Dollar bills 370.
(photo credit:Steve Marcus / Reuters)
Strange things are happening to Americans abroad and not just in Israel,
although here the problem may be magnified owing to the existence of a
proportionately large and veteran community of American olim, or expats as they
are known in other countries.
Ever since Uncle Sam began going after
money-launderers and financers of international terrorism, the lives of millions
of Americans overseas have been made increasingly difficult.
fiscal woes have further encouraged official money-grab schemes and the populist
hunt for tax cheats. Cheats indeed exist, but it is ordinary normative folks who
are caught in the net. This is somewhat akin to the more-often-than-not
ludicrous scrutiny Transportation Security Administration crews deal out at US
airports to elderly nuns or wheelchair-bound travelers rather than to more
The mark is missed when a net is cast too wide and
unwisely harasses sardines rather than apprehending the sharks.
seemingly minor example of this is the inability of late to quickly cash
American checks in Israel. This had been a speedy process at most money-change
Yet the arrangement – which typically served retirees not savvy
in hi-tech, students etc. – is no longer viable because American regulators have
cracked down on a small credit union that handled most of these small, innocuous
It is not this particular credit union that draws interest
but the suspicion that what should have been an insignificant event is but one
detail in the bigger Foreign Account Tax Compliance Act
Beginning in July 2014, FATCA will oblige non-US banks to
disclose the accounts of American clients and in essence behave as American
banks do vis-à-vis the US Internal Revenue Service. Despite the bureaucratic
headaches involved, failure to comply would deprive local banks of any ability
to do business in dollars. This sword hanging over them is coercive to say the
America is the only country – save for totalitarian Eritrea – that
considers its citizens taxable worldwide even when they have been residing
abroad for decades.
This legal oddity dates to the American Civil War but
had never been implemented in earnest until the Obama administration resolved to
go after so-called fat-cats (whom the FATCA acronym calls to mind).
not only obliges nominal Americans, entirely outside the US system, (including
mere Green Card permanent residency holders or “accidental Americans” born on US
soil during their parents’ sabbatical there) to report from here (with the
exceedingly expensive assistance of professional accountants and lawyers). They
might also face hefty fines and legal travails for failure to have done so in
It may well be that the regulators’ overzealousness to make
sure that no minor credit union exceeds its authority is part and parcel of
Washington’s frenetic and populist hunt after tax-cheats and money-launderers.
The upshot is that rather than focus on true fat-cats with elaborate shell
corporation constructs, it is the lives of ma and pa pensioners that will be
disrupted with all the misguided keenness with which TSA officials focus on
little old ladies.
There are no official statistics regarding how many
Americans reside in Israel. Conservative estimates cite 250,000, and that might
not include Green Card holders and assorted categories of dual
For a country with a total population of 8 million, that is a
proportionally huge American population, many of whom have scant ties left with
the US. Taxing them amounts to taxation without representation. Moreover, they
are theoretically liable for tax on what is untaxed in Israel – such as
inheritance, gifts and small rental incomes.
The trouble is that no
government – Israel’s especially – and certainly no financial institution
relishes taking on the US on behalf of a population of expats or of “accidental
Americans.” This leaves these Americans effectively without representation both
here and in the US, where hardly any politician has incentive to wage a battle
with unpopular overtones against the backdrop of populist
Some local banks will not open accounts for Americans and we
fear that the latest check-cashing difficulties are not unrelated. It’s
difficult being an American abroad.
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