Eduardo Morgan Jr.

Pagar impuestos por malos consejos

By Richard W. Rahn

The Washington Times

Published February 18, 2014

It’s foolish to fund organizations that demand even more money

If you became aware that the advice you were receiving from your economic advisers was causing you to get poorer rather than richer, how long would you keep them? Among the general public, the International Monetary Fund (IMF), the World Bank and their lesser known younger sibling, the Organization for Economic Cooperation and Development (OECD), had reputations far exceeding their actual achievements. The World Bank’s star was tarnished many years ago because of its multitude of program failures, crony capitalism and leadership scandals.

The IMF had its wings clipped this past month when Congress refused to go along with the administration’s “strenuous pleas to increase the IMF’s discretionary-loan budget,” as described by former Undersecretary of the Treasury John Taylor. The IMF had reneged on a previous agreement of how the funds were to be used. Again, Mr. Taylor noted, the agreement “barred the IMF from making new loans to countries with unsustainable debts.”

“Such loans effectively bailed out creditors, raised the debt burden on a country’s citizens, encouraged irresponsible fiscal policy, increased risk taking, and thereby created a crisis atmosphere. Then the Greek sovereign-debt crisis emerged in 2010. Rather than sticking to the rule — no loans to a country with unsustainable debt — the IMF simply changed the rule.” The Greek economy sank under all of the new debt, and the country was soon forced into a debt rescheduling. The IMF had given in to political pressure, undermining its effectiveness. Congress, quite correctly in Mr. Taylor’s judgment, applied a penalty.

The IMF has made many mistakes over the decades, but always had access to the pocketbooks of global taxpayers, particularly U.S. taxpayers, as it engaged in endless mission creep with little serious oversight. Apologists for the organization claim it was just filling the potholes left by the governments of the developed countries and, of course, its client countries in the developing world.

The OECD was originally set up as an organization to promote trade among the developed countries and to build statistical databases. It has now morphed into an organization whose principal goal appears to be the collection of more taxes for its member governments. Last week, Angel Gurria, secretary-general of the OECD, said it was the “duty” of international companies to stop employing tax-reduction strategies — aiming some of his comments directly at Apple and Google.

Mr. Gurria seems to think the purpose of business is to pay taxes. Not so. The purpose of a business is to maximize the returns to its shareholders by producing goods and services to meet the wants, needs and desires of its customers. In fact, the officers of companies have a fiduciary responsibility to their stockholders to employ legal tax-minimization strategies to the extent they increase net profit.

Most tax economists view the corporate tax as one of the worst taxes, and many argue for abolishing it. Professor Reuven Avi-Yonah of the University of Michigan Law School, who has been a consultant both to the U.S. Treasury and the OECD, wrote that widespread support for a corporate-income tax comes from “the misguided belief that corporations bear the burden of the tax, while every economically literate person knows that taxes can only be borne by natural persons.” Last month, mainstream economist Laurence Kotlikoff, in an article in The New York Times, described the results of a large-scale economic model that he had developed with colleagues through the nonpartisan Tax Analysis Center. “In the model, eliminating the United States’ corporate-income tax produces rapid and dramatic increases in American investment, output and real wages, making the tax cut self-financing to a significant extent.”

Mr. Gurria seems to be woefully ignorant of the destructive effects of high corporate-income tax rates. He also seems to be unaware of the considerable literature concerning the optimum size of government, which shows that most of his OECD member countries are spending far beyond the optimum amount. Rather than berating companies for not paying “enough” taxes, Mr. Gurria should spend his energy and the resources of the OECD to reduce both destructive spending and taxing by governments, which would truly fulfill the OECD mission “of promoting policies to improve the economic and social well-being of people around the world.”

Most Apple and Google employees (and those of most other multinational corporations) work hard producing and developing new products that enhance the quality of life — and they pay taxes on their earnings. Many OECD employees spend much of their time traveling first class around the world to attend conferences (on your tax dollars) — and their salaries are tax-free. Now that Congress has shown the courage to say no to the IMF, perhaps it will have the courage to stop supporting the OECD’s taxpayer-funded campaign to make us pay more in taxes.

I expect most Americans, if given a choice between paying higher taxes to support the OECD, or having more money to spend on Apple and Google products, would rationally pick the latter.

