I agree with others that Jim Jatras’ words in The Hill is important for its own post. Thank you, Mr. Jatras, saying that…
FATCA’s only beneficiaries are the army of lawyers, accountants and software vendors who are making a fortune on it, with the costs passed onto consumers.
I started my journey regarding US tax compliance almost ten years ago. I have paid dearly from my retirement savings and, although compliance has ended for me (but will that ever change?), the absurdity has not ended for my US-deemed Canadian-born son who has a developmental disability and, without requisite mental capacity, who would be trapped into such ongoing, never-ending costs of US tax and reporting compliance. Again, I will say that it is not only for my son that I have come forward in this fight but for that of any person / family with the same entrapment. My son will not be the only one so affected and for them this injustice to continue, year after year, to benefit that described army of lawyers, accountants and software vendors who are making a fortune on it, with the costs passed onto him and others like him.
I chose to go the route of having these professionals help get my family out of this US citizenship-based taxation nightmare, but have found it is impossible. I don’t want any special work-around for my son. I want this to end for all such sons and daughters. Personally, I want the end result to be US residence-based taxation so no *accidental American* faces this injustice. If there is the exceptionality of US CBT rather than RBT of the rest of the world (save Eritrea), then, in my eyes, there should only ever be an OPT-IN to US citizenship if the facts permit, never an OPT-OUT where some, the most vulnerable, are entrapped into, by US tax law, never-ending US tax compliance and reporting.
FATCA needs to go. The unconstitutional IGAs need to go. And the US needs to change to the same and much fairer residence-based taxation as the rest of the world and end the unconstitutional “warrantless seizure of personal financial information without reasonable suspicion or probable cause.”
I continue to be incensed that my chosen country of citizenship, Canada, and the country in which my son was born and raised (and never registered as a US citizen abroad) chose to honour the US in agreement to sign the extra-territorial IGA with the USA. I continue to say that the words of Prime Minister Trudeau that *A Canadian is a Canadian is a Canadian* were political rhetoric, untrue and audacious. It is discriminatory that some Canadians, those with some US connection, however meaningless, do not fit with his faux words. I don’t know what will take away the injustice for many. I continue to feel betrayed by both my chosen country and the country in which my children were born and the country of my birth.
Again, thank you for this article, Mr. Jatras. I have included it all below. (If there is a problem for this site with quoting all of it, I will update to remove part of it. I think it important for all to read the article in its entirety.)
The Hill, Contributer: Jim Jatras, November 16, 2016 — Dumping Obama’s faux foreign tax legislation should be high on Trump’s to-do list
President-elect Donald J. Trump has stated that among his top priorities will be revocation of President Barack Obama’s misguided executive orders. Among the first such items to get the ax should be a series of legally infirm international agreements to implement a monstrosity unfamiliar to most Americans, called the Foreign Account Tax Compliance Act (FATCA).
FATCA, enacted by Democrats in 2010, is an indiscriminate information dragnet requiring — under threat of extraterritorial sanctions — all non-U.S. financial institutions (banks, credit unions, insurance companies, investment and pension funds, etc.) in every country in the world to report data on all specified U.S. accounts to the IRS.
No proof or even suspicion of wrongdoing is required. The 2016 Republican Platform rightly called for FATCA’s repeal as an unconstitutional “warrantless seizure of personal financial information without reasonable suspicion or probable cause.”
FATCA supposedly is aimed at “fat cat” American tax cheats with money stashed abroad but does not include a single provision targeting actual tax evasion.
It has not yielded significant revenue recovery while imposing crushing compliance costs worldwide. FATCA’s only beneficiaries are the army of lawyers, accountants and software vendors who are making a fortune on it, with the costs passed onto consumers. It is a perfect example of the kind of wasteful, indiscriminate and counterproductive regulation Trump has promised to roll back.
Repeal of FATCA is a must-include item in a tax reform package Congress will send to President Trump’s desk in 2017. But while that package takes shape, there is something the incoming administration can do on its own authority as soon as the new president takes office, consistent with Trump’s pledge to reverse his predecessor’s extravagant abuse of his executive authority: He can nullify a series of unconstitutional fake treaties that outgoing Treasury Secretary Jack Lew (and before him, Timothy Geithner) used as a mechanism to implement FATCA.
This requires some short explanation. In addition to its other defects, FATCA is also one of the worst-drafted pieces of legislation this veteran of over 17 years working at the U.S. Senate has ever seen. Evidently no one noticed prior to enactment that the law’s central requirement — that hundreds of thousands of foreign firms outside of U.S. jurisdiction in almost 200 countries turn personal data directly over to the IRS — would be unenforceable under most countries’ privacy laws. Even supporters of FATCA concede it is “wholly unachievable” as written.
