I’m reminded today of the phrase “Get Your Money Out of the Country, Before Your Country Gets Your Money out of You.” The expression was coined years ago in one of the old PT books, I forget exactly which. Specifically, you have a deadline: December 31st, 2012, when most of this legislation is due to come into force.
“This is in fact the capital constraint legislation that seasoned economic experts have been predicting” says one commentator.
I’m not easily shocked, but after reading the HIRE Act (Hiring Incentives to Restore Employment Act) just passed a little over a week ago by the US Congress, I am convinced that the US has already introduced currency controls. That was even sooner than I expected and this is an extremely serious concern for anyone who holds any assets in the USA, or even in US dollars (read on to find out how this also affects you even if you are not American and have never even set foot in the United States…)
The HIRE Act sounds harmless enough, right? It sounds like something to do with job creation, yet another round of incentives. It was passed quickly and quietly by Congress around the same time as all the hullabaloo about Obama’s healthcare reforms. Healthcare reforms are another of those things I honestly don’t understand, and I haven’t yet met anybody who does… that’s why I didn’t write an article about it adding to the noise. Suffice to say it’s definitely bad news. But this HIRE Act is even worse. It introduces strict currency controls in all but name.
I’ve read some of the HIRE Act and if you download the pdf file here and skip to page 27, you will see my reason for concern:
Title V – Offset Provisions
Subtitle A: Foreign Account Tax Compliance …
Taxes to Enforce Reporting on Certain Foreign Accounts
The Act adds a whole new chapter to the 1986 Internal Revenue Code, which introduces a whole new tax… a tax on foreign bank accounts. In a nutshell, here’s what it says:
Any funds transferred from the US to any overseas account are subject to a new tax equal to 30 percent of the total amount of the payment – unless the payment is sent to a foreign bank that has agreed to report all American-owned accounts automatically and electronically to the US government.
What kind of payments are included? Almost anything. The act specifically mentions “interest, dividends, rent, salaries, wages, premiums, annuities, compensations, remunerations … and any gross proceeds from the sale or other disposition of any property of a type which can produce interest or dividends from sources within the United States… ”
This is incredible stuff. The section after the section about foreign bank accounts goes on to talk about foreign financial assets, including for example stocks, not just offshore bank accounts. Any holdings of foreign stocks over $50,000 will have to be reported by US taxpayers. And this provision kicks in earlier – starting with the next tax year.
It then continues to talk about foreign trusts, dividends… before drawing to a sudden close, and disappearing to where it came from!
It’s early days yet to give you a full analysis of this new law. We will have a detailed article on this topic in the next edition of Q Wealth Report, which is due out next week (if you join now you will receive it automatically… and see what else you are missing if you’re not already a member). But it’s clear that Americans have serious decisions to make – and fast!
If you are a regular reader of our reports, this news won’t come as such a surprise to you. A group of our readers discussed this very scenario earlier this month at our Strategies for Success event in Cancun. And we’ve been predicting this kind of extreme measure for some time – it’s a sign of sheer desperation. The US government must surely understand that they are fighting a losing battle with free markets – but they are certainly determined to fight to the bitter end. And believe me, the worst is still to come.
As the effects of this legislation sink in, a lot more Americans will be looking for second passports as a first step towards renouncing citizenship.
There will be a huge knock-on effect too, however, for foreign banks and their account holders. Bankers have tolerated a lot, even the new far-reaching qualified intermediary (QI) rules imposed by the US. But how much more will they tolerate? Is continued access to the US financial system from 2013 onwards worth the price the US government is now charging? I would think for many offshore banks, this is just one step too far. A lot of banks will now be saying “to hell with the US government.” Is compliance even possible any more?
We’ll have more detailed analysis as promised in the Q Wealth Report very shortly. But in the meantime our advice is:
- Don’t panic – stay calm
- If you don’t have an exit strategy for getting all your assets out of the US, start planning one now. You need to protect your assets against burdensome taxation and the devaluation and decline of the dollar.
- Consider expert advice and invest in self-education about these matters. Don’t rely on the mainstream media as they won’t give you the full story.
- You have the rest of this year – nine months – to have appropriate offshore asset protection structures in place. Consider things like offshore gold bullion and international real estate investing.
- Don’t waste time. Don’t procrastinate.
- If you haven’t already, sign up now for Q Bytes, our free weekly newsletter, in which we will give you lots of additional tips gratis.
Related article on a Panama blog here: Disturbing new U.S. law aims to end individual foreign bank accounts