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4. Scaring Away Foreign Banks
This isn't a new IRS rule, it's a new consequence of a lousy new law, called the Foreign Account Tax Compliant Act (FATCA ... get it??).
This 2010 law, which was passed in an effort to increase tax collections on Americans using shelters abroad, is estimated by its supporters to maybe bring in an extra $8 billion in receipts over the next 10 years, or less than $1 billion per year. This for a federal government that spends $1 billion every two and a half hours.
Uniquely in the world, the United States government is demanding that all foreign financial institutions disclose the details of all U.S.-based accounts and withhold 30 percent in potential taxes from accounts held by other institutions that don't disclose. Let's see, what do you suppose might happen when Washington makes life a living hell for every foreign bank that dares do business with Americans?
Shocker: "Banks no longer want American clients." So if you are one of the estimated 6.6 million Americans living abroad, you can forget about opening or even maintaining that bank account. Sorry! Those 150 minutes of federal spending won't pay for themselves!
And of course it gets worse: U.S.-based companies are discovering to their horror that foreign talent, no matter how executive, is getting caught up in Washington's greed. Expatriates from Switzerland—a country whose remarkable financial sector was built on the notion of banking secrecy—are getting their accounts closed by FATCA-spooked banks back home.