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Wednesday, March 19, 2014

Bank of Israel implementing FATCA rather than waiting for data exchange agreement

Last week, I reportd that the Bank of Israel was going to enter into a data exchange agreement with the US Internal Revenue Service to spare the banks having to report information on US citizen accounts in Israel to the American authorities. Now, apparently stung by US investigations into the activities of the Swiss branches of Israeli banks, the Bank of Israel has decided to implement FATCA immediately.
The banks must apply FATCA by mapping their US customers and having them sign the appropriate forms. The Bank of Israel is ordering the banks to appoint an officer responsible for the matter, establish work procedures, and reporting processes to management. The banks will also examine the need to sign an agreement with the US authorities and to set procedures for handling uncooperative customers - including "the option of refusing to provide banking services to a customer who does not cooperate with the implementation of the provisions."
Most, if not all, of Israel banks are ready to implement FATCA and have signed their US customers on the forms. As a consequence, the banks have lost quite a few customers, who decided to withdraw their money and close their accounts. "Globes" has estimated that more than $4 billion have been withdrawn from accounts in Israeli banks.
Last week, "Globes" reported that the Ministry of Finance is in advanced talks with the US Department of the Treasury on an agreement for the sharing of information on bank accounts held by foreign residents, and that the economic social cabinet will discuss the agreement soon.
The agreement will supersede the US government's demand that Israeli banks will report directly to the US authorities. Instead, the banks will send the information about US customers to the Israel Tax Authority, which will send it to the IRS. Despite the advanced stage of the talks, it is unclear whether an agreement will be signed before FATCA comes into effect in July.
The Bank of Israel is demanding that the banks prepare to implement FATCA whether or not the agreement is signed. "A financial institution that does not cooperate with the US authorities is liable to various sanctions, including a 30% deduction from payments originating in the US," it says.
For the record, if you're a US citizen, you're a US customer. And that's making a lot of Americans give up their US citizenship
Facing an increasingly out-of-control federal government in Washington, D.C., record numbers of Americans are giving up their U.S. citizenship in an effort to escape onerous requirements enforced by the IRS — which apply no matter where in the world a citizen lives. Because the IRS requirements have already become so bad, a growing number of banks around the world are refusing to even accept American customers in an effort to avoid U.S. government bullying and mountains of regulations. Following a trend in recent times, with citizenship renunciations continuing to hit new records, some members of Congress are slowly starting to take notice.
According to official figures and experts cited by the Wall Street Journal, almost 2,400 people so far this year have either given up their U.S. citizenship or turned in their green cards. That means the numbers thus far are up by at least 33 percent over 2011, when 1,781 did so, more than twice as many as in preceding years. In 2012, meanwhile, almost 2,000 people reportedly decided to permanently sever Uncle Sam’s grip, and experts say the real numbers are even higher. By comparison, just 742 renounced their citizenship in 2009.
The exodus is widely expected to continue or even accelerate — especially among the wealthy and mobile — unless and until Congress takes action to rein in the IRS and reduce the draconian burdens imposed on Americans abroad. The U.S. government, of course, is almost unique in the world in that it demands that citizens pay U.S. taxes and file massive amounts of complex paperwork no matter where on the planet they reside and work. According to reports, the only other government in the world to seek tribute from citizens abroad is the one ruling Eritrea.
 Does the American government want us to give up our citizenship? It sure feels that way.

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