May 7, 2013
by James Jatras
Treasury Department’s Promises of U.S. FATCA IGA ‘Reciprocity’ Dead
In a major game-changer, Senator Rand Paul (Republican of Kentucky) today introduced a bill (S.887) to repeal mandates of the “Foreign Account Tax Compliance Act” (FATCA) on financial institutions and individual American citizens as a “violation of sovereign nations’ laws and privacy matters.” In a letter to his Senate colleagues, Dr. Paul pulled no punches about the destructive effects of the FATCA law and the unsupportable claims that FATCA is a legitimate tool to combat tax evasion:
“I intend to offer a bill to repeal certain provisions of the Foreign Account Tax Compliance Act, or FATCA (P.L. 111-147). The intent of this law was to prevent tax evasion by increasing access to overseas bank accounts held by U.S. citizens. However, any law enforcement benefits have been vastly outweighed by the deleterious effects of FATCA on economic growth and the financial privacy of Americans.
“FATCA requires the financial institutions of foreign countries to register directly with the IRS, and to provide financial information on the accounts of U.S. citizens – regardless of whether or not these U.S. citizens are suspected of tax evasion. A failure to comply with these requirements subjects that foreign financial institution (FFI) to a 30% withholding of U.S.-derived revenues. This has had the practical effect of forcing FFIs to relinquish any association with American customers, and to avoid direct investment in the United States. It goes without saying that overseas investment in the U.S. is an important engine of our economic growth and prosperity. FATCA endangers an estimated $25 trillion in foreign capital currently invested in the U.S.
“Perhaps even more troubling, the implementation of FATCA has allowed the Treasury Department to make independent decisions with respect to the sovereignty of foreign nations and the privacy of United States citizens. In order to implement this law, Treasury has initiated intergovernmental agreements (IGAs), citing the intent to engage in reciprocal information sharing with other nations. The Treasury Department, without the consent and authority of Congress, will force U.S. financial institutions to provide the bank account information of private customers to foreign nations. Such a requirement not only diminishes U.S. privacy protections, but also imposes billions of dollars in compliance costs here at home, which will be passed onto customers and the American public.
“My bill is drafted with the intention of removing only FATCA provisions that undermine Americans’ constitutional privacy protections and add burdensome regulations with a negative economic impact on the United States. Other provisions enacted at the same time, such as those pertaining to clarification of foreign trusts and treatment of dividends that do not have those negative impacts, have been left alone. The intent of this bill is not to disrupt legitimate tax enforcement, only to repeal counterproductive and constitutionally suspect mandates.”
Senator Paul’s bold and principled action comes on the heels of a federal lawsuit against the U.S. Treasury Department and the Internal Revenue Service by the Texas Bankers Association and Florida Bankers Association. In that suit, the bankers assert they will lose billions of dollars in business over improperly imposed regulations to report on foreign residents’ deposits to foreign governments. Such reporting, a key feature in the so-called “reciprocal” version of FATCA “intergovernmental agreements” (IGAs) non-U.S. governments are being pressured to sign, is just the camel’s nose under the tent of far more invasive and expensive reporting, for which the Treasury Department recently requested additional authority from Congress.
It is anticipated that a companion version of Senator Paul’s bill will be introduced shortly in the House of Representatives. In addition, measures to block the Treasury Department from carrying out the IGAs, which have not been authorized by Congress, are expected.
With the wind in Washington blowing against FATCA, foreign governments are on notice that Treasury’s promises of “reciprocity” are plain rubbish. Congress will not provide the needed authority to rescue this fatally flawed law. Instead of getting aboard the sinking FATCA ship, foreign governments should reject the constitutionally deficient IGAs Treasury has offered them, tell the U.S. they will not comply with FATCA or allow their domestic firms to comply with it, and signal their willingness to fight any illegal sanctions Treasury attempts to impose.
