[unclesams-uncle]

The Foreign Account Tax Compliance Act (FATCA) might serve as a foreshadow of how these discussions might play out.

If you're not familiar, FATCA came out of the financial crisis as a way to uncover the undeclared assets held in foreign banks by wealthy Americans.

To get foreign governments to go along, the US more or less forced their parliaments to sign agreements with the US and pass local enforcement laws.

In short, these rules compelled domestic banks to share the bank account data of any US person in their system. If the bank didn't comply, the US could seize 30% of their US-based assets.

The results have been mostly catastrophic.

For one, FATCA didn't capture a lot of revenue for the IRS as most wealthy Americans shelter their assets domestically in trusts and LLCs.

Second, it had the effect of ruining the lives of ordinary Americans living abroad who, while by no means wealthy, were working middle class. People like myself had our bank accounts closed and were subject to being presumed money launders and tax evaders. Many expats -- including accidental Americans who only gained US nationality because they were born on US soil while their parents were on short-term work assignments -- lost their retirement accounts and mortgages.

More damningly, the US continues to refuse sharing bank account data of foreigners living in America back to their home countries, as per the agreement.

The reason for this refusal? The US government cites American banking privacy laws.

In other words, FATCA turned the US into the world's largest tax haven.

I have no doubt that the US will leverage its position as global tech leader in any data sharing deal to create a similar useless structure abound with unintended negative consequences.

[TacticalCoder]

> Second, it had the effect of ruining the lives of ordinary Americans living abroad who, while by no means wealthy, were working middle class. People like myself had our bank accounts closed...

Yup. Many banks in the EU simply said: "Screw that, we're not complying. We just kick all the US citizens out and close their account and refuse to ever deal with any US citizen now". I've had several bankers at different banks tell me the same. Now none of them told me they were consider these accounts as belonging to tax evaders: it's just that the complexity of complying was crazy.

You see the same on some website: some sites in the US simply don't want to bother complying with EU laws, so they just give the fingers to anyone coming to the site from an IP address in the EU.

That's the thing: a state or supranational entity like the EU can come up with any law it wants, private companies in other states aren't forced to comply. They can just give the middle finger and say: "if that's how you want to play it, then your citizens are out".

[noodlesUK]

It’s not just FATCA either, if you’re an ordinary US citizen living abroad, and you want to start even a trivially small business in a foreign country, the IRS will fuck you. You have reams and reams of compliance paperwork to do, 5471s etc, aimed at multimillion dollar multinationals, even if your annual turnover is less than $1000. It’s hugely chilling to Americans living abroad

[nvarsj]

As an expat myself with a business, this is true 100%. It has been a complete nightmare for me. GILTI / transition tax was another mess - with exemptions that were lobbied for US based businesses with foreign holdings, while the expat community got screwed over. And the main purpose of this law, apparently, was to go after mega corporations with lots of overseas wealth. But why didn't they exempt small businesses? It is a complete clusterf*ck for Americans abroad.

The problem I think is it is a really easy sell. Legislators can say "we taxed the wealthy", and everyone thinks it's great, yes the wealthy must pay and those damn corporations. Meanwhile the reality is the wealthy can lobby Washington to lessen the pain, and expats are an easy target with virtually no influence.

The icing on the cake is Obama raising the expatriation fee to $2350, and all expatriations closed for the last year. Surely it should be a basic human right to give up your citizenship?

[paxys]

> 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.

[huijzer]

I was just today thinking the same about FED policy. It is beneficial to not increase interests because otherwise people will do business elsewhere. In the worst case, these policies bring about a financial crisis, but as long as that will hit all the countries, no one gets better of than the US.

[rsj_hn]

No, in fact many nations make it illegal to park money in their shores, and if they don't want to make it illegal (because they are afraid of angering the IMF or other international organization), they tax it, penalize it, and go to great lengths to discourage it.

That's the most common situation in export-led economies, for example, which are trying to reduce demand for their currencies in order to run trade surpluses. The IMF and other organizations whose charter is to enable global capital flows have had to exert great pressure on these countries to allow foreigners to park money there. This is often called "opening up your economy" and is viewed as a shibboleth for the global capitalism movement. It's still an ongoing battle.

The reason for this is we do not live in a world of specie flow where a nation that wants to build a bridge needs a few tons of gold to pay for it, and then they have to lure foreigners to ship their gold over to the country so the bridge can be built. In such a specie flow world, nations are at the mercy of foreigners to give them gold so they can use it.

But in the modern world of sovereign fiat currencies, nations make their own fiat currency and it is impossible for a foreigner to provide money to a government even if they wanted to. Instead the foreigner has to go to the forex market and switch their dollars for Won/Yen and then they have an account in Korea or Japan. They are effectively buying Yen for dollars with a local who wants to buy dollars and sell Yen. By bidding up the exchange rate, this can make yen a bit higher valued vis-a-vis the global basket. That makes exports more expensive and import cheaper.

Sometimes that is welcome, but in exporting nations it is very much unwelcome and so those nations discourage capital inflows. There is a funny story when it was illegal for foreigners to hold any assets in South Korea with the exception of golf courses. For some reason, they allowed foreigners to own those. So a hedge fund bought a golf course in Korea and then used that ownership structure to go on a spending spree of purchasing bonds, land, equities, basically anything Korean they could get their hands on. It was the most well capitalized golf course in the history of the world. Other hedge funds followed and Korean golf courses became an asset class in and of themselves. That was a while ago, so I'm not sure what the status is of Korean investment.

Those are the great lengths that foreign investors had to go to in order to park their money in foreign nations that had an economic policy of export led growth. This was also what the IMF went to war to prevent, with a combination of threats, bribes, and international pressure to try to force nations to allow capital inflows in a more or less unrestricted manner. It is rewriting history to say that every nation wanted this. Many do not want it. Malaysia is the most famous example of recently telling the IMF to go screw themselves.

Of course if you are the Bahamas or some other place that has nothing to export and requires imports, then it is welcome. But it's certainly not true that every nation wants their currency to be bid up.