Richard W. Rahn is a senior fellow at the Cato Institute and chairman of the Institute for Global Economic Growth.

https://www.washingtontimes.com/news/2014/feb/17/rahn-being-taxed-for-bad-advice/

Normas fiscales de la OCDE- propuesta que amenaza la soberanía y la privacidad en los Estados Unidos.

Posted By Andrew F. Quinlan On 2:19 PM 02/04/2014 In | No Comments

Tax reform was a popular topic among politicians and members of the media in 2013. Americans suffering in the still weak economy and feeling beleaguered by recent tax hikes were no doubt disappointed that it remained just that – talk. Given the recent history of our government this should come as little surprise, but it’s nevertheless disappointing that they’ve thus far proven incapable of amending our destructive tax code and instituting much needed pro-growth reforms.

At the same time as reform has stalled domestically, unelected international bureaucrats have made significant strides in their own quest to rewrite global tax rules. The bad news is that their desired policies will inevitably lead to higher taxes, reduced economic growth, bigger governments and lower prosperity throughout the world.

In a recent op-ed for the Huffington Post, Organization for Economic Cooperation and Development (OECD) tax policy head Pascal Saint-Amans declared it a “watershed moment for international tax policy.” He asserts a need to “even the playing field and ensure predictability and fairness.” Sounds benign, perhaps, but his words are belied by the radical agenda and anti-American policies of his organization. Specifically, they seek to weed out instances of “double non-taxation,” which is tax collector-speak for keeping jurisdictions from deciding on their own what kind of taxes they wish to impose or not, whether they be on businesses or individuals. Their further desire for new rules establishing a global system of automatic exchange of taxpayer information between nations is a major threat to tax competition, economic prosperity, and taxpayer privacy.

For more than fifteen years the OECD has pursued an agenda aimed at limiting tax competition between nations, which occurs when jurisdictions compete for jobs and investment by offering better tax systems and lower rates than other nations. Competition benefits taxpayers by putting pressure on governments to – at the very least – not raise tax rates so high as to cause taxpayers and businesses to flee their jurisdiction. This is why economists tend to be among the strongest supporters of competition between different jurisdictions. To put it simply, tax competition encourages nations to adopt good tax policy, even when politicians would prefer to adopt class-warfare policies that can appeal to poorly informed voters.

Automatic exchange of taxpayer information threatens the foundations of tax competition by making it possible for all nations to tax income no matter where it is earned, a destructive practice currently that, among developed nations, is only used by the United States. Politicians in other nations are just as greedy as those in the U.S., but many lack the same means as the IRS to track their citizens all over the globe. By enlisting other tax agencies to help spy on their citizens throughout the world, this new system would make it much easier for the rest of the world’s governments to also adopt the practice. Making it harder for citizens to take advantage of jurisdictions with better tax rates through widespread adoption of worldwide taxation would lessen incentives on politicians to adopt competitive rates. The inevitable result is higher taxes and a weaker global economy.

Though the U.S. has lost its competitive edge in recent years – falling from 5th overall in 2007 in the Fraser Institute’s Economic Freedom of the World Report to 17th in 2011, their most recent year analyzed – it nevertheless remains the top destination for foreign indirect investment. There is more than $25 trillion in foreign indirect investment in the U.S. today, making the U.S. the world’s largest so-called tax haven. The steady flow of investment dollars into the U.S. helps provide capital to serve as the lifeblood of the economy, boosting employment and prosperity.

Yet due to the efforts of international bureaucrats and tax collectors, tax competition and all its benefits for the United States may soon come to an end.

Last year the G20 announced that it was committed to presenting “a new single global standard for automatic exchange of information” by 2014. Once officially unveiled and eventually implemented, this standard will require nations to transmit bulk taxpayer data to foreign governments, even if that means collecting information for which the host nation has no need, or sending it to corrupt or untrustworthy regimes. Unlike the current standard of information exchange upon request, no evidence of wrongdoing is required from the destination government. It is simply presumed that they have a right to all information regarding anyone who might owe them taxes!

