Another American Turns in Passport to Protest Idiotic New Banking Regulations
Scott Schmith is a 50-year-old fatcat ingrate American photographer who has lived and worked in Switzerland for many years. In June, according to a Wall Street Journal article brought to my attention by Stephen Shewmaker, Schmith
received a certified letter from Swissbankers Prepaid Services saying the firm was terminating the relationship because of his American citizenship. The company, which is owned by several Swiss banks, asked Mr. Schmith for an address to send his account balance.
Why are Swiss banks jettisoning American money? As we've been writing about in this space, the newish Foreign Account Tax Compliance Act (FATCA) has essentially conscripted foreign financial institutions into collecting tax money for the Internal Revenue Service. Unsurprisingly, most banks in otherwise friendly-to-America countries (and not just Switzerland) are opting out of the arrangement by telling Yankees to go home. Equally unsurprisingly, Americans are increasingly responding by opting out of their citizenship.
"Two months later, I got my Swiss citizenship, and I decided to renounce," says Mr. Schmith. "I have nothing to hide, but my heart is here, my business is here, and my life is here." On October 9, he went to the U.S. embassy in Bern and gave back his passport.
So how does FATCA sponsor and Senate Finance Committee chairman Max Baucus (D-Montana) respond to the news that his law is spurring non-rich, non-criminal, and professedly I.R.S.-compliant American expatriates to rip up their passports? A Baucus aide told the WSJ:
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.
Actually, American tax evaders will just transfer their money to territories (such as Macau) that don't care too much about fuzzy relations with Washington. It's the already tax-compliant non-rich who are feeling the squeeze. As Thomas Brotzer, a Zurich-based tax partner at Ernst & Young, tells the Journal: "If you are an ordinary retail client with an average income and wealth, you are in trouble."
After the jump, read an alarming detail from the WSJ article that I hadn't heard before.
Americans aren't absolved of their tax obligations if they renounce their citizenship.
For the renunciation to become official, the taxpayer has to certify that he or she has been in full tax compliance for five years and perhaps pay an exit tax. If a taxpayer lies, the IRS can declare the expatriation invalid and proceed against him or her, according to Scott Michel, an attorney with Caplin & Drysdale in Washington. "In practice, people shouldn't assume they'll never have to deal with the U.S. again," he says.
And did you know that there is a Senate bill, introduced by Sen. Chuck Schumer (D-New York), called "The Ex-PATRIOT Act"? Read all about it. Then read more on this topic from me, in chronological order:
* Stupid New Washington Law Blocks Americans From Opening Bank Accounts Abroad
* 5 New Ways the IRS Is Screwing America
* Facebook Co-Founder Eduardo Saverin Becomes Most Famous American to Renounce His Citizenship Probably for IRS-Compliance Reasons
* The Dark Side of Anti-'Swiss Bank Account' Politics
* 'No one in Youngstown has a Swiss bank account'…Except for Maybe That Big New Swiss Employer in Town?
* '[T]he legislation's penalties may end up killing more U.S. jobs than all the call centers in India combined'