Activists in Washington are weighing in in support of Senator Paul:
“Senator Paul’s bold stand against FATCA has come at an opportune time. The world is fed up with U.S. fiscal imperialism, and the economy can ill afford another pointless and self-inflicted wound, as FATCA is the worst economic idea to come out of Congress since Smoot-Hawley. Rather than allow regulators to continue pursuing an unconstitutional ‘intergovernmental agreement’ strategy, it is time for lawmakers to accept defeat and abolish this fatally flawed law. Now would also be a good time for any foreign governments thinking about getting in bed with the US Treasury Department to think again. Their promises for reciprocation are simply worthless.” – Andrew Quinlan, Center for Freedom and Prosperity.
“The U.S. federal income tax system already imposes 6.7 billion hours of paperwork on individuals and businesses; FATCA would not only worsen this burden here at home, it would also impose onerous new liabilities abroad. The last thing America should be exporting is its complex tax laws. Senator Paul deserves a round of applause from taxpayers in our nation and around the world for recognizing the dangers FATCA poses to our economy and our civil liberties.” – Pete Sepp, National Taxpayers Union.
It is increasingly clear to everyone that FATCA has almost nothing to do with curbing actual “tax evasion” and everything to do with massive unintended consequences that will lose money for the federal treasury.
Finally, both American and non-U.S. firms that stand to lose millions of dollars each complying with FATCA need to help push the repeal bill through. FATCA repeal needs to be part of any tax reform deal between Congress and the Obama Administration.
You can help – contact us at RepealFATCA.com and find out how!
Vote your Support for S. 887 and email to your legislators all at the same time at PopVox
James George Jatras
Thanks Just Me.
Here it is in Canada:
More on blow-back of reciprocity to the USA in another Rand Paul article in International Advisor…
US senator introduces bill to repeal FATCA provisions
Your moment of Zen…
It’s no wonder that Rand Paul is choked about FATCA being a fishing expedition. Look at what course the IRS normally would to take with taxpayers suspected of “non-filing”:
New editorial by Rand Paul… at Investors.com
Limiting Foreign Access To Your Bank Accounts
Earlier this week, I introduced a bill that would reform the Foreign Account Tax Compliance Act (Fatca).
Originally tacked on as the “pay-for” to a 2010 bill to incentivize hiring, Fatca was intended to crack down on overseas tax evasion.
That’s not been the reality, however.
Instead, the Treasury Department has chosen to manipulate Fatca to establish an international financial snooping scheme that violates the Constitution, disregards the mutual respect of sovereignty among nations, increases the national debt, and threatens America’s economic competitiveness.
Fatca, with little fanfare, made sweeping changes to privacy laws.
Read More At Investor’s Business Daily: http://news.investors.com/ibd-editorials-perspective/051613-656356-limit-foreign-access-to-your-bank-accounts.htm#ixzz2TbeLXZPh
Follow us: @IBDinvestors on Twitter | InvestorsBusinessDaily on Facebook
FATCAnatics propose to cut us loose:
FATCA: Toward a Multilateral Automatic Information Reporting Regime
This Note will argue that international cooperation is essential for successful FATCA implementation. Part II will provide background information on offshore tax evasion and existing U.S. mechanisms for international tax enforcement. Part III will explain key FATCA provisions, and Part IV will discuss concerns regarding FATCA as originally enacted. Finally, Part V will introduce the proposed intergovernmental approach to FATCA and argue that international cooperation and development of standardized requirements will mitigate FATCA concerns and facilitate its implementation. Part V also argues that abandonment of the U.S. policy of citizenship-based taxation is necessary to achieve an efficient multilateral FATCA regime.
@Johnson, the following part of the report is nonsense:
“Thus, renunciation only serves as a way for individuals to avoid U.S. reporting requirements and related penalties after the date of renunciation.”
It incorrectly assumes that everyone who renounces has “annual income of approximately $150,000 or a net worth of at least $2 million”
@Johnson – Excellent find!
