In a piece for Bloomberg, reporter Sanat Vallikappen begins, “Go away, American millionaires.” Valliikappen then goes on to explain that wealth management firms the world over are declining to open offshore accounts for Americans.
“I don’t open U.S. accounts, period,” said Su Shan Tan, head of private banking at Singapore-based DBS, Southeast Asia’s largest lender, who described regulatory attitudes toward U.S. clients as “Draconian.”
It hadn’t been easy for Americans doing financial business overseas, but since the 2010 passage of the Foreign Account Tax Compliance Act, known as Fatca, which seeks to prevent tax evasion by Americans with offshore accounts, opening a foreign bank account has become mission impossible.
The 2010 law, to be phased in starting Jan. 1, 2013, requires financial institutions based outside the U.S. to obtain and report information about income and interest payments accrued to the accounts of American clients. It means additional compliance costs for banks and fewer investment options and advisers for all U.S. citizens living abroad, which could affect their ability to generate returns.
The Institute of International Bankers and the European Banking Federation said in an April 30 letter to the IRS, that the 400 pages of rules and regulations issued by the American tax authority create Unnecessary burdens and costs.”
Massachusetts Democrat Richard Neal says the government needs to crack down on offshore tax dodgers. Mr. Neal wants tax money and doesn’t care much about privacy and all that.
“People should know, and the IRS should know, what money is being held offshore and for what purpose,” Neal said. “I don’t think there’s anything unreasonable about that.”
One young gentleman that believed Rep. Neal and the other thieves on Capitol Hill to be a bit too greedy and unreasonable is Eduardo Saverin, the billionaire co- founder of Facebook Inc. Before Facebook does its public offering, and the price of Facebook stock is quoted daily, making Saverin’s wealth undistributable, he decided to renounce his American citizenship and head for Singapore.
Saverin, 30, joins a growing number of people giving up U.S. citizenship, a move that can trim their tax liabilities in that country. The Brazilian-born resident of Singapore is one of several people who helped Mark Zuckerberg start Facebook in a Harvard University dorm and stand to reap billions of dollars after the world’s largest social network holds its IPO.
Singapore doesn’t have a capital gains tax. It does tax income earned in that nation, as well as “certain foreign- sourced income,” according to a government website on tax policies there.
Saverin has to pay the U.S. government an exit tax but doing it before the IPO was wise. Renouncing your citizenship well in advance of an IPO is “a very smart idea,” from a tax standpoint, said Reuven S. Avi-Yonah, director of the international tax program at the University of Michigan’s law school. “Once it’s public you can’t fool around with the value.”
There are a few Mises Institute supporters who have paid the American exit tax and now live in Singapore. None I’ve spoken with regret it.
“It’s a loss for the U.S. to have many well-educated people who actually have a great deal of affection for America make that choice,” said Richard Weisman, an attorney at Baker & McKenzie in Hong Kong. “The tax cost, complexity and the traps for the unwary are among the considerations.”
While Mr. Neal chases away taxpayers, the only ones left will be tax eaters.