In 2010, Obama signed into law the Foreign Account Tax Compliance Act, known as FATCA, which is aimed at Americans who have offshore bank accounts for the purpose of avoiding paying taxes.
The law requires banks either to collect and turn over data on US clients with at least $50,000 or to face a 30 percent withholding tax on any payment made on US securities to the offshore bank. For example, if the bank held US Treasury bills, a 30 percent withholding tax would be enacted on any interest owed to the institution.
The law, which goes into effect in 2014, was passed after investigations that showed some wealthy Americans were being sold tax-evasion services by UBS, a Swiss bank. When he signed the law on March 19, 2010, Obama called FATCA "a major new and positive development in the efforts to stop offshore banks from using secrecy laws to help US taxpayers evade their taxes."
As it turns out, Romney has foreign bank accounts. In ads, the Obama campaign tries to paint Romney as an unpatriotic tax-avoider who maintains offshore accounts. An Obama 30-second ad shows an off-key Romney singing "America the Beautiful" while the screen shows headlines about Romney’s having a lot of his family money in bank accounts in Switzerland, Bermuda, and Cayman Islands.
At the very least, the issue illustrates to most Americans the difference between Romney and themselves: He has the ability to set up bank accounts in foreign places, unlike most working Americans.
“One issue is whether offshore accounts are at all appropriate,” says Sally Painter, chief operating officer of Blue Star Strategies in Washington, which advises corporate clients on global government relations. Ms. Painter, who worked in the Clinton administration, says, “Some people believe these accounts shield income from taxes.”
Not the case, declares Romney.
During a Republican primary debate in January in Jacksonville, Fla., the issue was raised by former House Speaker Newt Gingrich, who said he thought it unusual for a candidate to have an offshore bank account. “I don’t know of any American president who has had a Swiss bank account. I’d be glad for you to explain that kind of thing,” he said to Romney.
Romney replied that his investments were in a blind trust so he can avoid any conflicts of interest. His trustee, he said, wanted to diversify his investments, which is why he invested in the Swiss account, reported it to US authorities, and paid taxes on it. “There’s nothing wrong with that,” stated Romney, going on, “Speaker, you’ve indicated that somehow I don’t earn that money. I have earned the money that I have. I didn’t inherit it.”
For a full list of stories about how Romney and Obama differ on the issues, click here.