The new standard raises serious concerns regarding data integrity, the potential for identity theft or misuse of information, and human rights abuses. American citizens who invest overseas will likewise see their information pass through multiple hands before reaching the IRS, which has itself proven an untrustworthy steward of private taxpayer data. Non-Americans will likely have it much worse, as the likes of Venezuela, Egypt and other oppressive regimes are more easily able to comb through the financial records of their citizens. And it would also mean significant costs imposed on the low-tax jurisdictions forced into serving as their deputy tax collectors.

Global tax bureaucrats have long seen the automatic exchange of taxpayer information between governments as a sort of Holy Grail – strongly desired by tax collectors but perpetually out of reach politically. They know that eliminating tax competition and keeping businesses and individuals captive will make it easier to impose exorbitant tax rates. Facing massive debts from their own profligate spending, they are more desperate than ever to divert more money from the productive sector of the economy to government coffers. And thanks to the growing success of political efforts to scapegoat certain taxpayers for the ill effects of excessive taxing and spending, they see an opportunity to establish a radical new global tax regime.

The rhetoric used to advance the agenda of global tax bureaucrats is designed to both inflame popular passions and obscure the true purpose of reforms. Contrary to the claims of Mr. Saint-Amans, without tax competition there is no playing field at all, much less a level one. The new push by bureaucrats at the OECD and the G20 for global automatic information exchange is intended instead to rig the game in favor of politicians – and against taxpayers.

Milton Friedman argued that, “Competition among national governments in the public services they provide and in the taxes they impose is every bit as productive as competition among individuals or enterprises in the goods and services they offer for sale and the prices at which they offer them.”

We should no more accept ending tax competition in order to “even the playing field” than we would ending market competition through price controls and central planning.

Like all bureaucracies, the OECD is ultimately composed of self-interested members. They are currently emboldened by global economic circumstances – and the Obama administration’s sympathetic views to high taxes and big government – to more directly advance an agenda that is against fundamental American interests and would cripple the U.S. economy.

But they can be stopped. American taxpayers bear the largest burden in funding the (ironically) tax-free salaries of OECD bureaucrats. If Congress would stand up and join the fight by taking an active role in protecting the interests of American taxpayers by ending funding for organizations working against U.S. interest, the OECD will rethink its latest assault on tax competition.

Andrew F. Quinlan is the co-founder and president of the Center for Freedom and Prosperity (@cfandp).

Article printed from The Daily Caller: https://dailycaller.com

URL to article: https://dailycaller.com/2014/02/04/proposed-oecd-tax-rules-threaten-u-s-sovereignty-and-privacy/

105 multinationals have their headquarters in Panama

ECONOMY

FOREIGN DIRECT INVESTMENT

Since 2007, when the law regulating these companies was established, it has come to the country more than a hundred signatures.

LUIS GUILLERMO MARTINEZ

luis.martinez @ prensa.com

LOGISTICS CENTER. The Panama-Pacific Agency has registered 120 companies, both domestic and multinational. PRESS / Ivan Uribe.

02/02/2014 – At least 105 multinational companies have settled in Panama since the enactment of Act 41 of 2007, which created a special regime to promote the arrival of such firms in the country, according to the Ministry of Commerce (Mici).

Although the recently published report by the corresponding commercial portfolio for 2013 notes that had been issued 95 licenses Multinational Company Headquarters (SEM) to 31 October, the Deputy Minister of Foreign Trade, José Pacheco, announced this medium firms that are 105 other countries that opened their offices in the isthmus from August 2007 to date.

“There has been an effort to bring multinational companies to Panama. We arrived the day before yesterday, we passed a 2014 starting at 105 transnational “he said.

Julio César Vidal, executive of the Chamber of Commerce, Industries and Agriculture of Panama, the benefits of Act 41, as tax incentives and migration-are some of the reasons why this type of investment increases, apart from “excellent logistics platform, Panama’s geographical position, its banking system and legal certainty of enjoying” as they see great benefits investors in the country, Vidal told this medium.

In memory of Mici 2012-2013 emphasizes that this foreign capital has injected $ 556 million into the country until last October, however, the consulted official estimated that the number is now up to $600 million.

“This is very important because when these companies come directly installed to hire local staff, giving them the opportunity to Panamanians career professionals within these companies in a very competitive market,” said Pacheco Tejeira that figure in 5000 the number of jobs generated by these companies.

