Senate Bill 1813 Passport Confiscation and “Stop Taxhaven Abuse”

About Senate Bill 1813 (passport confiscation), I’m not sure if anybody brought this up before on Isaac:

Perhaps most important, though, is Title II of the bill – “Stop Taxhaven  Abuse.”

Long story short, if the U.S. government decides in its sole discretion that  a foreign jurisdiction is impeding tax enforcement, Uncle Sam can shut them out  of the U.S. financial system, no questions asked.

It’s just another measure to turn foreign banks into unpaid spies of the  federal government … and limit financial freedom for U.S. citizens.

This is a bully move, plain and simple. Most of the global financial system  depends on U.S. banks for correspondent accounts. When you wire money from  Cambodia to Brazil, for example, the funds pass through New York.


  1. If the rest of the countries of the world allow the U.S. to get away with this then they only have themselves to blame. There is no way that a work around solution can’t be developed if there is the will. New York is not the only major financial center in the world.

  2. The US government is like the proverbial elephant in the china shop, blindly ambling around and breaking everything.


27 thoughts on “Senate Bill 1813 Passport Confiscation and “Stop Taxhaven Abuse”

  1. The US is playing a dangerous shell game with the world. With it’s declining % of world GDP, the rest of the world will not sit idlly by and allow the US to rule the roost.

    If the US is deemed as “unreliable” other countries will begin to bypass the US financially, and there’s little the US can do about it. Abusing its position of power will work in the short-run, but in the long-term the Americans will be the losers.

  2. @ John, exactly right. If I were to say to folks in the US, look, I’m not spending $10K per annum on your economy because I vacation in Grand Cayman and Aruba, instead of Hawaii, Florida and Texas; I haven’t gone to my annual professional conference since 2009; I don’t really visit my family except for emergency–their response is: Don’t let the door hit you in the ass on the way out. I get called names like coward and dumb ass. But multiply my response to this situation by 1 million (the number of expats in Canada alone), and that 100 billion dollars lost to the US economy. That’s just the expats in the United States. But listen, my father in-law says he’s not going to the states any more either, because of what’s happening to me. So these kinds of chilling measures have multiplier effect on the economy, because millions of people react to new measures in ways that are completely unexpected. The more you try to control people, the less control you can actual have, unless you start brutalizing them. Then all freedom will be lost and the US will become a third world tinpot dictatorship.

    I think that the problem is that the politicians in the United States have never read anything on economics. They should read Economics in one lesson, by Henry Hazlett, and they would see that you can’t measure the invisible effects that stupid government policies can have on an economy.

  3. @Jeff This is the first I’ve heard of this. I’d actually like to see them try this with Canada. Ha! How many days before the price of gasoline goes up to $500 dollars a gallon and they come whining back to us saying, “Oh please, sell us your oil.” But actually that would never happen. the more likely scenario is that they would just annex all of Canada, and say it was because we were gouging them at the gas pump.

  4. In my ignorance I am trying to figure out how reciprocity will work…can you imagine USA banks having to send reports to the countries of origin of all greencarders in America? But probrably these countries would not be interested on this because they don´t tax their citizens living and working abroad….

  5. The “Stop Tax Havens Abuse” (Section 100201 of MAP-21) is the legislative baby of Sen. Carl Levin (D. Mich.). His original draft legislation by that name was introduced in 2009 and was much more aggressive than this comparatively mild iteration.

    His original bill was aimed at the US tax code (Title 26 United States Code) and contained a list of countries that would be statutorily decreed to be what the bill defined as “offshore secrecy jurisdictions”. It did everything except authorize the 82d Airborne to take these countries “out”.

    Sen. Carl was said to have been dissuaded from pursuing his original bill in favor of allowing Charlie Rangel’s FATCAT bill (Yes, the original FATCA had a ‘T’ on the end for 2009.) Charlie was then the Chairman of the House Ways and Means Committee.

