EU economic chief Gentiloni to Europe's 'accidentals': 'no evidence FATCA infringes your basic bank account rights' https://t.co/m8syK6XKN6
— U.S. Citizen Abroad (@USCitizenAbroad) April 9, 2020
In a previous post I described America’s direct message to European Governments and to European residents who were born in America.
The message was simple, clear and unambiguous:
You either comply with the American extraterritorial taxation (and reporting) regime or you renounce!
Understandably, European citizens have looked to their Governments to protect them. As a case in point:
On February 11, 2020 Mr. Bellamy of the European Parliament posed the following question for answer, (pursuant to Rule 138), to the European Commission:
‘Accidental Americans’ is the term used to describe 300 000 Europeans who, while born in the United States, only lived there for a very short while or not at all.
Ever since the vote on the Foreign Account Tax Compliance Act (FATCA) in 2014, they have been targeted by the US Government, which is demanding they pay US taxes on income that is paid to them outside of America. ‘Accidental Americans’ who declare their income in the countries of which they are citizens and where they reside have even had to face the prospect of having their bank accounts closed. Banks have been threatened with having to pay almost 30 % in taxes on all their financial flows transiting through the United States. This state of affairs was placed on hold by an 18-month moratorium.
Will the Commission take action to defend its fellow citizens by guaranteeing them access to a bank account and fair treatment on tax, in order to protect them from the arbitrary extraterritorial application of this law? Are there plans to renegotiate the agreement on implementation of FATCA on an EU-wide basis, with identical reciprocal sharing obligations for both sides of the Atlantic?
At its core, the question is asking whether the European Parliament would take action to defend European citizens, from the extra-territorial application of US law, to European residents who, the United States claims to be U.S. citizens. (Note that the FATCA IGAs allow the United States to define and redefine who is a U.S. citizen). Paolo Gentiloni replied as follows:
“The bilateral agreements between EU Member States and the United States (US) implementing the Foreign Accounts Tax Compliance Act (FATCA) are not within the remit of the Commission unless they breach EC law. To date, there is no evidence of any such breach. Nationality ties, even when acquired by ‘accident’, come together with the existence of reciprocal rights and duties, including paying taxes in the United States for US citizens.”
The impact of FATCA on individuals and financial institutions and the lack of full reciprocity have been raised with the US authorities by Members of the Commission and their competent Services on a number of occasions. We have seen improvements on the first two issues, i.e., the impact on citizens and financial institutions, with additional guidance and information published on US administrations websites, and new ‘relief procedures’ for individuals who wish to relinquish their citizenship.
Concerning the respect of the Payment Accounts Directive, the Commission has looked into the alleged infringements of the right to a basic bank account as prescribed, but has found no evidence of violation of the EU legal framework in the national measures transposing the directive.
The negotiation on an EU agreement with the US on automatic exchange of information would be conditional to a mandate by the Council. So far, the Commission has not received any indication that such a mandate is being considered”
In its basic terms, Mr. Gentiloni is saying that the EU Parliament doesn’t have jurisdiction over the issues raised in the question. The question of the extra-territorial application of U.S. law on European soil is an issue that is NOT within the jurisdiction of the EU Parliament (the jurisdiction being restricted to issues that govern the relationship among the EU Parliament and its members states). Put it another way: This is not our problem.
If that is what Mr. Gentiloni really believes then he should have ended his answer after saying:
“The bilateral agreements between EU Member States and the United States (US) implementing the Foreign Accounts Tax Compliance Act (FATCA) are not within the remit of the Commission unless they breach EC law. To date, there is no evidence of any such breach.”
If the EU Parliament really has no jurisdiction then his first two sentences (in the above block quote) were sufficient.
Yet, Mr. Gentiloni continued expressing (what appears to be nothing more than his personal view) that regardless of the EU’s jurisdiction:
“Nationality ties, even when acquired by ‘accident’, come together with the existence of reciprocal rights and duties, including paying taxes in the United States for US citizens.”
Mr. Gentiloni doesn’t seem to understand (or claims he doesn’t) that the issue is with respect to:
1. EU citizens who are EU residents
2. Who are being asked to pay taxes to the United States on income earned in the EU.
Apparently, Mr. Gentiloni doesn’t understand that the FATCA IGAs allow the United States to define and redefine the definition of US citizen for tax purposes. In fact, there is NOTHING WHATSOEVER to prevent the United States to amend the definition of US citizen for tax purposes to include Mr. Gentiloni himself. Interestingly a recent comment on Facebook included:
The only way to get real action would be for the US to grant hereditary honorary US citizenship to all EU heads of state, EC commissioners and heads of service, without a right of refusal on their part.
Legally and morally, there is no difference between taxation based on the accident of birth and taxation based on the accident of unasked for honorary citizenship.
As I have mentioned previously, there is precedent for my seemingly laughable suggestion, given that there is an exception to the limitations against unlimited transmission of US citizenship to descendants without some period of residence in the US. In effect, the French General Lafayette and all his male descendants, down to the present day, have been given hereditary, honorary citizenship, which carries with it the curse of citizenship based taxation!
Surely, part of the purpose of the EU is/was to create a whole greater than the sum of the parts. An act by a foreign power (the United States) that weakens each of the EU members is a reason for the European Parliament to speak with one voice and defend the interest of Europe and European interests against arbitrary and unjust US law.
As one member of the European Parliament said at the FATCA hearings:
“These are European citizens. If we are not going to protect European citizens we might as well go home.”
But, there is another option. By its statutory terms, FATCA does NOT apply to U.S. Territories. Perhaps the easier solution would be for European countries to simply become territories of the United States. This would solve the FATCA problem and prevent the European Parliament from further embarrassing itself.
Perhaps Mr. Gentiloni should open the negotiations himself.
But, in the days leading up to Europe’s formally surrendering its sovereignty to America, the message from the EU to European citizens “Born In The USA” is:
Nationality ties come with obligations including paying taxes to America!