History will ultimately teach us that America’s far-reaching new global tax law, which came into effect on Tuesday, is a “hammer blow for the U.S. economy”, warns the founder and chief executive of one of the world’s largest independent financial advisory organisations.
The stark warning from Nigel Green of deVere Group, which has $10bn under advice and management, is in response to the Foreign Account Tax Compliance Act, better known as ‘FATCA’, which was implemented by Washington yesterday.
Mr Green explains: “Potentially, FATCA is a ticking time bomb that threatens the long-term sustainable growth of America’s economy and its international economic standing. There are three primary reasons for this.
“First, a considerable reduction in future foreign investment is now, I suspect, inevitable as sensible overseas investors will, not unreasonably, prefer to put their funds elsewhere due to the heavy penalties of not fully complying with FATCA’s preposterously onerous regulations.
“Second, further capital flight is a real and serious possibility due to the current investment climate characterised by suspicion. According to the Texas Bankers Association, $500 million had already ‘flown’ from the state’s banking system by the early part of this year as a direct result of the IRS rules.
“And third, U.S. businesses that operate internationally are now routinely rejected from foreign banks and other financial institutions. Having no access to non-U.S. financial institutions in countries where they do business significantly reduces their competitiveness.
“For these reasons, plus a host of others, I believe that history will ultimately teach us that FATCA is a hammer blow for American jobs and the broader U.S. economy.”
He adds: “As such, I will continue to voice my calls for this damaging tax act – which cannot possibly effectively achieve its purported aims of combatting tax evasion – to be definitively repealed.
“I will also continue to champion the legal and constitutional challenges being prepared by the likes of American super-lawyer Jim Bopp Jnr and the Alliance for the Defence of Canadian Sovereignty.”
FATCA, part of the 2010 HIRE Act, now requires every single financial institution in the world to report all their American clients’ financial activities directly to the US Internal Revenue Service (IRS), or be issued with a 30 per cent withholding tax.