    FATCAT, as we all know, took the tactic of end-running governments by going after banks and the big money they represent. The theory being that if you have ’em by the banks their hearts, minds – and governments will follow.

    As we can now see, Charlie Rangel’s approach is proving prophetic. At least 5 European governments are already lined up to play ball and Israel (and, according to rumor control: China) also making noises in that direction.

    Unlike Sen. Levin’s original “Stop Tax Havens Abuse” bill, the latest iteration has abandoned the anti-country approach and instead also takes the approach of threatening to kick the opponent in their banks – where it really hurts. His draft law also uses Title 31 of the USC (where the FBAR regulations are located) rather than the income tax title.

    The greatest threat to the effectiveness of both Charlie’s FATCAT and Carl’s STHA is the very real possibility that they will trigger a reaction that attempts nothing less than the establishment of an alternative world financial system parallel to that based on the Tokyo-NY-London-Frankfurt axis.

    Johannesburg, Dubai, Mumbai, Jakarta, Singapore, Sao Paolo, Shanghai suggest themselves.

    One highly-regulated, highly taxed, safe but stagnant and the other looser, lightly taxed, risky but freewheeling and dynamic.

    We shall see.

    The prob

  6. @all- the real funny thing about this is that as far as I have been able to find out there is no “official” definition of what a tax haven is. I know that the term is used all the time but even the experts, when they are confronted on this, admit that there is no such legal definition.
    So my question is; how can you take legal action when the act that you are penalizing has no legal definition? This leaves the U.S. free to engage in its own arbitrary and damaging kangaroo court.
    It is amazing that a government that is staffed by such a seemingly august collection of people can be so ignorant?

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  9. @todundsteuer so is this “Stop Tax Havens Abuse” part of the current highway bill just another rendition of what Levin wanted to do with “CUT” as discussed on IBS a few months ago? It certainly reminds me of the same.

    Congress should be forced to propose bills about one topic at a time. I want a constitutional amendment to such effect. We should not accept irrelevant riders that force measures which mislead about the purpose and effect of a given bill. Example: “HIRE” contained “FATCA”. Throwing unrelated stuff into bills is just a way for the wankers in congress who cannot get past their bipartisan politics to force measures upon some of their colleagues that would not otherwise have voted in such a traitorous way. What a misdemocracy such parliamentary procedure forces!

  10. John Boehner said it’s hard to get a bill passed without offering goodies to people in Congress. In other words the United States’ version of democracy can only function when politicians are offered bribes.

  11. @omghesstillanamerican- You are correct. It is funny that the U.S. has an anti bribery law for corporations that do business outside of the States but harness the power of bribery as the way of getting things done in the legislatures at both the State and Federal level.
    Over the years there have been many attempts to get bill stuffing stopped but it hasn’t worked. I believe though that the office of the President did win the right to exercise a line item veto. In the old days he had to sign all of the law or none at all.
    Bill stuffing is a terrible practise but its supporters say that without it the passage of any bill would take extremely long or may be totally impossible.
    It is a sickening process that benefits weak and poorly conceived bills.

  12. @ Petros who wrote: “The more you try to control people, the less control you can actual have, unless you start brutalizing them.”

    That reminds me of Aesop’s fable about the Sun and the Wind and the traveller’s cloak.

    “The Wind and the Sun were disputing which was the stronger. Suddenly they saw a traveller coming down the road, and the Sun said: “I see a way to decide our dispute. Whichever of us can cause that traveller to take off his cloak shall be regarded as the stronger. You begin.” So the Sun retired behind a cloud, and the Wind began to blow as hard as it could upon the traveller. But the harder he blew the more closely did the traveller wrap his cloak round him, till at last the Wind had to give up in despair. Then the Sun came out and shone in all his glory upon the traveller, who soon found it too hot to walk with his cloak on.
    MORAL of the STORY: Kindness effects more than severity.”

