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Thread: It's Official - America Now Enforces Capital Controls

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  1. #1
    Join Date
    Mar 2007
    Randolph AFB TX

    Default It's Official - America Now Enforces Capital Controls

    Wow, this is getting REALLY interesting.

    It couldn't have happened to a nicer country. On March 18, with very little pomp and circumstance, president Obama passed the most recent stimulus act, the $17.5 billion Hiring Incentives to Restore Employment Act (H.R. 2487), brilliantly goalseeked by the administration's millionaire cronies to abbreviate as HIRE. As it was merely the latest in an endless stream of acts destined to expand the government payroll to infinity, nobody cared about it, or actually read it. Because if anyone had read it, the act would have been known as the Capital Controls Act, as one of the lesser, but infinitely more important provisions on page 27, known as Offset Provisions - Subtitle A—Foreign Account Tax Compliance, institutes just that. In brief, the Provision requires that foreign banks not only withhold 30% of all outgoing capital flows (likely remitting the collection promptly back to the US Treasury) but also disclose the full details of non-exempt account-holders to the US and the IRS. And should this provision be deemed illegal by a given foreign nation's domestic laws (think Switzerland), well the foreign financial institution is required to close the account. It's the law. If you thought you could move your capital to the non-sequestration safety of non-US financial institutions, sorry you lose - the law now says so. Capital Controls are now here and are now fully enforced by the law.
    Let's parse through the just passed law, which has been mentioned by exactly zero mainstream media outlets.
    Here is the default new state of capital outflows:
    (a) IN GENERAL.—The Internal Revenue Code of 1986 is amended by inserting after chapter 3 the following new chapter:
    ‘‘Sec. 1471. Withholdable payments to foreign financial institutions.
    ‘‘Sec. 1472. Withholdable payments to other foreign entities.
    ‘‘Sec. 1473. Definitions.
    ‘‘Sec. 1474. Special rules.
    ‘‘(a) IN GENERAL.—In the case of any withholdable payment to a foreign financial institution which does not meet the requirements of subsection (b), the withholding agent with respect to such payment shall deduct and withhold from such payment a tax equal to 30 percent of the amount of such payment."

    This is Jesse's response to the ZH article. He seems to agree with FRED.

    by Jesse
    on Sun, 03/28/2010 - 14:58

    Not to be nitpicky, but these are not "capital controls."
    Capital controls are restrictions on moving currency in and out of a country, in order to help to manage against volatile swings in valuation.
    These are tax controls on foreign held assets, part of the admittedly widening grip of the US on its citizens wealth. It is almost assuredly in anticipation of a 'capital flight' from those who wish to evade taxes as you suggest.
    China has capital controls. One cannot take their currency out of country when you leave. But given the huge amount of eurodollars and their relative free flow, it is a bit misleading to say that 'capital controls' are now in place.
    It sounds nitpicky again, I know. But it is important. Because if the US ever does put in genuine capital controls, you know the dollar is on the precipice.
    As it is this is just the taxman doing his thing, trying to crack the tax shelters, and upsetting some nations that made an industry out of it.
    Last edited by jtabeb; 03-28-10 at 09:23 PM. Reason: ADDED JESSE FOLLOW-UP

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