@Admins – Might this be worthy of a post of its own?
Indeed, a false assumption. To make matters worse, if I remember correctly, that particular criterium for covered expats is not $150K annual income, but rather $150K annual tax liability. Still, I think the report is overall quite good, especially since it brings many of the severe problems associated with FATCA to light.
Joanna is hardly a FATCAnatic, but it would have been good if she was…
Student at Washington & Lee University School of Law Lexington, Virginia
Do you know the date this was written and what the distribution was? She has a lot of good foot note references..
Senator Paul comments on IRS scandal, the person responsible for targeting conservative non-profits
has been promoted to enforce compliance with the health care tax.
deemed as “enemies of the state” expats are likely for increased scrutiny
PAUL: A staggering abuse of power
Obama acts as though we no longer have a Constitution
Read more: http://www.washingtontimes.com/news/2013/may/16/a-staggering-abuse-of-power/#ixzz2TkRJD0xT
Follow us: @washtimes on Twitter
@Just Me, I had a glance at the comments in the washingtimes article and, well, I don’t like it. I get the impression that most commenting are trying to invent some stupid reason to condemn an American.
I posted this primarily for a couple comments, which I think are true…
Lincoln wrote that nearly any man can stand adversity, but if you want to test a man, give him power.
Power corrupts. Absolutely.
Now, as for comments, I am still debating whether or not to throw something into the mix. A comment about the abuse of power by the IRS related to FATCA IGAs and FBAR/OVDP penalty administration would get attention, I think. Comments are pretty much what I expected would be an avalanche of from the right to which the editorial resonates.
Now, Republicans should have been asking these questions about power abuse when ‘W’ was leading our nation in decline, but never mind.
I am all for anyone willing to fight the Executive Branch and the power grab that has gone unchecked. Something is very wrong when 66% of the US population lives in a Constitution free zone and when the Executive Branch can single handedly suspend due process because some junior Justice Department lawyer writes a memo saying they can.
Rand Paul on cover of TIME magazine issue: “100 Most Influential People in the World”
Rand Paul hits another one out of the park! I know a lot of self identified progressives don’t like the messenger, but what do you do when he is absolutely right?
Great CBC story today about Eritrea’s ongoing shakedown of its overseas citizens … sounds familiar …
I copied that link back to a couple threads we have on the Eritrea story.
America wakes up to FATCA
US institutions and individuals are becoming increasingly aware of the existence of the Foreign Account Tax Compliance Act, which received little media coverage in the States until a US senator earlier this month introduced a bill to repeal certain of the act’s provisions, arguing that they infringed “upon basic constitutional rights”.
Meanwhile, a petition has appeared on the website of MoveOn.org, a liberal/progressive public policy advocacy group which has had a history of championing Democratic candidates and liberal causes, calling for FATCA’s repeal. The petition aims to collect 2,000 signatures (it has 1,950), and will be sent to the US House of Representatives and President Obama.
Here is the petition…
I came across this petition a little while ago, and apparently missed it here on Brock when it was brought to everyone’s attention the first time. I’ve had a few email exchanges with its creator, Rami Schandall, who told me that every time the number of signatures reaches the goal, he increases it. He didn’t answer me when I asked him if he was intending to get a data base of emails for the required 100K in 30 days it takes to get a response from the President via the “We the People” petition program. His petition has been sitting just under 2K for weeks now. Maybe with the growing awareness of FATCA, there may be a surge. It will be an interesting gauge in that regard, won’t it?
The significant thing to me, is that this petition sits on a Progressive Left leaning web site, and that is very good ammunition to use for those on the left that want to attack Rand Paul’s Appeal FATCA effort. You can point to this, and say, see there is a common ground that we can unite on. Even though we have differences we can join together to oppose this on civil liberties grounds.
Got it, and it will be interesting to see how many jump on the bandwagon, and how quickly.