  13. @recalcitrantexpat
    Re: April 20, 2012 at 10:15 am “the real funny thing about this is that as far as I have been able to find out there is no “official” definition of what a tax haven is.”

    There is this OECD definition,3343,en_2649_33745_30575447_1_1_1_1,00.html

    “Four key factors are used to determine whether a jurisdiction is a tax haven. The first is that the jurisdiction imposes no or only nominal taxes. The no or nominal tax criterion is not sufficient, by itself, to result in characterisation as a tax haven. The OECD recognises that every jurisdiction has a right to determine whether to impose direct taxes and, if so, to determine the appropriate tax rate. An analysis of the other key factors is needed for a jurisdiction to be considered a tax haven. The three other factors to be considered are:

    Whether there is a lack of transparency
    Whether there are laws or administrative practices that prevent the effective exchange of information for tax purposes with other governments on taxpayers benefiting from the no or nominal taxation.
    Whether there is an absence of a requirement that the activity be substantial………”

    As you will see, Canada does not meet the first and foremost criteria: “The first is that the jurisdiction imposes no or only nominal taxes. ”

    Which the US knows very well. So it just tosses around the term ‘tax haven’ disingenuously, just like the equation of ‘taxpayer abroad’ = ‘tax cheat/evader’ as part of the strategy never to actually use robust facts or criteria – because that would just get in the way of their rationalizing. Similar to the multiple references to the lack of good robust data to quantify the so-called ‘tax gap’ – much less root it in any reliable data to identify the cause as being us ‘abroad’. This appears in several GAO reports – and does not perturb Congress or the IRS one whit. Shulman has even said in some of his speeches, that although he doesn’t have numbers to prove it, he won’t let that get in the way of his singleminded ‘myopic’ pursuit and enforcement efforts re US citizen/’persons’ ‘abroad’.

    Commissioner Shulman certainly knows how to stay on message –
    Why let mere facts get in the way of the story you’re selling?

  14. @badger- thank you for that information. What constantly perplexes me is that in the interviews that I have seen and where this issue of tax haven has been raised is that people like Geithner will be quick to point out that there is no definition of what a tax haven is. And he isn’t the only U.S. government official to say this.
    I can understand the Finance Minster’s anger about FATCA. FATCA is another case of the U.S. changing the rules in midstream and essentially breaking all previously signed international agreements.
    I don’t understand why Canada and other OECD nations don’t take the U.S. to the International Court, I don’t believe that the U.S. acknowledges the Court’s authority, or accuse it of violating trade agreements. Any restrictions that are placed on capital flows are going to in the end hamper trade.
    Just when it comes to financial services alone the U.S. has basically made it so that Americans can buy financial services only from either only U.S. financial institutions or U.S. based operations of foreign financial institutions. Telling people where they can buy a service is a form of trade restriction. It would be like the U.S. saying that all call centers that serve American customers must be located in America.
    Just as a side note I should say that the U.S. has many of the characteristics of a tax haven.

  15. @recalcitrantexpat;
    There is also this reference to a GAO report (but as it is in a Wikipedia entry, it isn’t definitive).

    “In its December 2008 report on the use of tax havens by American corporations,[5] the U.S. Government Accountability Office was unable to find a satisfactory definition of a tax haven but regarded the following characteristics as indicative of a tax haven:

    nil or nominal taxes;
    lack of effective exchange of tax information with foreign tax authorities;
    lack of transparency in the operation of legislative, legal or administrative provisions;
    no requirement for a substantive local presence; and
    self-promotion as an offshore financial center.”
    The citation given for the GAO report is:
    ^”International Taxation: Large U.S. Corporations and Federal Contractors with Subsidiaries in Jurisdictions Listed as Tax Havens or Financial Privacy Jurisdictions GAO:GAO-09-157″. Government Accountability Office. December 18, 2008. Retrieved 2009-01-21.

