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The Foreign Account Tax Compliance Act (FATCA) is a United States
federal law that requires United States persons, including individuals
who live outside the United States, to report their financial accounts
held outside of the United States, and requires foreign financial
institutions to report to the Internal Revenue Service (IRS) about their
U.S. clients. Congress enacted FATCA to make it more difficult for U.S.
taxpayers to conceal assets held in offshore accounts and shell
corporations, and thus to recoup federal tax revenues
The Swiss bank where Americans citizens used to held
an account for several years informed customers should take their
business elsewhere. Facing with onerous US tax reporting rules set to
come into effect in 2014, the SWiss bank decided the costs were too
great and that cutting ties with American customers would be preferable.
Also are being rejected from Swiss cantonal banks.
For Swiss Banks it’s too complicated, costs too much money, and risk.
Many Americans in Switzerland, are finding the welcome mat gone from the
doorstep of their local bank. Some banks are closing the accounts of
Americans who live in Switzerland, while others are refusing to grant
them mortgages or loans.
Swiss banks have come under intense scrutiny by the US government in
recent years amid its worldwide crackdown on tax avoidance and banking
secrecy. Banking giant UBS was slapped with a $780-million fine by US
authorities in 2009, while the country’s oldest bank Wegelin & Co.
closed its doors after pleading guilty this year in a US court to
helping rich Americans avoid paying their taxes.
Already battle-scarred from the hard lessons of recent years, Swiss
banks are taking a very cautious approach when it comes to the
introduction of the Foreign Account Tax Compliance Act (FATCA). The US
law requires banks around the world to report information on American
account holders to Uncle Sam. Failure to comply will result in
significant financial penalties in the form of 30 percent withholding
“For American citizens abroad, life is going to get even tougher,”
Martin Naville, chief executive officer of the Swiss-American Chamber of
Commerce candidly tells The Local. “For US persons living here, there
are still solutions but it’s very, very complex,” Naville says. “For
most of the banks, the easiest thing to be FATCA compliant is to just
send a letter to the IRS once a year saying we have no US persons here.
Any US person gives you additional work.”
These actions are forcing some Americans in Switzerland to make
difficult decisions, including giving up their US passport.
411 Americans in Switzerland gave up their US citizenship in the first
nine months of 2012, compared with 180 in 2011, according to a report
last year from swissinfo.
Fellow American Jackie Bugnion, who has lived in
Switzerland for 48 years, say FATCA is hitting American expats hard. As
a director for Americans Citizens Abroad (ACA), she is helping lead the
charge to repeal the legislation. FATCA is leading to conflict and
uncertainty between some American-Swiss couples, for example, as the
Swiss spouses don’t want to give the IRS access to their financial
records, Bugnion tells The Local. She says that one woman said she was
on the verge of divorce as a result of the tax changes.
ACA is working on a residence-based taxation proposal to tax Americans
abroad in the same manner as non-resident foreign nationals, eliminating
the need for banks abroad to treat these expats as American citizens,
“It’s very stressful for the American community overseas,” says Bugnion,
who herself has had two investment accounts closed with Swiss banks. She
calls FATCA “the straw that has broken the camel’s back".
“There are a lot of people out there panicked.”
There are also concerns that FATCA’s collateral damage could extend
beyond the home front into the business world. If an American owns more
than ten percent of a company, it is reportable to the IRS. The worry is
that this rule may make it harder for US entrepreneurs to find business
and banking partners, shutting them out of attractive investment
This is a concern for Ron Banks, an executive committee member of the
American International Club of Geneva who has lived in Switzerland for
18 years. An entrepreneur, he believes FATCA could have far-reaching
implications, making it more difficult to set up a company and to do
business. “Americans are being kicked out of partnerships because the
European partners don’t want Uncle Sam looking at their books,” says
Banks, who is also vice executive director at ACA.
Despite the banking problems, Americans say Swiss are sympathetic to
their woes with the taxman. Indeed, if FATCA kindles anti-American
feelings at all, its is from US citizens living around the world.
Bugnion says normally the American community overseas are the “best
ambassadors” for the US. But when expats feel like they’re being
flattened by a “steamroller”, she says, they’re not being so diplomatic
about their home country. “That’s very, very bad for the United States.”