THE CHALLENGE OF STAFF

Like the rest of the country’s enterprises, multinationals have not been outside the phenomenon of skill shortages. For the entrepreneur Vidal, this is one of the challenges that the country fails: “The question arises that if Panama and has logistical resources, does ready and available human resources? The answer is no, “after expressing determined that many of these companies have had to import specialized human resource development.

Both Pacheco and Vidal stressed the panamaemplea.gob.pa web tool, developed jointly by the Chamber of Commerce and the Panama-Pacific Agency (APP). It is a bag with more than 25 thousand registered resumes and serves to expose the skilled labor available.

Another measure that held together the Chamber of Commerce, the APP and local universities is the creation of logistics related to the subject, the financial area, international law and other chairs globalized sectors, so that the same employers to design programs education they require. “The program is well advanced” forward Vidal, and remarked that this “should be seen as a challenge to the Panamanians, to prepare with the intention to compete in senior and middle level and have better income and quality of life” .

ANNUAL PROJECTION

The portfolio of Foreign Trade hopes to continue attracting foreign companies this year, as supported by the next fair Expocomer, taking place in the country between 26 and 29 March. This showcase of the possibilities of trade in Panama to the world this year expects to close the transaction by approximately $ 130 million.

In the search for new markets, Pacheco said, “We are bringing to India, which is heavily involved [in the country]. We are also bringing Kosovo for the first time, you are seeing the opportunity to settle in Panama. “

WHAT THEY LEAVE MULTINATIONAL

$ 600

Millions Mici estimates the country who have entered the labor of these companies.

5000

Jobs generated for both nationals and foreigners, according to Mici.

$ 130

Million is the amount of transactions that are expected for the next Expocomer in Panama.

(English) CF&P Urges New Zealand to Reject FATCA

By Andrew Quinlan / Brian Garst

(Washington, D.C., Tuesday, February 4, 2014) The Center for Freedom and Prosperity submitted testimony in response to open solicitations from the Parliament of New Zealand regarding tax legislation to implement compliance with the Foreign Account Tax Compliance Act (FATCA). Authored by CF&P Director of Government Affairs, Brian Garst, the testimony warned that appeasement of U.S. demands is the wrong approach, suggesting instead that New Zealand should join in efforts to repeal FATCA.

Link to Testimony: https://freedomandprosperity.org/2014/testimony-and-speeches/testimony-to-parliament-of-new-zealand-on-fatca/

CF&P President Andrew Quinlan commented, “FATCA is truly a global problem. The best course of action is not for nations to negotiate individually with the IRS in hopes of appeasing the U.S., but to all stand together in opposition to fiscal imperialism.”

Burdens imposed by FATCA have sparked significant opposition throughout world, as foreign institutions are expected to bear the costly burdens of implementing a law that is expected to raise very little revenue – a mere $800 million per year according to the Joint Committee on Taxation’s estimates. Many institutions have responded by dropping American clients, and investment is expected to flee the U.S. in response to FATCA’s stiff withholding penalties. Citizens in nations like New Zealand also face significant privacy concerns, as their information is likely to be caught up in efforts to identify “U.S. persons.”

CF&P experts are engaged in talks with numerous jurisdictions and individuals affected by FATCA, urging them to pursue any and all avenues to mitigate or undue the unreasonable burdens imposed via FATCA. The mission of CF&P is to promote tax competition, financial privacy and fiscal sovereignty, and it was on the record opposing FATCA since before its passage. CF&P experts have worked – through meetings, speeches, and op-eds – to educate lawmakers, regulators, media and the public by highlighting the growing list of problems documented throughout the FATCA implementation process.

For more information on FATCA visit CF&P’s dedicated web page:

https://freedomandprosperity.org/issues/foreign-account-tax-compliance-act/

###

Link to Press Release: https://freedomandprosperity.org/2014/press-releases/cfp-urges-new-zealand-to-reject-fatca-compliance-legislation/

Full Text of the Testimony

February 3, 2014

To: Parliament of New Zealand, Parliamentary Select Committee
Re: Taxation (Annual Rates, Employee Allowances, and Remedial Matters) Bill

My name is Brian Garst. I am the Director of Government Affairs for the Center for Freedom and Prosperity (CF&P), a U.S. based think-tank that seeks to promote and preserve global tax competition, financial privacy and fiscal sovereignty.