    I haven’t read the full GAO report above yet. I note however, that they did use the OECD definition I mentioned previously as one source. Here is the first entry I came to on the ‘highlights’ page, that touches upon the basis for a definition:

    “There is no agreed-upon definition of a tax haven or agreed-upon list of jurisdictions that should be considered tax havens. However, various governmental, international, and academic sources used similar characteristics to define and identify tax havens. Some of the characteristics included no or nominal taxes; a lack of effective exchange of information with foreign tax authorities; and a lack of transparency in legislative, legal, or administrative provisions. A few sources used terms such as offshore financial centers or financial privacy jurisdictions to refer to jurisdictions with similar characteristics. Based on a review of a variety of sources, GAO identified three lists of tax havens or financial privacy jurisdictions. The three sources GAO used are (1) the Organization for Economic Co-operation and Development, (2) a National Bureau of Economic Research working paper, and (3) a U.S. District Court order granting leave for the Internal Revenue Service to serve a “John Doe” summons. GAO combined the three lists into one for the purposes of this report. GAO did not develop its own definition of tax haven or its own list of jurisdictions. In commenting on a draft of this report, the Department of the Treasury expressed concerns about GAO using a list of tax havens or financial privacy jurisdictions because there is no agreed-upon definition of tax havens or list of jurisdictions. However, GAO noted that there is no agreed-upon definition or list and also noted that the jurisdictions on the three lists used have similar characteristics. Further, background for one list said that industry analysts recognize them as offshore tax haven or financial privacy jurisdictions and that they are promoted as such”

  16. @badger- unfortunately for us, because there is no official definition, Mr. Geithner has said no country shall be exempt. Basically the U.S. has torn up the automatic exchange agreement between it and Canada. And al because of citizenship based taxation and the U.S. interpretation of the FBAR reporting law.
    Unfortunately horizontal equity means that none of us can ever leave home.
    The lack of a legally acceptable definition is just a ruse that is used to serve the purposes of giving a self righteous legitimacy to heavy handed U.S. stalking of its citizens abroad and of immigrants at home..

  17. Here’s a good condemnation of the passport clause – with explanations why it is so very wrong: Click here to find out more!
    Kelly Phillips Erb
    4/23/2012 @ 8:35AM |1,072 views
    “Mammoth Bill Makes IRS Play Border Control”
    an excerpt;
    “Since there’s no actual authority for information sharing (remember how worried Congress was about doing that?), the bill would authorize the IRS to share taxpayer identity information with the Department of State “to the extent necessary.” Cause there are no privacy concerns there, right?

    So let me summarize for you: if the IRS liens or levies you, the Department of State can choose to restrict your right to travel without a judicial hearing. To be clear, these aren’t cases of U.S. citizens who have been found to have committed a crime or have been proven to owe taxes. There’s no day in court. There’s no opportunity to argue a case or prove that there has been a mistake. In other words, it gives the IRS the authority to determine your future travel plans. No due process for you.

    Ah, that pesky due process. Generally, the taking or denial of a passport is a judicial matter when there is a risk of a person trying to flee the country. Not so here.”

  18. Interesting info I found from Passport Canada. If you are a Canadian Permanent Resident and your country of nationality refuses to issue you a passport for any reason you can apply for a Canadian travel document from Passport Canada as long as you commit to becoming a Canadian citizen.. Additionally stateless persons are also entitled to travel documents too. At least for purposes of Canadian laws permanent residents are not really considered stateless people technically as it is assumed they have an eventual path to Canadian citizenship. While I don’t recommend it at this point I think there is quite possibly a case for US Person Canadian Permanent Resident to renounce and become technically “stateless” in certain circumstances.

    From Passport Canada
    Certificates of identity are issued to permanent residents of Canada who are not yet Canadian citizens, and who, although not considered to have refugee status in Canada, are otherwise stateless or unable, for a valid reason, to obtain a national passport or travel document from any source.

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