Mr. Obama has proposed a massive revision to the U.S. tax law’s treatment of international transactions. Don’t worry about the details for now. You don’t need to know them to start to understand what is happening. You just have to look at the likely effects that common sense can predict.
British bankers announce they are likely to refuse to take on new U.S. customers if the U.S. changes its laws. Simply put, Mr. Obama’s proposed new tax laws attempt to make British banks responsible for enforcing U.S. tax law. The British bankers don’t want to do the IRS’s work at their expense.
That’s pretty much common sense. Why pay for someone else’s problem if you don’t have to? U.S. banks don’t have the luxury of telling Uncle Sam to go fly a kit. Uncle Sam can revoke the banking license that causes the bank to exist in the first place. So they have to suck it up, hire more people, and do the Federal government’s job. In the Federal/State context, they call this an unfunded mandate: Congress tells the States they have to do something but don’t give them the money to do it.
Same idea here. Except the British (and other foreign) banks can declare that they won’t play the game. And they do that by not doing business with the United States and U.S. persons. (I’ve already had Swiss banks flatly refuse to do business with my clients.)
U.S. international tax policies are slowly but surely building a barrier between the United States and the rest of the world.