Accordingly, after FATCA became law, the Obama Treasury Department figured out that the only way it could work at all would be to pressure foreign governments to enforce it against their own citizens and to abrogate their domestic privacy protection laws to do so.
This was done through a series of bilateral “intergovernmental agreements” for which Treasury has no statutory authority, under either FATCA itself or any other law. While these agreements read like treaties and are duly ratified as such by foreign “partner” governments, they are not submitted to the U.S. Senate for its advice and consent under the U.S. Constitution.
In short, these agreements are purely distilled examples of Obama and his underlings using their respective pens and phones to create the appearance of legality where none exists. Dozens of such agreements have been signed and more are in the works.
But wait, it gets even worse! As a sweetener to induce countries to agree to sacrifice their sovereignty and to place their financial sectors under Internal Revenue Service (IRS) supervision, Treasury offered, also without statutory authority, “reciprocal reporting” from domestic U.S. institutions to foreign governments.
This would hit U.S. banks, credit unions, insurance companies, mutual funds, etc. with costs comparable to those FATCA inflicts abroad, extracting billions of dollars from American consumers and taxpayers and spurring job-killing capital flight from the United States.
Several attempts by the Obama administration to sneak through legislation for FATCA reciprocity have been blocked in Congress. But as long as the law remains on the books and the implementing agreements remain in force, they hang like a sword of Damocles waiting for the next Democratic administration to press forward.
The illegitimate FATCA agreements include a provision for one year’s notice of termination, which Trump’s Treasury secretary can issue upon taking office.
Even better, the Trump White House’s Office of Management and Budget could also immediately issue a determination declaring the agreements null and void on the grounds that the Obama administration had exceeded its legal authority in making the agreements in the first place.
That would effectively gut FATCA and put foreign governments on notice that the U.S. is pulling the plug on it, pending enactment of a tax reform bill that includes final repeal of what I have called “the worst law most Americans have never heard of.”
James George Jatras is a former U.S. diplomat and foreign policy adviser to the Senate GOP leadership. He edits www.RepealFATCA.com and recently published a major study, “How American Media Serves as a Transmission Belt for Wars of Choice.”
EmBee: although anything can happen in 2016 it’s highly unlikely that Clinton becomes president. If she does, she’ll be facing tremendous opposition from Congress.
However, even with the GOP holding Congress and the Presidency, I’m not holding my breath.
FATCA is in keeping with current worldwide efforts against tax evasion, being similar to other efforts in the EU that ask you to report foreign accounts. Also, in the EU I believe accounts belonging to non-residents are automatically reported to the country of residence (i.e. my French account is reported to Belgium, where I live, because the bank sees a Belgian address).
FATCA + CBT is what got us, meaning US citizens abroad, into troublen, by making normal banking impossible (difficult or impossible to open bank accounts, basically impossible to invest in mutual funds, costly compliance even for no tax owed …)
I’m all for the repeal of FATCA, but an acceptable alternative to me would be the simple repeal of CBT and the adoption of RBT. Or, more cumbersome, the non-applicability of FATCA to non-residents.
I wonder if we would have more weight if we lobbied for, or would be happy with, RBT rather than CBT, and leaving FATCA in place.
@EmBee………….it is President elect Trump…there are going to be no recounts. Statistically, if there was a three state recount Clinton would need to win in every recount, not gonna happen…..
@Fred……….I agree with what you are saying BUT…… Unsigning the illegal IGA agreements is SIMPLE, the GOP and Trump are committed to doing that and that will kill FATCA solving many problems.
KISS….keep it simple stupid. I live by it…….
BUT we can not be satisfied with eliminating FATCA because it can come back from the dead when the next Democrat wins election. Thats why CBT needs elimination.
So your strategic thinking is spot on but your tactical thinking is off.
@Fred, other thoughts?
Step one because its a fast easy win is killing the IGAs…….that lets us breath again.
But if FATCA repeal is problematic…..then amend FATCA so it only applies based on residence. I.e…amending FATCA to be in line with CRS. Make it a mirror image.
Other alternative is get the USA to sign the Master Nationality Rule.
Other plan…..get the tax treaties amended to create a tie breaker rule on Citizenship. Remember our problem is that US citizenship trumps in your example EU Citizenship whilst resdent in the EU and that is wrong.
More ideas……the new Sec Treasury under his/her powers in the Bank Secrecy act excludes all countries that have robust AML/KYC from its FIs to be included in FBAR. Plus the FBAR filing amount can be readjusted so its in line with 2017 dollars not 1970 dollars.
