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Uncle Sugar goes international looking for your loot!

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Robertt S:
 How far can the reach of the United States’ Internal Revenue Service (IRS) extend? Certainly it is no longer strictly “internal”. The US has already secured agreements with most of her Western allies (and Japan) to provide information on the finances of their residents upon which the US taxman can stake a claim. It is also to ensure people cannot keep their money from the clutches of Uncle Sam simply by physically relocating. Now the tentacles of the US Foreign Account Tax Compliance Act (FATCA) are reaching out to Hong Kong in the form of a mutual information-sharing agreement on the finances of each other’s residents. This is only a first step which will lead to an agreement that Hong Kong will enforce American law on US’s behalf. (The agreement is only theoretically mutual, as Hong Kong does not enforce taxation laws on non-residents.)
How are Americans able to do this? Taxation normally depends on residence, and countries other than the one in which a person is resident in usually have no claim, hence the need for separate agreements with other jurisdictions. And the provisions of FATCA are not even limited to US citizens. Any person with the right of residence in the US is covered, as are partnerships or trusts based in the US. So why are other economic centers prepared to do the IRS’s dirty work for them? There must be considerable advantages which can be gained by the US’s partners; either that or great disadvantages for non-participants. The US position is that financial institutions from countries, which refuse to sign a FATCA agreement, will be subject to a 30 percent withholding tax from any of their US-related businesses. Therefore, governments can easily be pressured from financial institutions to sign up.
The recent agreement with Hong Kong obviously opens up the question: what about the Chinese mainland? Apparently US authorities are confident China will sign up to FATCA in due course, to maintain her position in the US-dominated global financial system. I can imagine, however, that there might be some resistance. Will all Chinese business people who hold US “green cards” really welcome the attentions of the IRS? And, although mainland financial institutions will find their US operations easier and more profitable, how will FATCA affect relations with their domestic customers? Hong Kong is already witnessing banks displaying some reluctance to open accounts for customers with US connections, on the grounds that information transfer requirements are likely to lay them open to extensive compliance requirements.
So, will the US be able to continue expansion of the FATCA regime indefinitely? It is clear that a degree of financial and economic hegemony must exist before one country can enforce its own regulations on other jurisdictions. Other countries can’t do this. Britain, for example, falls over herself to make life tax-free for foreign citizens and companies. She is even prepared to pretend they don’t live in London when they obviously do. This is because London is competing with other centers for its share of financial services — as is Hong Kong.
The US does not believe it really needs to compete — it thinks it is so central to the global economic system that no serious player can afford to ignore it. There is a parallel here with the increasing inconvenience imposed on travelers by US immigration. It is simply assumed the US can make immigration as difficult as it likes because everyone who matters sometimes has to visit the US. When the US has to compete for international attention, things might change.
This will probably be more important in determining China’s attitude to the acceptance of foreign tax-enforcement agreements rather than the short-term convenience, or otherwise, of a FATCA deal. The Chinese government may be prepared to sign up for practical reasons. But in the long term they will find it very difficult to accept clear evidence of an American hegemony which China does not believe can last. Many Chinese (and non-Chinese too) believe that, one day, business people will be able to pick and choose whether they need an operation in the US. But they will pay whatever they need to in order to establish themselves in China.
So, although it is clear that the US tax regime has made a first successful incursion into Chinese territory, it is far from clear what the ultimate outcome of this will be. The outcome is likely to be determined by China’s reluctance to concede that the US has any right to impose compliance requirements on any other jurisdiction other than on a multilateral basis. And also the belief that if any country is to have such a dominant position in the global economy (and able to enforce its tax legislation worldwide) then it should not necessarily be the US.
The author served 1986-2006 in the British Diplomatic Service, including nine years in Beijing. He is now a freelance writer, journalist and commentator on political, economic and diplomatic affairs, especially China.


http://www.chinadailyasia.com/opinion/2014-04/07/content_15129200.html

 
The wives of Americans that are LPR's of the United States also fall under these guidelines, but I doubt China and the Chinese banks will cooperate very much with this policy anytime soon.

ChinaBound:
  Our wonderful government always looking for a way to get more and more
  from us.  >:( >:(

Robertt S:
Like a friend of mine said earlier, it appears that possessing a US passport is becoming more of a liability than an asset. :-\

Willy The Londoner:

--- Quote from: robertt S on April 07, 2014, 10:19:36 pm ---Like a friend of mine said earlier, it appears that possessing a US passport is becoming more of a liability than an asset. :-\

--- End quote ---

What have I been saying for years. LOL  ROFL

Willy

P.S. In case anyone misses me I am off to the UK in the morning and taking our eldest daughter with me.

Pineau:
are ex-pats exempt from federal tax? that used to be an incentive used by companies to get you to accept oversea positions

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