Part 13: What God Hath Wrought – The #FATCA Inquisition (Review, Identify and Report on “U.S. Persons”) – Colonizing other nations by imposing US taxation on the world

Introduction – FATCA is really about extending the U.S. tax base into other nations …
In other words, FATCA is more about the “creation of taxable income” than it is about the “taxation of existing income”. This point was also made in my “Tax Haven or Tax Heaven Series“.

What follows is a comment that I tried to leave on the following blog post:

I tried to leave the following comment on this post, but somehow didn’t see where to click to leave the comment. In any event, feel free to add this as a comment (or even a separate post if you like).
FATCA is a very serious problem and needs to be discussed widely.
Thanks very much for your post – I thought it was well done.
John Richardson
Toronto, Canada
Here is the comment I tried to leave:
Thank you for writing about FATCA and its effects on both “Americans Abroad” and on the financial institutions and investment counselors who work with them. The “FATCA of the matter is” that FATCA has led to asituation where:
1. Americans abroad are renouncing their U.S. citizenship in order to protect their ability to plan and invest for retirement and to otherwise live a normal life; and
2. Banks, investment firms, investment counselors, investors and anything else on the planet are avoiding any person with a U.S. taint.
These effects are being more and more understood.
But, FATCA is about much more …
But, there is a third aspect to FATCA that is NOT well understood and is a much larger problem.
To put it simply: FATCA results in the United States imposing a permanent “capital tax” on every COUNTRY that agrees to assist the United States to implement FATCA. In other words, every country that implements FATCA by signing a FATCA IGA (“Inter Governmental Agreement”) has actually agreed to allow the United States to impose direct taxation on the country as long as that country allows U.S citizens to reside in the country. Please understand that in a world of dual citizenship,
there are many U.K. citizens who are also U.S. citizens.
To give you a simple example, you wrote about the case of your London Mayor Boris Johnson (who because he was born in New York is a U.S.citizen). What happened was this:
Mr. Johnson sold his house which resulted in a tax free capital gain in the U.K. The sale was NOT a tax free capital gain under U.S. law. The result was that the IRS claimed a share of “after tax U.K. capital” (properly belonging to the UK and not taxed in the UK as a matter of public policy). This money was transferred from the U.K. economy to the U.S. Treasury because of the rules of U.S. citizenship taxation. As you know, the sale of a principal residence is only one way that U.K, citizens who are also U.S. citizens will pay taxes to the United States.
As an investment adviser, you would also know about PFIC (mutual funds, etc.) and more. Now, magnify this result by millions and millions (think of all the people living around the world, who because they were born in the USA are considered to be U.S. citizens). Stick with the example of U.S. born people selling their house and having to pay taxes to the United States. Think of the money that is being transferred from other economies to the United States ONLY because a person had a U.S.birthplace.
“Millions of UK residents required to pay a capital gains tax on the sale of their house to the United States!”
FATCA is a mechanism to identify those residents of of other nations with a U.S. birthplace. From this perspective, FATCA is really a tool to extend the U.S. tax base into other countries. In other words, FATCA is NOT about tax evasion. FATCA is about the United States extending its tax base into other countries.
This is part of the basis for the Canada based FATCA lawsuit against the Government of Canada.
In any case, you might find this blog post (which describes these issues in more detail to be of interest.
Thanks again for your post.
John Richardson
Toronto, Canada
P.S. See the following to understand U.S. citizenship taxation extracts capital from the economies of other nations:

Everybody knows that U.S. “citizenship taxation” extracts capital from other nations and transfers it to the U.S. Treasury. The above tweet references an interesting Facebook post that demonstrates “CBT Capital Extraction” in action.
As always, the comments are interesting. The post begins with:
The author, Heitor David Pinto has been an extremely prolific and effective advocate for residence based taxation. He also submitted comments to the Senate Finance Committee in April 2015.

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