supposed $100 billion a year Levin repeatedly claims is lost to alleged offshore tax evasion).

Obama All for It

In a canned statement from the White House President Obama, who during his campaign said he favored "spreading around" other Americans wealth, said: "The legislation introduced today would put a stop to billions of dollars worth of abuses. I look forward to working with Congress to turn these proposals into law so that honest Americans no longer shoulder the burden of the few individuals and businesses that put profit before responsibility."

 
If you want to dig into the gory details of the new proposal, you find the text of the bill here and its technical description here. They both make freightening reading. 

Peeved Levin Reacts

This slightly less radical legislation does not have the endorsement of Capitol Hill's leading anti-tax haven demagogue, Sen. Carl Levin (D-MI), (below) who said he doesn't think the bill goes far enough.

 That may be because it omits the ridiculous blacklist of scores of nations included in Levin's Anti-Tax Haven Act, as well as many punitive anti-tax haven powers his bill would have given to Treasury Secretary Timothy Geithner. The tax dodging hypocrite Geithner, who failed to pay taxes for several years until he was named to his post, praised the bill.

The die-hard Levin told reporters: "When their committees move to markup, I hope to work with my colleagues to strengthen the Baucus-Rangel bill by adding some of the measures from the offshore tax bill I’ve introduced."

Offshore Reaction

As a result of numerous anti-offshore policies of the IRS and the Obama administration, as well as the UBS bank scandal, many Swiss and other offshore banks have closed existing accounts of Americans and have turned away new U.S. applicants.

Switzerland's oldest bank, Bank Wegelin in Saint Gallen, was typical in not only confirming its "no Americans" policy, but in announcing it would not longer invest in American investments for itself or its clients.

Another Freedom Destroyed

One can only guess what may be the reaction of offshore bankers to the threat of a 30% tax to force release of client information that would clearly violate Swiss bank secrecy laws, as well as financial privacy laws in many other countries such as Panama, Austria, Singapore and Hong Kong.

If this bill becomes law, it may well block the ability of all Americans to bank offshore, simply because no offshore bank will put up with these unprecedented bullying tactics by the IRS. There are plenty of other people of wealth whose governments do not think they can impose their rule on the entire world.

Stay tuned for developments.

 

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Comments

[Bryan J Busch]

When an American citizen gains wealth due to American activities, he/she is responsible for contributing a part of it to the common good, so that we continue to grow and improve.

If you're arguing in favor of avoiding the responsibility of paying taxes, you should just go ahead and argue in favor of abolishing the income tax altogether.

[Jeff]

I'm trying to understand how this would be enforced.

Would this mostly affect transfers out of the USA to Foreign Banks and only incur the 30% tax when transfers leave the USA?

Or would every Foreign Bank transacting in US Dollars have to audit and transmit the beneficiaries of every account at their institution, regardless of citizenship just to use US correspondent banks?

More motive for the rest of the world to move off the US currency.