Chuckle, Chuckle, Look Who’s Caught with His Hand in a Foreign Bank Account!
Every morning once the alarm has shaken all senses, I reach for the remote control that lays dormant in the same bed to turn on France 24, the national news channel — which broadcasts in French, English and Arabic — to see what’s up in the world. Shamefully, I admit that it’s a main source of news as I’ve never been one to get my fingers dirty on newspaper print and don’t have enough time or brain power to absorb it all, anyway.
France 24 is the French perspective on life which is preferable over CNN’s sensationalist and ‘quite’ American take on how the world shapes up. It’s true that watching it in English is lazy to a student of French, but there you have it — the lazy side of an otherwise industrious human being.
This morning the news was worth a chuckle. One of France’s ministers — French Budget Minister Jérôme Cahuzac — resigned once an investigation began into a secret bank account he held in Switzerland with allegations of tax fraud. Of course, President Francois Hollande is a bit embarrassed — as he should be considering this is the man responsible for balancing the country’s budget and who, according to France 24, “rose to prominence as the Socialist Party’s toughest budget-watcher, has led efforts to crack down on tax evasion and fraud by French citizens seeking to avoid high levies at home.” — !!!
Personally, I think Hollande ought to look deep into his soul to understand why if someone with such a serious responsibility to the French people should feel the need to be so selfish as to endanger his own credibility much less the people he serves. This is where human nature kicks in (greed, is it?) — something the Socialist Party doesn’t seem to usually consider (my opinion).
Everyone in business in France knows that if you don’t ‘cheat’ on your taxes, you can’t survive. Taxation is so stifling that entrepreneurs find it difficult to have enough profits to reinvest in their own growth or be rewarded enough, not only for their hard work and creativity, but the risks they take as self-employed. It’s worsening under the Hollande administration — as he tries to tighten the reigns, lower the deficit, raise the taxes while removing the incentives for growth. Of course, this is my point of view from an American, Capitalist, free enterprise indoctrination that is tough to shake, even if being a left-leaner U.S. style.
I see the businesses that prosper in France are those that take in a certain amount of cash — the kind the owners can put in a safe or under a mattress, carry across a border and plunk into an investment in another country or in a secret bank account. Those businesses that open and close in a flash (we watch them come and go in the blink of an eye) are the ones where the owners haven’t been quite so clever…or so dishonest.
Many must feel they have no choice. It’s either play the game using “Système D” or play by the rules and lose. “System D is a shorthand term that refers to a manner of responding to challenges that requires one to have the ability to think fast, to adapt, and to improvise when getting a job done. The letter D refers back to either of the French nouns ‘débrouillardise’ or ‘démerde’ (French slang). The verbs ‘se débrouiller’ and ‘se démerder’ mean to make do, to manage, especially in an adverse situation. In recent literature on the informal economy, System D has become a shorthand name for the growing share of the world’s economy which makes up the underground economy, which as of 2011 has a projected GDP of $10T. (Wikipedia.org)
Meanwhile, as you know, the U.S. government is working hard to ‘crack down’ on tax evasion, too, evidenced by the new Foreign Account Tax Compliance Act (FATCA), Subtitle A of Title V of the Hiring Incentives to Restore Employment Act (HIRE), of the Internal Revenue Code. Believe it or not, the U.S. government now requires foreign banks and financial entities to disclose the balances, receipts, and withdrawals of any American account holders to the IRS, or be subject to a 30% withholding tax on income from those U.S. financial assets held by the banks or financial entities.
This shocks me — that the U.S. thinks it can actually legislate over foreign banks or other foreign financial institutions! And you know what’s happening? Those foreign financial institutions don’t want to take on the burden or expense of managing American customers and are simply blackballing us from doing business with them. Some of our French lenders have done just that — we’re becoming Pariahs on the international financial scene.
Do the politicians realize how that will affect our ability to do business on an international basis? Or how more insular the nation is to become as a result of these ‘straight jacket’ tactics? It frightens me to think that the U.S. will become an even bigger ogre on an island that the world wishes to destroy.
Yesterday I emailed off a slew of documents to my U.S. CPAs for the 2012 tax return. The same was done on the French side. On the U.S. side, every bank account held outside the U.S. must be reported, and not just those that hold more than $10,000, but one must report the largest amount in these accounts at any one time! This in itself is no easy task when an account is active, such as an ongoing business account. It takes downloading every transaction to an Excel spreadsheet and creating daily balances to accomplish such a task.
Yes, I report and pay taxes on both sides, but fortunately because of the France-U.S. tax treaty, tax is only paid once on the same income. The trick to paying minimum tax is part of Système D — learning how one can best take advantage of the regulations on both sides. It’s an art form, and only the CPAs that know both tax codes know how to do it…or individuals who are aces at Système D!
Americans living in France need to know that they should consult with professionals who know both sides of the coin to AVOID rather than EVADE tax. And Americans living everywhere should be questioning how our U.S. government can have the right to impose their own regulations (FATCA) on other governments! Can someone explain how the U.S. can get away with these imperialistic tactics?
Meanwhile, it’s evident by this morning’s news implicating the French Budget Minister that we’re all trying to figure out how to keep a little more for ourselves…individuals and governments and even the so-called Socialists!
A la prochaine…
Editor, Parler Paris & Director of The Adrian Leeds Group, LLC
(Photo by Tom Reeves)
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