There is a whole list of reasonable and proportionate things that can be done.
@ Fred and George
If it’s just a matter of money, the recounts are a done deal. The funding site Jill Stein set up has more than enough for the WI recount and will easily get what is needed for MI and PA before their filing deadlines. Unbelievably Americans stayed up all night long to provide a steady stream of money for this effort. And I thought it was just NYC that never sleeps. I won’t pretend to understand the baffling complexity of American elections but as a Canadian looking southward at the shenanigans I’m calling this election, in particular, as insanity on steroids.
Speaking of insanity … insanely funny this time. Here’s my all-time favourite Thanksgiving TV clip:
“FATCA is in keeping with current worldwide efforts against tax evasion, being similar to other efforts in the EU that ask you to report foreign accounts.”
It is not. Efforts in the EU are for banks outside of the country where the person resides to report accounts to the country where the person resides. The Fuckedta version is far different.
“Other plan…..get the tax treaties amended to create a tie breaker rule on Citizenship.”
Just like Same Country Exception, that pseudo-solution wouldn’t be enough. My example is hypothetical, but if I had a boatload of interest income from Canada and if I were still a Canadian-US dual, Japan would give me a foreign tax credit for tax paid to Canada but not for tax paid to the US, and the US would give me a foreign tax credit for tax paid to Canada but not for tax paid to Japan.
It also wouldn’t stop the US from harrassing US Non Resident Aliens due to the little brown monkey’s mistake of marrying a former US Person.
A tie breaker rule based on Residence would help make America great again, along with dumping CBT.
Obviously doing away with CBT is the first choice. I also agree with eliminating FATCA but that, as George says, might be temporary.
Doing away with the IGAs is great BUT: doesn’t FATCA allow the US to “tax” the banks directly on US based income when they hold accounts that aren’t reported? Wouldn’t an IGA-free world make things more complex, i.e. force banks to check if each and every one of their US person customers is compliant, and therefore want to throw them out?
In this sense, it would seem that doing away with the IGAs would just serve to shake foreign countries confidence in the US (good thing — might make them think twice in the future before getting on their knees immediately when Uncle Sam asks for something), and mess up enforcement possibilities, drowning the IRS in unmanageable information, prompting unwarranted withholdings, leading to lawsuits etc, making the system break down. BUT there could be victims AND the system may not totally break down and you could have the US trying to enforce FATCA without the IGAs. What I’m trying to say is that getting rid of the IGAs will, in theory, just make FATCA worse. Playing devil’s advocate, but would enjoy reading thoughts on this.
Finally, if we do get rid of FATCA, the obligation to file will remain, as will the costly CLN and filing obligations (bar FATCA) to get rid of the IRS when one does renounce.
If FATCA becomes residence based, same thing.
Embee: don’t hold your breath. I sweated out Kerry’s stolen Ohio election a while back and came to conclude that elections are not precise, no more than taxes or information technology. I know it’s counter-intuitive, but these things are no more precise than friendship or love. Clinton didn’t win by enough to win, so to speak. Sure, elections are stolen (maybe this one, probably others). But if people who had voted for Obama had voted Clinton she’d have won. In the end you can only steal an election at the margins.
“Wouldn’t an IGA-free world make things more complex, i.e. force banks to check if each and every one of their US person customers is compliant, and therefore want to throw them out?”
Same as now? Sure. But let’s hope Trump gets his walls built, so that no money will enter the US. Canadian and other banks will stop investing in the US, Trump’s companies won’t remit their profits and won’t even return their capital to the US, etc.
“mess up enforcement possibilities, drowning the IRS in unmanageable information, prompting unwarranted withholdings, leading to lawsuits etc”
Why would it lead to lawsuits? The IRS violates all kinds of laws and still wins lawsuits. It’s only idiots like me who think we can tell the truth in court and get our refunding withheld. We get expensive lessons that facts and evidence aren’t allowed in court and true testimony is illegal in court as much as it is on tax returns. The IRS has nothing to worry about.
Unmanageable information? Sure. That just lets the IRS’s embezzlers steal more withholding and frame the victims. The IRS doesn’t “follow the money” to find where the withheld funds went, and it won’t change a bit.
Fred – “What I’m trying to say is that getting rid of the IGAs will, in theory, just make FATCA worse. Playing devil’s advocate, but would enjoy reading thoughts on this.”
If a “partner” IGA country unsigned its IGA, it would make things worse for the residents of that country (not just USPs) because the withholding would kick in and the economy would feel the effects. Due diligence would continue.
