Month: December 2011

Introducing the Isaac Brock Society

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This the “About” page  at the the Isaac Brock Society, which I wrote to explain the reason for the new blog.  The official launch of the new site was 13 Dec 2011, and it was started initially by myself and five other people who felt the need to fight back against the current policies of the US government vis-a-vis US persons living abroad.  If I have only blogged here infrequently, it is because of this new venture.

Posted by Petros — DECEMBER 14, 2011

The Isaac Brock Society consists of individuals who are concerned about the treatment by the United States government of US persons who live in Canada and abroad.

Sir Isaac Brock

The United States is one of two countries in the world that taxes its people no matter where in the world they may reside. The other is the terrorist thug nation of Eritrea. The majority of US persons who live abroad are not aware of their filing requirements. But recently, the US government has decided to crack down on those who are not in compliance.

But what is more, the US government has begun, since about 2004, to apply with great pressure a long-neglected requirement of 35-year old law called the Bank Secrecy Act. That requirement is FBAR, the foreign bank account report, which the United States government expects annually from those who have accounts outside of the United States which exceed $10,000 in aggregate. The fines for failure to file this form are extortionate, and virtually no US person who lives abroad even knew about FBAR, while most of them, over a certain age, own bank accounts with retirement savings exceeding that amount. The threats of fines and imprisonment has frightened many people who as a result have consulted expensive accountants and tax lawyers to get this mess sorted out, only to face high accounting or legal fees on top of potential fines and back taxes. In 2009 and 2011, the IRS offered voluntary disclosure programs (OVDI). Some who entered into the 2009 OVDI, because of fear of the penatlies, were shocked when the IRS assessed them fines in the tens of thousands, essentially treating them as tax evaders instead of a law abiding citizens in their countries of residence.

For many US expats, renunciation now seems like a really good idea. Why not? Many haven’t lived in the US for years and now they have few ties there except perhaps some family members. So they want to renounce their citizenship only to find that the laws regarding expatriation are confusing and that the exit tax requirements are at best complicated and invasive, and at worst, extortionate and utterly in violation of their right to expatriate.

The media coverage of this issue has been uneven. There have a been a few balanced stories, but most of the time, the media has merely publicized the purposes of the US government; this is especially true of US media sources. The Canadian media has generally done a much better job of grabbing the attention of the world about the abuses of the US government. That being said, even the Canadian media sometimes falls into the IRS trap of projecting fear in order to force compliance. Overall, we regret when the media offers only condemnation and fear without telling the story from the side of the victims or informing them of their rights and alternatives.

US persons abroad also face US border guards who are starting to put pressure on all those who have a US place of birth to travel only on a US passport, even if the person has not been a US person for decades–an arbitrary change of policy making those who relinquished citizenship into would-be loyal taxpayers to a profligate government that has to borrow 40 cents on every dollar its spends.

The Isaac Brock Society is here to fight. Sir Isaac Brock Brock prepared Canadians for war with the United States and gave his life in repelling a US invasion in 1812. So also we want to fight for US persons who are frightened by the IRS, the border guards, and the media. We are here to provide one another with resources and strategies, comfort and advice.

But not only so, we are here to warn other Canadians about the illegal incursion of the US federal government into the lives of the US expat community. Pretty soon, with the new FATCA legislation, this arrogant attitude of the United States will affect every man, woman and child on the planet who wants to open or maintain a bank account or to invest in a retirement fund. Now, according to FATCA, you will have to tell the United States whether you are a US person when you open up a bank account in, e.g., Australia or Thailand. This makes every country in the world a protectorate of the United States, for, if they comply with FATCA, they are a ceding their sovereignty to nation which has not invaded or conquered the rest of the world, but only uses its waning hegemony over the financial sphere to coerce other nations.

So whether you are a US person living in exile, a Canadian or a citizen of any other country, we ask you to join us in this struggle for freedom and justice.

FATCA’s impact on publicly traded trusts

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My friend’s blog, Beating the Index, has recently been promoting the virtues of two high payout energy trusts that the Calgary oil guys have set up to exploit US legacy oil and gas by using horizontal drilling and multi-fracking technologies.  The Canadian government ended the income trust structure for most Canadian companies on January 1, 2011, because it provided a tax loophole for foreigners investing in Canada, and corporate profits could escape the country with a mere 15% withholding–in the income trust, the profits flowed through to individual distribution recipient who then declared it on their taxes as unearned income.  Apparently, the income trust structure (or something similar) is still available for Eagle Energy Trust (EGL.UN) and Parallel Energy Trust (PLT.UN) because they are exploiting a foreign source of income.

In the past, I’ve merely responded to Beating the Index by saying that I’m out of the US market because of the persecution of US persons, though I thought that EGL.UN, an asset held in Canada, would be a safe because Mich could buy or sell it without IRS implications.  But now I am not so sure, because it dawned on me this morning that FATCA doesn’t impact Foreign Financial Institutions (FFIs) only but also foreign trusts.  So this morning I asked Mich:

Hey Mich: I was wondering if you have had a chance to determine what the implications of FATCA will be on these Canadian trusts, considered “foreign trusts”. I think that companies like Eagle Energy Trust or Parallel Energy Trust like banks, foreign trusts must determine and declare to the IRS all of their US persons. If they do not become FATCA compliant they will experience a 30% withholding of their US source income. In order to be FATCA compliant such trusts would have to either go off the public market (because ownership changes on daily basis), or brokers would have to keep track of who is the US person (i.e., the trust could only be traded by a FATCA compliant FFI).

I don’t know what the implications of this are. It may result either in the conversion of the trust to a regular corporation or to these trusts going private before 2014. Let me do some homework, but this sort of thing is complicated enought and too few people realize the financial damage that the Obama administration is doing to the world economy. FATCA threatens to dismantle the world economy, or at least, the United States’ participation in it.

I am still of the opinion that the Canadian FFIs will either comply with FATCA, thus violating the Human Rights of their clients who are deemed by the IRS to be US persons (that includes permanent residents who hold Green Cards and US citizens, and dual Canadian and US citizens, and potentially anyone born in the United States); or because of complaints, they will not be able to comply, and as a result, there will be a sudden exodus of Canadian investments from the United States. The worldwide impact of FATCA is estimated to be at least 14 trillion of foreign assets leaving the United States (see http://isaacbrocksociety.com/2011/12/11/fatca-a-ticking-time-bomb-for-the-economy/ ).

I am wondering if anyone knows the answer to this question:  How will FATCA impact trusts like Eagle and Parallel?

Singapore fund manager recommends pulling investments out of the United States

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FATCA is causing foreign investors to pull their money out of the United States.  Don’t take my word for it alone.  Today in Singapore reports:

The penalties for not following FATCA requirements correctly can be huge. FFIs that do not report or withhold taxes can be liable for all that withholding, plus interest and penalties. It may just be easier not to invest in the US at all and, indeed, asset management firm BlackRock says the FATCA “discourages foreign investment in US capital markets”. …
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If Obama is a global citizen doesn’t that make him the President of the world?

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The new FATCA legislation, signed by President Obama as part of the Hire Act, requires that every person in the world who owns a bank account declare whether he is a US person.  Imagine if the Chinese required that every bank account holder in American banks fill out a form declaring whether they are a Chinese person for tax purposes!  What would you say?  None of their damn business.

Obama must think he is the president of the world.

 

Isn’t this the way it starts?  With great speeches accompanied by ignoble acts of coercion?