May 7, 2013
Washington, DC
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
+1.202.375.1007
Holy shit…we might just get this thing repealed!
Been waiting for the big news you alluded to, Jim. I too stand with Rand, alpha dog of the week!
Great news. But can the damage be undone? If this bill passes, will the policy of foreign banks who stopped serving Americans change?
repeal of FATCA would be terrific, however the history of US CBT is not very encouraging.
scapegoating of US citizens abroad and non relevant sniper amendments to any proposed legislation
by a congress, and government addicted to spending other people’s money ensures that more onerous reporting and tax requirement will be added to those already in place.
Rand Paul is the best friend ex-pats have in Washington!
He’s turning out to be real chip off the block from his dad. And he’s gonna make a run for President in 2016 — with 6 – 7 million well deserved votes in the bag from ex-pats.
Time to mobilize the support letters. Rand definitely deserves formal recognition from ACA like that Thomas Jefferson Award. He just trumped all the previous recipients with a single stroke of the pen.
Three cheers for Rand!
Carl Levin, its time to retire you old communist!
@ Patrick Henry
@All
Yes, support letters (emails better, of course) to Sen. Paul’s office are very much desired. Also, please ask other Senators — Rep or Dem, doesn’t matter — to COSPONSOR the bill. The bill number is S. 877.
Yes, support letters and e-mails, lots of them!
If Rand Paul gets enough support from ex-pats, perhaps he will be willing to take a leading role on abolishing citizenship-based taxation.
He has, after all, been completely on board with eliminating the cap on the Foreign Earned Income Exclusion.
@Jim Jatras, do you have a cover letter you wouldn’t mind sharing to ask senators to cosponsor the bill.
Thanks in advance.
@Jim Jatras
When do you think we can expect to see S877 up on https://www.popvox.com/ So far, I can not find it, and it is a very convenient mechanism for supporting a bill and sending emails to your Senator.
BTW, I don’t see the bill on his web site or in his tweet stream yet. Assume that is coming?
@Jim
Done, fired one off to my Congressman, Bill Posey. It’s a slam dunk, he already hates FATCA (at least for sure the reciprocity aspect of it).
@Just Me,
Your comment on the recent News Max article reads:
“I am not usually a supporter of Rand Paul on a lot of social issues, but I wish to god that he could put a hold on FATCA IGAs or FATCA generally speaking, but frankly, he can’t.
FATCA IGAs have been designed by Treasury to never see the light of day in the Senate, and so he can NOT stop them. Only full action by Congress to tell Treasury to stop their unconstitutional FATCA IGA end run on the democratic process can.”
It seems like Rand Paul may have read your comment and is now out to prove you wrong. Let’s hope he succeeds.
Posted by WhiteKat on an earlier thread:
For those who want to send and email to Senator Rand Paul to show support for his opposition against FATCA, here is the link to his website:
http://www.paul.senate.gov/?p=contact.
Anyone worried about keeping anonymous, can put a fake name or address in the contact information.
Also, the state drop down does not have provinces, but requires a selection, so just select any state.
If you want to clarify that you are a US person abroad, you can free format whatever address you like in the street section.
If FATCA is in fact repealed, what is going to happen with the IGAs that have already been signed? Do they remain valid?
The Center for Freedom and Prosperity and Isaac Brock are the only sites reporting on this event, at least as far I can see…
http://freedomandprosperity.org/2013/press-releases/rand-paul-fatca-repeal/
“Additional comments from the experts:
Dan Mitchell, Senior Fellow, Cato Institute:
“FATCA only exists because of bad American tax policy. The United States should not be double-taxing income that is saved and invested. Nor should the American government be imposing tax on income earned in other nations. The right tax policy is to reform the tax system with something akin to a Hall-Rabushka flat tax, at which point FATCA becomes totally irrelevant.”
Grover Norquist, President, Americans for Tax Reform:
“Successful tax systems attract capital. Unsuccessful tax systems attempt to force other countries to become their tax collectors. That’s what FACTA is, and it should be repealed.”
Veronique de Rugy, Senior Research Fellow, Mercatus Center:
“The passage of FATCA reveals a fundamental misunderstanding of tax evasion on the part of policymakers. There is no need for violating privacy rights or engaging in an international witch hunt to reduce tax evasion. Simplifying the tax code and reducing rates will do the job and grow the economy at the same time.”
Bruce Zagaris, International Tax Law Expert and Partner, Berliner, Corcoran & Rowe LLP:
“The combination of FATCA’s enormous complexity, the global financial downturn, sequestration, and difficulties in adjusting foreign law and culture to FATCA, even with the FATCA intergovernmental agreements, pose obstacles to implementing FATCA and risk dislocation of foreign investment in the U.S. Just implementing FATCA has required the IRS and Treasury to spend scarce resources and has overtaxed the good will of the U.S. as governments and investors react harshly to the unilateral extraterritorial application of U.S. law and at a time when good will and diplomacy are critical components to achieving economic prosperity.”