If the US unsigned all IGAs globally, probably not much would change. The IGAs only commit the US to reciprocity – which it doesn’t and can’t fulfill – and refraining from withholding. Unsigning the IGAs would allow them to withhold massive sums globally but in practice that would be unworkable, so they’d continue to refrain from withholding (mostly) and the “partner” countries would (mostly) continue to report.
That’s my guess. My further guess is: it won’t happen. It would be pointless to unsign the IGAs yet keep FATCA; and abolishing FATCA would cost money, making such a bill difficult to get through Congress. As ever.
“If a “partner” IGA country unsigned its IGA, it would make things worse for the residents of that country (not just USPs) because the withholding would kick in and the economy would feel the effects. Due diligence would continue.”
Like what might happen in Canada should the ADCS lawsuit be successful? I don’t think the US is truly interested in being held responsible for ruining the Canadian economy in its pursuit of taxing its non-residents.
I’d like to see the US put in a position of having to choose between FATCA and CBT, because having both is a train-wreck.
Bubblebustin – “Like what might happen in Canada should the ADCS lawsuit be successful? ”
Like any country that for whatever reason decided to withdraw from its IGA. There’s an escape clause, and the US has not fulfilled its commitments on reciprocity, so any country with a Model 1 reciprocal agreement could opt to withdraw.
Iota use the UK as an example if the US unsigned.
Under existing uk law firms can not hand over your info to the USA. They can give it to hmrc not usa
@George – correct. If the UK were to opt to withdraw from its IGA, FATCA reporting would stop. Due diligence would continue, since FATCA is only one of the Automatic Exchange systems now in place. So USPs, and those with US indicia, would continue to be flagged, along with every other accountholder whose account indicates a non-UK tax residency.
Here’s a great idea others might want to consider doing. A small group of constituents in my area has invited our MP to discuss broken campaign promises on Sunday. I’ve been invited, but can’t participate because of a family event, but one of its organizers has offered to present my concerns on my behalf. I wrote:
Last Thursday I signed an affidavit for the Alliance for the Defense of Canadian Sovereignty (ADCS) in a legal effort to repeal the enforcement of the US’s Foreign Account Tax Compliance Act (FATCA) in Canada. As you are aware, the Harper government signed an agreement with the United States to turn over the private banking information of a select group of Canadians to the CRA and IRS. What this means is that Canada, under the threat of economic sanctions from the US has agreed to target many Canadians without any suspicion of wrongdoing by those Canadians.
Prime Minister Trudeau spoke out against FATCA prior to the election, yet the Liberal government continues to fight for FATCA in Canadian court. In a private conversation you told me that you don’t agree with FATCA. Would you please provide an explanation as to why you feel FATCA is wrong, and how our government plans to retaliate when the US fails to provide the information it promised Canada in return?
BB. I hand delivered a note to Ms. Goldsmith-Jones at a meeting at,the WV library several months ago. No response!
Any idea how I can get invited to her meeting on Sunday?
The 30% withholding is a giant bluff. It would lose in the courts.
Iota my understanding is that sans iga the search for place of birth indicates would go away as that’s likely illegal.
The electoral college doesn’t meet to vote until Dec, 2016!! I never knew that.
It’s not over yet guys.
“§ 7. The electors of President and Vice President of each State shall meet and give their votes on the first Monday after the second Wednesday in December next following their appointment at such place in each State as the legislature of such State shall direct.”
George – “Iota use the UK as an example if the US unsigned.”
Only just realised I misread your question as “if the UK unsigned”
If the US unsigned the US/UK IGA, the US would no longer be bound to reciprocate, and would not be bound to refrain from withholding. My guess would be that in those circumstances, the banks would probably carry on sending the FATCA information to HMRC and HMRC would probably continue passing it to the IRS. And banks (and credit unions and other previously-exempt FIs) now with no IGA to protect them, might require a waiver of privacy rights as a condition of allowing USP accounts to remain open.
@George – “Iota my understanding is that sans iga the search for place of birth indicates would go away as that’s likely illegal.”
It’s not illegal. It’s required information for CRS purposes, though it’s used for identification purposes rather than as indicia.
My concern is that without the IGA, I might not be able to open an account at all, since the banks would no longer be required to respect my CLN. Which, as many have observed, would be extremely east to forge.
I’ll ask the gentleman who’s hosting the meeting if you could attend in my absence. Are you interested in travelling to the Sunshine Coast?
Bubblebustin Thanks, but no, I can’t go to the Sunshine Coast Cheers.
Is anyone following the Canadian expat voting rights case on the verge of going to the Supreme Court of Canada?