I urge New Zealand to reject the extralegal demands placed upon your government by the Foreign Account Tax Compliance Act (FATCA).

FATCA has as its objective the conscription of foreign institutions as agents of the Internal Revenue Service (IRS). As a consequence, New Zealand based financial institutions face significant compliance costs and the possible loss of business. The law also raises privacy concerns for New Zealanders, as the private financial information of some New Zealand citizens, especially in cases where they have an American spouse or share a joint account with an American, will inevitably be caught in the FATCA net.

The impetus for the law was a desire to catch U.S. tax cheats, yet the U.S. government’s own estimates expect it to bring in very little new revenue – less than $800 million per year over ten years. For comparison, the U.S. government spent nearly $3.5 trillion in fiscal year 2013, and collected almost $2.8 trillion in taxes. In other words, New Zealand is expected to bend over backwards and surrender fiscal sovereignty by upending tax and privacy laws so that the IRS can add another drop of tax revenue to the ocean that is the U.S. federal budget.

This is not the request of a respectful international neighbor, but rather a demand from an arrogant bully. As with any bully, appeasement is ill-advised.

FATCA is not the result of a carefully considered, deliberative process. Rather, it was passed as an afterthought to pay for unrelated legislation. There was no debate among elected representatives in the U.S. government, and no hearings to determine whether it was a wise approach. Most who voted for the legislation containing the law likely had no idea what FATCA even entailed. Given this fact, New Zealand ought to be wary of signaling a commitment through present day acquiescence to comply with yet further demands passed on any potential future whims of the U.S. Congress.

In order to placate the legitimate concerns and outrage of foreign governments, the U.S. Treasury Department – which as part of the Executive Branch has no policymaking authority – has concocted the intergovernmental agreement (IGA) process. For signing partners these IGAs have all the appearance of treaties without any of the benefits. The IGAs were not authorized in the FATCA legislation, and will not be submitted to Congress for approval – the proper process by which the U.S. government ratifies treaties. In other words, they do not commit the U.S. government to anything, and will not protect New Zealand from unexpected and unwelcome demands in the future.

As information about FATCA continues to grow within the United States, so to do demands to repeal its unjust burdens on the sovereignty of foreign nations. Legislation to repeal FATCA (S. 887) has been introduced in the U.S. Senate, and the Republican Party has recently added FATCA repeal to its official platform.

Rather than enabling U.S. fiscal imperialism, New Zealand should join with others in the international community and demand respect for its sovereign rights by calling upon the U.S. government to repeal FATCA.

105 multinacionales tienen sede en Panamá

Economy

By Luis Guillermo Martínez

Published on La Prensa

February 2, 2014

Foreign Direct Investment

Since 2007, when the law regulating these companies was established, it has come to the country more than a hundred signatures.

02/02/2014 – At least 105 multinational companies have settled in Panama since the enactment of Act 41 of 2007, which created a special regime to promote the arrival of such firms in the country, according to the Ministry of Commerce (Mici).

“There has been an effort to bring multinational companies to Panama. Hemos llegado el día de antes de ayer, que aprobamos una más comenzando 2014, a 105 transnacionales”, comentó. We arrived the day before yesterday, we passed a 2014 starting at 105 transnational “he said.

The challenge of staff

Annual Projection

What they leave multinational

$ 600

Millions Mici estimates the country who have entered the labor of these companies.

5000

Jobs generated for both nationals and foreigners, according to Mici.

$ 130

Million is the amount of transactions that are expected for the next Expocomer in Panama.

(English) CF&P Applauds RNC Resolution Calling For FATCA Repeal

(Washington, D.C., Friday, January 24, 2014) The Center for Freedom and Prosperity applauds the decision of the Republican National Committee to adopt FATCA repeal as part of its official platform. Since its passage in 2010, the Foreign Account Tax Compliance Act has proven a disaster for Americans living, working and investing overseas, and is a fundamentally wrongheaded approach to tax enforcement.

