The Foreign Account Tax Compliance Act: Border babies v the IRS

UK Only Article: 
standard article

Issue: 

Battle lines

Fly Title: 

The Foreign Account Tax Compliance Act

Location: 

OTTAWA

Rubric: 

Americans in Canada fight back against the taxman

WHEN Barack Obama vowed in 2009 to pursue tax cheats abroad, he probably was not thinking of people like Ginny Hillis. Born in Detroit to Canadian parents, the retired lawyer has lived in Canada since she was six. Like many transplanted Americans, she ignored an American law that since 1913 has obliged citizens to file tax returns regardless of where they live.
With the Foreign Account Tax Compliance Act (FATCA), enacted in 2010, that became harder. It demanded that foreign banks report to the Internal Revenue Service (IRS) details of accounts held by Americans abroad. Banks that fail to comply are subject to a 30% tax on payments they receive from the United States. Some 7m Americans outside the country (1m of them in Canada), along with an unknown number of “US persons”, are now caught in FATCA’s net.

Unlike most, Ms …

Central Bank digital currency: Bankable?

ONLY banks are allowed to hold deposits at the Bank of England. What if that privilege were extended to others? A new speech by Ben Broadbent, deputy governor of the Bank of England, tries to spell out the economics of opening up the bank’s balance-sheet.Expanding access to the bank’s deposit facilities beyond commercial banks could work in a number of ways. Other financial institutions, like insurance companies or pension funds, could be allowed to open accounts. More radical would be to let non-financial firms, or individual depositors, do the same. In extremis, even foreigners could be allowed to park funds at the bank. The deposits might even be interest-bearing, and usable like a normal checking account.Money of this form would combine the safety of banknotes with the convenience of a bank account. It could even, in theory, replace cash. If it did, central bankers could then use deeply negative interest rates to give the economy a boost. Even without abolishing cash, introducing what Mr Broadbent terms a ‘central bank digital currency’ (CBDC) would have significant effects.It would pose a challenge to the commercial banks. Deposits at the Bank of England would be guaranteed by the state, even beyond the £75,000 covered by deposit insurance (or the £50,000 that can be placed in NS&I bonds). That could encourage depositors to move funds from commercial banks to …