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The IRS Will Soon Extend Its Long Arm to Foreign Banks

Written by Gary North on December 12, 2011

Bill Bonner’s Daily Reckoning ran this. The IRS has extended its long arm to foreign banks.

The FATCA law (Foreign Account Tax Compliance Act) will force banks across the globe to collaborate with the IRS. An explanation of the huge repercussions this legal precedent will have on banks and banking clients.

Once FATCA — Foreign Accounts Tax Compliance Act — is enacted on January 1, 2013, banks worldwide will find themselves subject to the American tax administration bureau known as the IRS (Internal Revenue Service). Adopted in March, 2010, FATCA is a facet of the broader Hiring Incentives to Restore Employment (HIRE) Act which is designed to promote employment opportunities in the United States. In order to finance the HIRE Act, fighting tax evasion is even more in the spotlight than it has been in the past and Washington wants to use its political clout to get its message across this time. What this really means is that foreign banks — or FFIs (Foreign Financial Institutions) — will be obliged to conform to a long series of procedures designed to identify US Persons (US citizens & Green Card holders) subject to American taxes. This naturally concerns American citizens but likewise extends to American nationals’ foreign spouses. However, the long arm of the US administration will even be going so far as to include foreigners residing outside American borders, some of whom may have never even set foot on US soil. This is due to the fact that non-American banks will be obligated to report portfolios which include American assets even if they belong to foreigners with no ties to the US.

This will force many foreign banks to tell Americans to close their accounts. If these banks have branches in the USA, they must comply. This means that the noose is tightening on anyone who wants to get his money out of the USA.

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