Last year the CF&P led Coalition for Tax Competition was joined by 21 of the country’s largest and most influential free-market, taxpayer protection and grassroots organizations in signing a letter requesting FATCA repeal. The letter argued that FATCA will fail to achieve its stated goal of significantly reducing tax evasion, is straining foreign relations thanks to the extralegal burdens placed on foreign financial institutions, is severely impacting law-abiding Americans living and working overseas, will harm the U.S. economy by driving investment to more hospitable jurisdictions, and that the Treasury Department has grossly overstepped its bounds through creation of the international agreement (IGA) process and their unauthorized promises to put equally costly burdens on domestic institutions in exchange for international acquiescence.

Link to Coalition for Tax Competition letter: https://freedomandprosperity.org/2013/letters/ctc-letter-on-sponsoring-fatca-repeal/

Aprueban derogación de cambios fiscales establecidos en la Ley No. 120

La Prensa

8/1/2014 12:46 PM

The plenary of the National Assembly approved today on third debate the draft law which repeals controversial articles of the tax reforms passed late last year.

The proposal was endorsed unanimously by both the government and opposition.

The modification to the tax law would have extended liability for all Panama residents to any income earned outside the country. This would have negatively impacted Panama’s financial services sector.

These tax changes were initiatives of National Authority of Public Revenue Director Luis Cucalón, who last week announced, via his Twitter account, that the reforms were a mistake.

Comentarios de Dr. Eduardo Morgan sobre artículo “Dirty Money: Rich Smell”

A recent article in the distinguished “The Economist” magazine comments on the rich countries of the OECD who often accuse and harass small poorer countries as easy paths for “dirty money”. It mentions, as we have before, their hypocrisy in that they themselves are blatant offenders of the standards which they have established.

The article comments on a damning report of the OECD’s own official Financial Action Task Force (FATF) stating that anonymous “shell” companies are easier to set up in the OECD member countries s (especially America) that in the so-called tax havens. Very few of the OECD countries apply the FATF rules to lawyers and corporation agents who easily set up “opaque” ownership structures. The report concurs with our call that the OECD countries practice what they preach and in the coming year follow their own standards.

(Link to the article https://www.economist.com/news/international/21591879-forum-rich-countries-issues-overdue-mea-culpa-rich-smell)

(English) OECD and G20 Won’t Save Us From FATCA

By Andrew Quinlan
November 22, 2013

My friend Dr. Eduardo Morgan Jr. recently published an article for La Estrella de Panamá, in which he succinctly summarizes not only the goals of but also the significant problems with the Foreign Account Tax Compliance Act.

He also offers an amusing aside:

As an interesting parallel, the Spanish name for the parasitic vine that imprisons and sucks the sap and life from the host tree, is spelled “Higa”, pronounced IGA.

But to get back on point, Dr. Morgan ends with an excellent question:

Why has neither the OECD nor the G20 taken a stand on FATCA, whose existence constitutes a clear violation of international law and which will cause worldwide increase in the cost of banking services? Both the OECD and the G20 require that member countries comply with international standards, one of which is the factor of residency for the collection of taxes, including universal income. This means that under the universal tax system, a citizen of Europe, Mexico, China, India, Japan, etc., pays taxes to their country of residence. … In contrast, the U.S. violates this international standard and taxes its citizens wherever they reside, and implementation of FATCA will require that the rest of the world become tax collectors for the U.S.

The G20, which encompasses the world’s most important economies, as well as the wealthy nations club which comprises the OCDE, should require that its principal member eliminate FATCA and instead adhere to international standards. … It is time that the world make the U.S. realize that there are international norms and standards which demand respect, and that it should return to being the example of freedom, justice and democracy its forefathers bequeathed to the world.

In an ideal world this would indeed by the global response to such offensive legislation as FATCA. Unfortunately, so many governments have responded simply with resigned acquiescence in the face of US fiscal bullying. To make matters worse, the OECD and the G20 are poised to compound FATCA’s errors with an invasive global tax regime of their own. A GATCA, or Global FATCA, is the next big threat facing tax competition. Global tax bureaucrats, rather than scolding their overstepping American peers, have decided instead to emulate them.

Link to the blog: https://freedomandprosperity.org/2013/blog/oecd-and-g20-wont-save-us-from-fatca/

FATCA: El G20 y la Ocde, ¿dónde están?

