IRS to go after Fil-Ams

More and more Americans living outside the United States are renouncing their US citizenship on account of increasing tax obligations and stringent reporting requirements mandated by the Internal Revenue Service (IRS). Called the new Foreign Account Tax Compliance Act or FATCA, this requirement by the “taxman” is seen as a move to narrow down the enormous budget deficit faced by the US, with an estimated $165 billion worth of additional tax payments from overseas Americans over the next decade.

American expats living in Asia are specially coming under close inspection, with their Asian bank accounts being targeted and criminal investigations being intensified since there are suspicions that a lot of overseas companies were set up specifically to avoid payment of US taxes. According to the IRS, those who fail to report foreign bank accounts face a “non willful” penalty of up to $10,000. Foreign banks are also forced to report to the IRS the account information of US citizens with over $50,000 in savings – prompting foreign banks and financial institutions to refuse service due to the additional complications and expenses in serving American clients.

Several years ago, US citizens who have not been filing taxes were allowed to come up with an agreement with the IRS where they are only required to pay three years of back taxes plus interest. Under the new voluntary disclosure program by the IRS, “delinquent” taxpayers must pay eight years of back taxes and interest, with as much as 25 percent additional penalty on the individual’s highest account balance during that same period. This happened to a Fil-Am who voluntarily disclosed $300,000 life savings in an offshore bank with taxes and penalties amounting to $150 – but the American citizen had to shell out $60,000 as penalty for the highest amount in the unreported bank account – something which ordinary Americans who have saved up painstakingly consider abusive and onerous.

Filipino-Americans are now finding out much to their chagrin that maintaining American citizenship is becoming more complicated and expensive. In 2010, more than 1,500 people gave up their US citizenships, and those suspected of doing so for the sole purpose of avoiding taxes are barred from re-entering the US under a little known provision in immigration reform called the “Reed Amendment,” which was enacted in 1996. Not surprisingly, the new taxation program has generated a lot of controversy, not to mention fear, from American expats who have become naturalized citizens in their adopted countries. They resist what they call “double taxation” because they have been paying taxes in their adopted countries and so over the years, have not been filing US federal income tax returns. Even people who were born elsewhere, have never set foot and have never worked anywhere in the US – are considered American citizens simply because one of their parents happens to be a US citizen, and are therefore subject to the tax provisions of the IRS and required to file US taxes and disclosures. The US has income tax treaties with more than 42 countries – and the IRS can ferret out information on US citizens living in those countries and get a list of persons who have not been filing their income tax returns. Tax delinquents who returned to the US after living abroad for so many years found themselves not only swamped by tax assessments and penalties – they also had to pay fees far exceeding the original taxes they owed with their properties seized.

It is said that in this world, only two things are certain: death and taxation. For US citizens, the latter is turning out to be a nightmare. Worse for some people, they feel it is better to die than go to jail for tax evasion.

Jockeying for the CJ position

With the recent “disclosure” that President Noynoy Aquino is scouting around for the possible replacement of embattled Supreme Court Chief Justice Renato Corona, the jockeying for the CJ position has gone into high gear. One of the names that has been cropping up (and getting a special endorsement from a businessman known to be close to P-Noy) as potential CJ material is DOJ Secretary Leila de Lima.

However, some insiders especially those coming from the Balay group of DOTC Secretary Mar Roxas, say that the most logical choice would be Associate Justice Antonio Carpio, who is the most senior among the present crop of Supreme Court associate justices and was in fact a rival of Corona for the CJ position. And in what could only be termed as an ironic twist of fate, it is Carpio who will reportedly handle the case questioning the constitutionality of the impeachment of Corona. The issuance of a temporary restraining order meant to stop the Senate from proceeding with the impeachment trial has been set for deliberation on January 17.

Ongpin’s Christmas gift

Close friends of former Trade Minister Roberto “Bobby” Ongpin say he certainly got a very welcome Christmas gift in the form of the final approval of his acquisition of the Philippine Bank of Communications. Two days before Christmas, the three regulatory agencies – the Monetary Board of the Bangko Sentral, the Philippine Deposit and Insurance Corp., and the Securities and Exchange Commission gave their imprimatur on the Ongpin Group’s 97 percent takeover of PBCom.

His associates claim that this approval should douse accusations about his controversial loans from a government bank, and that Ongpin is in fact a legitimate businessman contrary to what some people are trying to portray him to be. The former Trade Minister is expected to be back in Manila on Monday in time to attend a new round of Senate hearings on his controversial loans.

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