The intent of this law was to prevent wealthy individuals from avoiding taxes through offshore accounts. I'm sure there are dozens of threads on HN lamenting this very practice.
Those laws were written to make sure the government gets their tax money from people who are way wealthier than you. that's why the law is nearly incomprehensible: it's a compromise between lobbyists of moneyed anti-tax interests and those who are trying to solve legitimate tax dodging problems that arise with expats and international wealth in general.
When taken together, it means that Americans are basically unable to ever leave American taxation. No other nation has the ability to restrict their citizens like Americans do while their citizens are abroad.
This is bad news if you want to own a company while living abroad (you can't unless it's American or you'll be double taxed), live in a lower taxed country, or renounce your citizenship if you make more than something like 139k a year.
Any tax applied to America's rich would not result in money leaving the country - it's no longer really possible.
I wholeheartedly support strong inheritance tax. Dynasties are bad things and create bad systems. The US is uniquely positioned to enforce it even if it means that citizens are basically serfs to their country.
This article feels like rich people who were trying to get around US law/regulations/taxes now wanting the protections afforded by it.
They deposited money in SVB's Cayman Islands subsidiary (a country that's a well-known tax haven). SVB goes under and the Cayman Islands have no deposit insurance so their deposits are wiped out. Now they want their money back or their debt forgiven. The SVB Cayman deposits didn't pay into the FDIC insurance fund so they shouldn't be given the protection of the FDIC.
The title of the article makes it sound like some poor SVB "customers" are in a bad situation. The truth is that it's going to be venture capital, private equity, and some really wealthy individuals (who were probably trying to dodge taxes). It's hard to feel bad for extremely rich people using a well-known tax haven losing some money. The WSJ is really burying the lead in this story. If you're trying to avoid US laws, regulations, and taxes, you can't come looking for US protections.
EDIT: In a previous article on the topic, the WSJ noted "The financial pain being felt by SVB’s foreign depositors could make investment firms that are incorporated or doing business in offshore financial hubs reconsider where they should put their money and what protections they have" https://www.wsj.com/articles/cayman-islands-regulator-explor...
We don't want to incentivize people to dodge taxes while thinking they'll enjoy all the protections paid for by taxes.
It's worth pointing out that the US model of taxation (US citizens pay taxes on income earned anywhere in the world), as much as people complain about it, completely negates the value in offshore income a la Panama papers.
Sure, until recently you could hide your income in Switzerland, but it was a clear crime -- there wasn't legal grey area.
And yes yes, there are other ways to try to avoid taxation (deductions etc) but this is a really big one that the US doesn't have to worry about.
>It's legal because, as noted by Adam Smith: "Wealth, as Mr Hobbes says, is power."
No.
It's legal because it's a reasonable and morally acceptable thing to do. You put money in an offshore account, then pay tax in your home country. No moral or legal problems there. There are many valid and morally acceptable reasons for doing this.
The problem is when people don't pay the taxes in their home country.
> In other words, FATCA turned the US into the world's largest tax haven.
Was this unintended though? Every government wants rich foreigners to park money in their shores, whether legally obtained or not. Bonus points if it is an easily seizable asset like bank accounts and property.
Right, we all know offshore havens exist, we all know rich people and companies use them. So papers showing that these rich people are using these tax havens is not exactly surprising. That's not to condone this activity, it's just that I'm surprised anyone thinks the response would be otherwise. We know about this stuff already in general, this is just specifics and as the guardian points out it's not as if all this in even necessarily illegal. We just need to push harder to shut down these loopholes.
> I've said it before, I'll say it again: the USA are the last big tax haven
It's a long-reported problem [1][2]. You can set up a trust or LLC in many states e.g. Delaware without providing any identification. That is not possible in most countries, in large part due to American lobbying.
Then really I guess we need to work harder to change the letter of the law. I was under the impression when I started the conversation that the tax havens were more of a loophole or ambiguity in the law and that you could prevent this behavior by showing intent to dodge taxes but apparently it is a long standing explicit component of the law. Id be happy to read up more on the existing laws if you would be willing to provide links
It's not a matter of national expenditure, but that of personal expenditure of those pulling the strings. It's just being framed that way by the "will of the people"/"take back control" brigade, and people are dumb enough to listen.
Multi-nationals create mass webs of offshore companies to move money round outside of their primary tax jurisdiction and then bring it back sans-taxiation if they had just done the simple straight forward thing.
Multinationals made the situation complex to get around simple tax rules. So the tax rules were expanded to try and keep up.
And thus it is a never ending race with ever increasing complexity of tax law.
Yet somehow I think you would bitterly oppose a move to principle based tax law (as opposed to rules based) which is the only way of actually simplifying tax law and putting all companies of an even level footing.
The problem is lobbying and laws being written with the help of banks and financial firms like Deloitte with intentional loopholes, who have large wealth advisory services and then go on to market and sell their services to wealthy clients.
This is brazen corruption and everyone knows it. There has been focus on offshore havens for decades now with no resolution suggesting a lack of interest in fixing the loopholes.
It's like saying every employee can sell their services to a marketing firm which can then lease it out to employers. And the marketing firms can exist in low tax regions. If the law allows this it is not 'tax evasion', merely 'tax optimization'. The end result is is lower tax revenue but of course employees as a group do not have this kind of clout so won't happen. But let us not pretend we do not understand what is happening and muddy the waters in the face of brazen opportunism and corruption.
"A crackdown on international evasion is difficult because it requires international co-ordination, but common sense tells us this would be by no means impossible. Effective legal instruments to prevent offshore tax evasion are incredibly simple and could be enacted overnight, as the United States has just shown with its crackdown on oligarchs linked to Putin’s regime. All you have to do is make it illegal for banks to enact transactions with territories that don’t comply with rules on tax transparency."
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