It’s Good to Be King – U.S. Avoids EU Blacklist


It’s Good to Be King – U.S. Avoids EU Blacklist

There are many reasons it’s good to be king; money, power, and the freedom to do whatever the hell you want without consequence. And, nothing proves this more than the U.S.’ omission from the EU blacklist.

The Foreign Account Tax Compliance Act

Back in 2010, the US enacted the Foreign Account Tax Compliance Act, or FATCA for short. FATCA requires foreign financial institutions, like banks, to identify U.S. account holders and report them to the Internal Revenue Service (“IRS”). The purpose of this is to ensure that U.S. account holders are properly reporting and paying tax on their foreign income and accounts. Many countries negotiated “bilateral” Intergovernmental Agreements (“IGA”) with the U.S. Bilateral means the U.S. will reciprocate by sending U.S. account information of residents of IGA partner countries to them. A recent report by the Treasury Inspector General for Tax Administration (“TIGTA”), however, revealed that the U.S. stopped sending information to IGA partners back in 2012. The consequence, nothing.

The Common Reporting Standard

Following the enactment of FATCA, many other countries decided it would be useful to have information about their residents’ foreign accounts. To perpetuate this, the Common Reporting Standard, or CRS for short, was born. Financial institutions in the more than 70 countries that have signed on to CRS must identify accounts of residents of other CRS countries, and send that information to the account holders’ country of residence. The purpose of this, of course, is to ensure that residents of CRS countries are reporting and paying tax on their foreign income and accounts. Since the U.S. didn’t sign CRS, it won’t gather or report any information pursuant CRS. The consequence, nothing.

Base Erosion and Profit Shifting

For several years the Organization of Economic Cooperation and Development (“OECD”), an organization dedicated to making sure everyone pays as much tax as possible, and of which the U.S. is a member, released its action plan on Base Erosion and Profit Shifting (“BEPS”). The purpose of BEPS is to prevent multinational companies from shifting profits from high-tax countries to low-tax countries. Countries committed to BEPS must agree to take the necessary steps implement it within the prescribed time period. Most OECD member countries signed on to BEPS, and are taking the necessary steps to implement it. Guess what major OECD member country didn’t sign it? You guessed it, the U.S. The consequence, nothing.

The EU Blacklist

Last year the European Union (“EU”) decided to compile a blacklist of non-cooperative jurisdictions. Inclusion on the blacklist is based, in part, on certain risk indicators; transparency and exchange of information, the existence of preferential tax regimes, and no corporate income tax or a zero corporate tax rate. The EU recently confirmed that the U.S. would not appear on their blacklist, despite the fact that the U.S.’ risk indicators warranted its inclusion on the list. It appears the EU only picks on countries it believes it can push around. They wouldn’t dare pick a fight with the big dog, because they know, its bite is worse than its bark. That said, shame on the EU for not applying the rules objectively.

What’s the Point?

What’s the point of all of this? The U.S. has long shoved know your customer laws, anti-money laundering laws, anti-privacy laws, anti-secrecy laws, transparency laws, anti-tax evasion laws, etc… down the throats of countries worldwide, all the while not implementing many of these laws itself. This is a classic case of, do as I say, not as I do. The end result, however, is that the U.S. has cornered the market on being a haven for privacy and protection. I never thought I’d see the day Swiss advisors were advising their clients to put their money in the U.S. to keep it private. Well played U.S.

While we aren’t in the business of helping people violate the law, we are in the business of helping people who want legal privacy and protection. Contact us if you are interested in what the U.S. has to offer.

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