The HIRE Act, the IRS, and dirty tricks
Americans with banking or business interests overseas–or who may simply want to have such interests one day–should be terrified over confiscatory provisions that have been tucked into a recent Congressional bill.
The bill, passed into law by Congress, purports to be simply an amendment of the HIRE Act, which touts itself as the “Hiring Incentives to Restore Employment Act.”Â What could an act dealing with hiring incentives have to deal with overseas business dealings of Americans?Â More than would first meet the eye.
Tucked into Title V of the Act is something titled “Foreign Account Tax Compliance.”Â The short version of the Title is attempting to further turn both American and foreign financial institutions into the police and tax collectors of American citizens.Â Specifically, the law is designed to:
1.Â Force foreign banks to report on U.S.Â bankÂ account holdersÂ to the American government;
2.Â Require United States banks to collect taxes from American account holders; and
3.Â Try to discourage U.S. citizens from sending money outside of the country unless it is to a U.S.-approved and compliant bank.
Crazy, you say?Â Title V provides that if a U.S. account holder is trying to send money to a foreign bank or foreign entity, the U.S. bank is required to withhold 30 percent of the funds being send for possible taxes, under the assumption that this account holder owes money!Â The main exceptions to this rules are if the foreign bank agrees to submit itself to U.S. reporting requirements; in other words, if the foreign bank agrees to tell on you and provide your information to the government, our government will let you expatriate money out of the United States.Â If you are sending money to an entity or bank that does not so agree, our government will penalize you by withholding 30 percent of the funds.
The silver lining?Â Not much of one, other than you can, the following year, receive a refund of the money with your taxes–of course, interest free, and most likely, the way things are going, at less value than when the government took it from you the previous year.
Think of the enormous logistical problems this could pose on average people, looking to live, buy and invest overseas.Â If you, for example, wanted to purchase a $100,000 piece of property in, say Belize (where the banks currently have not submitted to U.S. jurisdiction and processes), you would need to transfer more than $140,000 in order to simply net enough to pay your purchase price!
What will this do to the viability of foreign markets built off of U.S. consumers?
What may this do in the two years leading up to 2013 with the flow of capital out of the country?
More important than the practical is the question:Â is this the type of governmental intrusion that is appropriate in a country that is supposed to be free?
To get a better idea of the ins and outs of the law, go to the link below, starting at about page 28, and take a look.