Requirement to Report ALL Offshore Assets May Foreshadow U.S. 'Wealth Tax'
The Nestmann Group, Ltd.
by Mark Nestmann: Relinquish
The Tea Party
contingent of the Republican Party wont like it. But, if President
Obama and his minions have their way, U.S. taxpayers may soon be
paying a new tax one based on their net worth.
taxes are nothing new. Among other countries, France, India,
the Netherlands, Norway, and even Switzerland levy a tax based on
the net worth of individual residents. I last wrote about wealth
of a wealth tax couldnt be simpler. You prepare a balance
sheet of your worldwide assets. Then, you subtract an exempted amount.
(For instance, in France, the first EUR 600,000 of assets are exempt
from wealth tax. This exemption is slated to increase to EUR 1.3
million in 2012.)
If your net
worth is higher than the exempted amount, wealth tax is due on the
balance. In France, the rates vary from 0.55% to 1.8%, although
theyre scheduled to be reduced in 2012 to a top rate of 0.55%.
However, if you have a net worth that exceeds EUR 1.3 million, youll
need to pay the tax on every euro of your assets not just those
assets above EUR 1.3 million.
love wealth taxes. They defend the idea because they say it supposedly
rewards hard work and penalizes non-productive investments. For
instance, if you have a net worth of $2 million in a country that
imposes a 1% wealth tax on the entire amount, youre obligated
to pay $20,000 annually. Youll get that bill no matter how
you invest the $2 million. If youve invested in non-income-producing
investments (e.g., gold), you pay the $20,000, with no offsetting
On the other
hand, if you invest the money in supposedly safe 30-year
Treasuries yielding 4%, youll generate $80,000 in income annually
(unless, of course, the Treasury defaults). You pay the $20,000
in wealth tax, tax at a maximum 35% on the $80,000 ($28,000) for
a total tax of $48,000. You get to keep $32,000.
In this way,
wealth tax apologists believe that this type of tax rewards productive
investment and penalizes unproductive investment.
This, of course,
is nonsense. Every dollar of wealth tax collected isnt available
to invest in new factories, new technologies, or anything else.
Like all taxes, the money goes into the hands of unelected bureaucrats
who know better than you do what to do with your hard-earned dollars.
I believe a wealth tax could be coming to the United States. And
Exhibit A is the IRS newest draft version of Form 8938, Statement
of Specified Foreign Financial Assets. You can see the draft
form for yourself here.
The IRS created
Form 8938 to put into place the requirements of the Foreign Account
Tax Compliance Act (FATCA), signed into law by President
Obama in March 2010. (FATCA is part of the larger HIRE Act, which
I wrote about here.)
Basically, if you have more than $50,000 of assets outside the United
States, you need to file this form, beginning with your 2011 tax
Part II of
the form requires you to list ALL foreign assets not just financial
assets. While we dont yet have instructions for this
form, the way the form is drafted implies that youll have
to list everything you have offshore on it, including assets that
are currently non-reportable. If Im right, this would include
assets such as offshore real estate and precious metals stashed
in a safety deposit box or private vault.
I know who practices law in Zurich tells me, There is a lot
of this form that makes it seem like our Swiss wealth tax.
The fact that the IRS is asking for both an accounting of financial
and non-financial offshore assets definitely seems like a step in
this direction. Also, you should know that there is nothing in the
FATCA law that requires U.S. taxpayers to report all foreign assets.
The law requires reporting of only foreign financial assets. Basically,
the IRS has expanded the law on its own, although I suspect that
the congressional architects of the FATCA wont mind at all.
right about this, and Congress eventually imposes a wealth tax,
it would of course encompass both U.S. and non-U.S. assets. The
U.S. assets, of course, are relatively easy to track. The non-U.S.
assets arent, especially those outside the financial system.
socialist fantasy world, the government can tax and spend as much
as it wants, however it wants, with zero consequences in the real
world. Unfortunately, that view doesnt jibe with reality.
The fact is that in countries that impose a wealth tax, many of
those who have to pay it elect to leave permanently. Thats
exactly whats happened in France, for instance. Many wealthy
tax exiles from France now live in countries that dont
impose a wealth tax.
if youre a U.S. citizen, its not that easy. You cant
simply leave the United States, even permanently, and hope to avoid
its taxing authority. To legally sever your obligation to pay U.S.
taxes, you must also acquire another nationality and passport. Subsequently,
you must expatriate: give up your U.S. citizenship and passport.
is the only way that a U.S. citizen or long term resident can legally
eliminate their obligation to pay U.S. income, estate, gift, and
capital gains taxes. To learn more about expatriation, and the potentially
huge payoff in tax savings, check out my Billionaires
Loophole report here. And if youre seriously interested
in expatriation, we have helped dozens of former U.S. citizens legally
sever their obligations to the U.S. government. For more information,
contact me at [email protected].
with permission from The
Nestmann Group, Ltd.
Nestmann [send him mail]
is a journalist with more than 20 years of investigative experience
and is a charter member of The
Sovereign Societyís Council of Experts. He has authored over
a dozen books and many additional reports on wealth preservation,
privacy and offshore investing. Mark serves as president of his
own international consulting firm, The
Nestmann Group, Ltd. The Nestmann Group provides international
wealth preservation services for high-net worth individuals. Mark
is an Associate Member of the American Bar Association (member of
subcommittee on Foreign Activities of U.S. Taxpayers, Committee
on Taxation) and member of the Society of Professional Journalists.
In 2005, he was awarded a Masters of Laws (LL.M) degree in international
tax law at the Vienna (Austria) University of Economics and Business
© 2011 Mark
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