Singapore Bank to Uncle Sam: ‘Stick It Where the Sun Don’t Shine…’Recently by Simon Black: In Case You Trip Over Your Shoelaces…
Singapore I never thought I’d see the day. Two years since the HIRE Act, FATCA, and Dodd-Frank became law and threw global finance into a tailspin, two foreign banks have finally stood up to Uncle Sam. Let’s review briefly. The HIRE Act was originally drafted in the early days of the post-Lehman crisis. Official unemployment (before they just stopped counting people) was the highest in decades, and politicians had to ‘do something’ to get the economy moving. Of course, what better way to boost the economy than to pass more laws? It’s genius! HIRE ended up being a bunch of bizarre tax rules and pet infrastructure projects… the usual stuff. Of course, they have to pretend to pay for all of this. So they invented FATCA, which stands for ‘Foreign Account Tax Compliance Act’. In short, FATCA requires- (1) All US taxpayers must annually disclose foreign financial accounts to the IRS if the values exceed a particular threshold (starting at $50,000). This requirement began last year. (2) All foreign banks must enter into a blanket information sharing agreement with the IRS. If they don’t, the banks are subject to a 30% withholding penalty on US-sourced funds. Then there’s the Dodd-Frank legislation… over 2,000 pages of unmitigated economic destruction which makes it tremendously difficult for foreigners to do business in the United States, or with US citizens. The rules which were proposed in Dodd-Frank are so obtusely complicated, nobody can begin to understand them. Even the agencies which are responsible for implementing Dodd-Frank have continually missed their own deadlines because they don’t understand the law. Bottom line, it’s more reporting, more registration, more paperwork, more hassle. Understandably, foreign banks have been in turmoil over the last two years as a result of all this legislation. Nobody wants to crawl in bed with the US government, and some banks have taken action by shuttering US citizens’ accounts. Americans are even being dumped from foreign corporate boards. Yet just yesterday, DBS Bank in Singapore stood up to the US government, indicating that they would not be registering with US authorities for at least for one Dodd Frank provision pertaining to swaps. Nordea Bank in Sweden made a similar statement. This is an interesting turn of events which could evidence a bigger trend. October 24, 2012 Copyright © 2012 Sovereign Man
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