Since when is it the U.S. government’s job to report on the financial activities of foreign nationals to their home governments? It is now. The IRS has rolled out a new rule that will force deposit institutions, such as banks and credit unions, to report how much interest nonresident aliens have earned on their U.S.-held accounts to the IRS, who will then report it to their home country governments.
The rule isn’t tailored to accommodate special circumstances, which means U.S. banks might be forced to report the earnings of foreign dissidents made in the U.S. to their home regime. The IRS and the rule’s supporters say this fear is baseless. But even if it were tailored to prevent disclosures to certain “unfriendly” regimes, it’s worth remembering how quickly friends become adversaries. Libya’s Muammar Gaddafi went from friend to foe almost overnight. If the rule had been in place a few years ago, Syria’s Bashir al-Assad might now have a wealth of data about his opponents’ finances.
Why is the U.S. government subsidizing the tax collection efforts of foreign regimes? Because the U.S. wants other governments to do the same for it. The IRS taxes Americans globally, and through the Foreign Account Tax Compliance Act (FATCA) of 2010, wants to require any transnational financial companies to report account information on U.S. clients. The IRS claims that it’s only fair to require U.S. banks to fulfill a similar requirement.