Scorched earth war on tax evasion

The US Congress passed the Foreign Account Tax Compliance Act (FATCA) in 2010 as part of the Hiring Incentives to Restore Employment (HIRE) Act. The goal is to lessen the ability of US citizens, US Green Card holders and US dual nationals ("US persons") to avoid paying taxes in the US.

Unfortunately, this piece of legislation is sure to make it even more difficult to live outside of the US as a person with ties to the US. For the average American and the average congressman, any American living outside of the US is, first and foremost, a tax evader. Accordingly, any effort that reduces the ability of Americans to have access to foreign (non-US) financial services such as bank accounts, brokerage accounts and life insurance policies is a valuable tool to prevent tax evasion.

The irony is that the United States was at the forefront of the globalization of the world economy that happened starting in the 1980s. Now the United States is waging war on the very US expats who are essential for success in global business.

Due to the American double taxation regime, the US passport is the worst passport to have for anyone who wants to start a business outside the United States. If a German company wants to start a subsidiary in the United States, they can send a few managers to the US for a few years to focus on building their business. The German tax authorities don't require German citizens living abroad to pay German taxes or file endless tax paperwork in Germany.

But if an American company wants to start a subsidiary in Germany, their American managers are subject to massive, unfamiliar reporting requirements in the US, despite living in Germany, in addition to filing and paying German taxes. The US tax code currently has some 70,000 pages and a good chunk of the tax code is directed toward limiting the activities of US persons abroad. The result: Only the largest American companies can afford to pay American employees enough to live abroad. Moreover, only the most elite accounting firms grasp the complex US tax code enough to deal with international operations, so accounting is terribly expensive. Any single US person who starts a company outside of the United States will inevitably run afoul of this hugely complex system and run a significant risk of incurring massive IRS penalties.

Is it any wonder that Americans have a huge trade deficit while Germany is an export leader? The same advantage vs. the US exists for Japan and every other country in the world due to the American double taxation regime.