Thursday, 15 December 2011

paperwork reduction act or schwarzgeld

Der Speigel (auf englisch) reports that in response to the reporting burdens coming with the enforcement of the US Foreign Account Tax Compliance Act (FATCA), starting in 2013, many European banks are barring or dropping their American clientele. Brokerage services, small business with American partners as well as accounts with assets of more than $50 000 must be identified and reported back to the US Internal Revenue Service.

Servicing such a constraint would cost significantly more, by several fold, than the revenue than the IRS expects to capture from this inspection, not to mention investment opportunities lost over this entanglement and ignoring the fact that the IRS is assigning (without commission) foreign banks the task of collecting money for them. For now, regular giro and savings accounts are not covered by this American provision but may well be in the future. Merely having investments in US assets, without any direct US shareholders, may even make a financial institution liable.  This is bound to have some serious repercussions, not least of which could be retaliation or reciprocation--payback which no one can afford on top of reduced investment in exchange for vanishing gains.  If a year and more out, some American accounts are already being abandoned, imagine how this might escalate.  Being out of compliance could result in a withholding on placed on the foreign bank’s earnings from American sources, but given that the demands of the reporting, detailed transactions, are in clear and pointed violation with German and EU privacy laws, it may be simpler and safer for some banks and businesses to be bullied into paying this transaction, maintenance fee.