James George Jatras, Former Senate Staffer and U.S. Diplomat, and Manager of RepealFATCA.com:
“Senator Paul’s introduction of this bill is a game-changer. It has to be clear to everyone that FATCA has almost nothing to do with stopping actual “tax evasion” and everything to do with massive unintended consequences that will lose money for federal treasury. FATCA’s demise is now a question of ‘when,’ not ‘if.’ With the wind in Washington blowing against FATCA, foreign governments are on notice that Treasury’s promises of ‘reciprocity’ are worthless. Congress will not provide the needed authority to rescue this fatally flawed law. Instead of getting aboard this sinking ship, foreign governments should reject the constitutionally deficient ‘intergovernmental agreements’ Treasury has offered them. Finally, American and non-U.S. firms that stand to lose millions complying with FATCA need to make their voices heard. FATCA repeal needs to be part of any deal on tax reform.”
Pete Sepp, Executive Vice President, National Taxpayers Union:
“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 it 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.”
John Berlau, Senior Fellow for Finance and Access to Capital, Competitive Enterprise Institute:
“Not only is FATCA doing great harm to America’s international competitiveness, it is also straining international travel and damaging goodwill among nations the Obama administration promised to improve.”
Brian Garst, Director of Government Affairs, Center for Freedom and Prosperity:
“FATCA is as arrogant as it is destructive. Under what possible authority does the US government presume to demand that the entire world be responsible for chasing down every last dollar for it to waste? If not simply for its size and vindictiveness, the US would have been laughed off the world stage for such demands. Thankfully, it’s not too late to reverse course and put an end to America’s destructive and counter-productive policy of fiscal bullying.”
I woke up to this in Asia and thought I was dreaming. Will write an email to Rand today, and pass the word. I trust that ACA and others in the Repeal Fatca camp, including the Anti Datca bankers camp will lend support for this much needed bill. If any IBS folks have connections to the top of ACA and others please pass the word on as well.
The FATCA Compliance Complex (FCC) is really going to up Rand’s A$$ now.
They will be looking at losing mega bucks if the bill passes — which it may with the backing of the Florida and Texas Bankers Associations.
@Steve Klaus
ACA leadership is aware and formulating their response. The bill should be up on PopVox by tommorow?
@Bubblebustin… Give it time, this just dropped at 6 p on the east coast. 🙂 Don’t worry the Rand trashing will start shortly.
@Chris… Well, I would have to think it kills the IGAs, but the FATCAnatics are a clever crowd and they will not go down without a fight in the ideological war. If any government is rushing to sign new IGAs, this should give them pause to re-consider before rushing headlong into the one way cram down.
Also note, that all of FATCA is NOT being repealed, just pages 111-147 are purposed to go, so really need to take some time to review the original and see what that means.
I would say, that the chances of this bill getting wide support are slim. Dems never, and cowardly Reps will not be wanting to be smeared as being in favor of ‘tax cheats’ as that is how opposition to FATCA will be characterized, IMHO.
I have written to Rand Paul and also to ACA. Sen Paul seems willing to do what it takes to hold up the passage of the various tax treaties and resist FATCA. The ‘compliance’ industry will surely throw money against Paul, as will the IRS/Treasury – but US banks facing DATCA, and non US banks facing massive costs to implement and potential penalties if they don’t comply should be lobbying for Paul. The Dems and Administration will resist – the Empire does not go down easy.
@Just me
I meant to say “so far”. You heard it here at Brock first, thanks to your and Jim’s coordinated efforts. Mucho thanks to both of you 🙂
This could prove to be an epic battle. If Rand Paul can gain traction, this is going to make Obama’s administration look worse than it’s already starting to look. May justice prevail!
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@Just Me: popvox is probably using the same Library of Congress “THOMAS” feed as govtrack, opencongress, etc. They usually take a couple of days to get all the data unless the bill is unusually long. Seeing as it’s a repeal bill, it should be pretty short. However at the moment THOMAS doesn’t have an inkling of the bill yet either:
http://thomas.loc.gov/cgi-bin/bdquery/z?d113:s.877:
To put it in perspective, the most recent bill they do have up on THOMAS is S.867 from Monday
http://thomas.loc.gov/cgi-bin/bdquery/z?d113:s.867:
Weird, Reuters had their article about Paul’s bill up for only 10 minutes before they closed the comments with no comments posted: “This discussion is now closed. We welcome comments on our articles for a limited period after their publication.”
But it was dated for tomorrow morning 5am…from none other than Patrick Temple-West.
http://uk.reuters.com/article/2013/05/08/usa-tax-fatca-idUKL2N0DP00X20130508
@FromTheWilderness says
Thanks for the NewMax reference. I gave up waiting to see it that would ever get out of moderation. 🙂
I certainly hope Rand Paul can pull this off. This is more than just a “hold” which he can’t do on an FATCA IGA as it is NOT a treaty, but he can do better, and that is try to repeal it.
On a practical side, I am a realist. This is a long uphill grind. I hope he has the stomach of the attacks that will soon be coming.
@bubblebustin. Jatras was expecting that one, and I bet I could write the narrative from good ole Patrick. Now I will read it and see if I am wrong. Hope so. LOL
@Eric… The bill went down apparently about 6p Eastern time, so guess it will take a day or two to show up, and then we hit it. 🙂