What makes an American angry?
The US tax law FATCA (Foreign Account Tax Compliance Act) causes discontent among American emigrants and US-Swiss dual citizens living in Switzerland. Some have given up their US citizenship.This content was published on May 28, 2013 - 11:00 am
The London-born multimedia journalist Simon has been working for swissinfo.ch since 2006. He speaks French, German and Spanish and reports on the UN and other international organizations in Geneva as well as on a wide range of topics, especially from French-speaking Switzerland.
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"People are very angry and upset, some are really scared," said Jackie Bugnion, director and tax expert at American Citizens Abroad (ACA), a Swiss-domiciled organization that describes itself as the "voice of Americans abroad."
Apart from Eritrea, the US is the only state in the world that collects taxes from its citizens abroad - who according to the US State Department amount to around 6 million.
Since the introduction of FATCA, which was enacted in 2010 as a kind of incentive law and aimed at wealthy tax evaders, the tax problem for expats has become more complex. Fatca requires banks and other financial institutions that are established outside the US to obtain information about income and interest income from assets over 50,000 dollars from US citizens and to submit this information to the US tax authorities.
In addition to the annual tax return, every US citizen must use a special form to disclose in detail to the IRS the savings abroad above a certain amount.
Switzerland is one of a handful of countries that have agreed to introduce FATCA, which will be implemented from 2014. But the Americans who live in Switzerland already have their hands full with the new legislation.
Increasing investigations have forced a lot to put their tax situation in order for the past few years and, moreover, to come to terms with the new rules.
"Tax returns have become more burdensome and complex," says JoAnn Salvisberg, an English teacher who has lived in Switzerland for many years. "It's a terrible paperwork. You have to spend hours or days and thousands of francs on it."
According to the ACA, Fatca has serious, deleterious effects on numerous common people. "Many banks declare that it is no longer worth having American customers," says Jackie Bugnion. "People were affected by account closures. You might get a current account in some banks, but getting an investment account has become very difficult. Some American customers have their mortgages canceled, others denied."
With the FATCA (Foreign Account Tax Compliance Act), which has been in force since 2010, the US uses financial institutions around the world to obtain information about American taxpayers.
The law requires foreign financial institutions such as local banks, stockbrokers, hedge funds, pension funds, insurance companies, trusts, etc. to provide information to the US tax authorities (IRS) about all of their customers who are American (citizens and holders of the green card who are in the US or abroad Life). The penalties for institutes that are not willing to cooperate are steep.
FATCA requires US citizens with assets in excess of $ 50,000 to declare them in detail on a new form.
(Source: American Citizens Abroad)End of insertion
Discrimination and tension
According to Sandro Bartolini, director of the private consultancy US Tax & Financial Services, a lot has changed since Fatca was first announced: "At first everyone was confronted with the unknown. In the meantime, the rules have been published and more information is available. But they are not as stringent as has been suggested. The cost of administering the Fatca will be substantial, but it is starting to normalize. "
Bartolini heard of various problems. Americans have been forced out of commercial transactions or prevented from advancing their careers solely because of their nationality and their view of tax returns and FATCA. According to Fatca, if an American has a ten percent stake in a foreign company, it is obliged to report the stake to the IRS.
FATCA has also created tension within mixed couples, critics say. If such couples share assets, FATCA also requires the identity of the non-American partner to be disclosed. "My husband, who is from Bern, is angry," says JoAnn Salvisberg, who has to tell the IRS how much money her husband had in his account last year. "In his opinion, it is none of the business of the United States that he has in his account. He is absolutely right, but if I do not admit it, I am committing a criminal act."
Forced to act
All children born on American soil are automatically granted US citizenship. Many US citizens living overseas were born to couples with at least one parent American but living overseas most of the time.
Because of their humble relations with the US, they have little familiarity with the complexities of US taxation.
Robert *, who has dual citizenship in Switzerland and the USA, knows the problem from his own experience.
"I was born in the US, but never lived there. Nobody told me I had to file a tax return in the US. My parents even told me I didn't have to. So I failed. That was a big mistake, "he says. "Now I have two legal advisors - one in Switzerland and one in the US - and an accounting firm that handles my tax problem."
Two years ago he received a call from the Swiss PostFinance asking for confirmation of his US citizenship. "They made it clear to me that they would be stricter with the US clientele and that I would have to sell my balances immediately ... So I sold everything within 15 minutes."
The next day he transferred all of his money to Valiant Bank, where I had other balances. "A year later I received a letter from this bank telling me that I would have to sign a contract that would oblige me to pay any fines if the US were to bring charges against the bank on my behalf. The other option was to lose all my balance. I signed, although the bank recommended that I give up my US citizenship as soon as possible because they could still close all my bank accounts. "
The position of the USA
Former US Ambassador to Switzerland and Liechtenstein, Donald S. Beyer, said at an event in Washington on March 26, 2013: "The current US tax policy to combat tax evasion has a negative side effect on Americans who work abroad, and that has to be addressed.
In a joint US-Swiss press release dated June 21, 2012, Emily S. McMahon, chief negotiator for the US Treasury, said: "FATCA is an important part of US efforts to improve tax compliance. The intergovernmental framework announced today, enables FATCA to be implemented in such a way that domestic legal obstacles are addressed and burdens on financial institutions are reduced. We welcome Switzerland's willingness to strengthen and improve its cooperation with the USA in the fight against international tax evasion.End of insertion
Waiver of the passport
IRS data shows that 932 people worldwide gave up US citizenship in 2012. In 2011 it was 1,781 and in 2009 it was 742. In 2013, Jackie Bugnion suspects it will be considerably more: "Before Fatca became an issue, nobody had spoken of renouncing US citizenship. Now it's an open discussion. For many people, it is but unfortunately not the question, should I or not, but when should I? "
Brian * and Diane *, who have lived in Switzerland for many years, gave up their US citizenship three years ago. That was "indirectly" a consequence of the tax complications that would have arisen on retirement, they say.
"Honestly, I've felt relaxed ever since. There is so much scare tactics and greedy tax attorneys trying to make easy money. Many of our friends are in a similar position. They are angry or hurt," says Diane.
"We know a lot of people who work hard to get their tax situation in order. Many of them have been married to Swiss people for 30 years. They have no idea about the American tax system."
Fatca does a lot of damage, she adds. "The American government makes its most important ambassadors in the world an enemy."
(* Name changed.)
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