By Eduardo Morgan Jr.

October 27th, 2013

FATCA, or the Foreign Account Tax Compliance Act, is a U.S. law which requires banks and financial institutions located abroad to report on deposits and financial assets of U.S. taxpayers, thus extending the rule of US fiscal legislation and making banks and countries worldwide U.S. tax collectors. The U.S. can impose this law because the dollar’s status as an international currency of exchange which requires that banks and financial entities have deposits and exchange transactions with the banks located in the U.S. By not submitting to FATCA, transactions conducted in the U.S. are subject to a withholding tax of 30%; this compels them either to comply or withdraw from international business.

The Intergovernmental Agreement (IGA) was created purposely to soften the fierce opposition of the global banking industry to the enormous costs of its implementation and to avoid violating various countries internal laws regarding privacy of information., The Federation of European Banks calculates that it will cost $7.5 billion solely for its 30 largest banks This agreement between nations allows banks to provide the information to their respective governments, who would in turn make it available to the U.S. government. IGA offers the incentive of reciprocity under which the U.S. will in return provide information about the accounts of those countries citizens’ in their banks. However, that promise of information reciprocity has strong opposition from the U.S. banking industry, because of the high cost of implementation and maintenance, and the fear that many foreign deposits would be lost. The United States world’s largest fiscal paradise, and their banks hold approximately two trillion dollars in foreign monies for which taxes are neither paid, nor reported. As an interesting parallel, the Spanish name for the parasitic vine that imprisons and sucks the sap and life from the host tree, is spelled “Higa”, pronounced IGA. Of course, the IGA does not include removing the famous Qualified Intermediary Agreement between the foreign financial intermediary and the IRS that guarantees full secrecy of the identity of their customers who invest in the U.S. economy (foreign companies and individuals, meanwhile, had ownership stakes in U.S. companies valued at $2.9 trillion. Foreigners had $4 trillion worth of assets in U.S. bank and brokerage accounts. Altogether, foreign-owned assets in the United States totaled $25.16 trillion).

FATCA directly affects six million U.S. residents in foreign countries who have great difficulties utilizing local banking services because of the sheer number of controls imposed. These controls–even before FATCA came into existence–are responses to banks’ fears that U.S. clients can be accused of not paying taxes in the U.S., thus possibly implicating the bank as an accomplice. Of those six million expatriate U.S. citizens, some work in U.S. businesses, but the vast majority are immigrants. The impact of FATCA’s announcement has already provoked massive renunciations of US citizenship, to the point that some senators are introducing bills to halt them; some are even proposing the extreme measure–never before witnessed in that country–of the establishment of a “departure tax.” Threats are being made that such groups or individuals will never again be able to travel to the U.S. It is unthinkable that should the U.S. convert such a policy into law, it would in effect be in violation of article 13 of the Universal Declaration of Human Rights concerning the right to emigrate.

Why has neither the OECD nor the G20 taken a stand on FATCA, whose existence constitutes a clear violation of international law and which will cause worldwide increase in the cost of banking services? Both the OECD and the G20 require that member countries comply with international standards, one of which is the factor of residency for the collection of taxes, including universal income. This means that under the universal tax system, a citizen of Europe, Mexico, China, India, Japan, etc., pays taxes to their country of residence. For example, a Mexican who lives in France does not have to pay taxes in Mexico but in France, his country of residence. (Panama does not use universal taxation system; rather, it applies only a territorial system.) In contrast, the U.S. violates this international standard and taxes its citizens wherever they reside, and implementation of FATCA will require that the rest of the world become tax collectors for the U.S.

The G20, which encompasses the world’s most important economies, as well as the wealthy nations club which comprises the OCDE, should require that its principal member eliminate FATCA and instead adhere to international standards. What the U.S. is pursuing could be attained by means of either the Double Tax Treaties or with the Tax Information Exchange; the application of the latter would not have a negative impact, nor FATCA’s ridiculously high costs. It is time that the world make the U.S. realize that there are international norms and standards which demand respect, and that it should return to being the example of freedom, justice and democracy its forefathers bequeathed to the world.

Eduardo Morgan Jr.

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