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
@Just Me and all,
Perhaps this approach might entice the author to do a follow-up. It would certainly peak the interest of some Mother Jones readers.
Victoria, I’ve borrowed and included your common sense. You are so more eloquent than I.
Victoria as a US Ambassador to the US Persons Abroad of the World Outside the USA!
Time to summon the Brock SWAT team over at Mother Jones to take care of one Mario Gonzales (please).
Mario Gonzales 2 hours ago
Living abroad is a choice. All choices have consequences, including tax treatment of income, wherever earned. If living abroad is a burden with FATCA, come home. Please quit exporting talents you acquired through education, training, or breeding in the USA, profiting from that, and then expect to owe nothing to those who gave it to you.
Rand Paul is a traitor to the US for what he is doing. He must be getting well paid, but I just wonder how much voter fraud will be committed to getting him illicit votes from abroad?
Luckily, he can’t count (see his ludicrous 17% flat tax), so nothing he does will come to account. But like every other dumb rock in the world, he can block progress for the rest of us. Until somebody picks up the rock and turns it into gravel.
honeebadger 36 minutes ago in reply to Mario Gonzales
My husband was born in Canada, is a US citizen through his father, has never worked or lived in the US. Are you suggesting he leave his business here and join other Americans in your long unemployment lines?
Mario Gonzales 9 minutes ago in reply to honeebadger
Nope, I’m saying pay for the infrastructure that allowed his father to live a healthy enough life to father a productive person. Without that support, your husband is never born and has no prosperity anywhere.
That’s worth nothing?
If your husband is worth anything, 50% of it is his father’s biological contribution, at minimum. This doesn’t even count the cultural, educational, and sociological elements in the USA that allowed him to be the good father you seem to think he must have been, else you wouldn’t have married his boy, would you?
He owes. Pay.
I don’t want to sign up with Mother Jones but I have up-arrowed everyone’s efforts there. If I were to comment it would go something like this …
I appreciate the valiant efforts by the well informed people here who have tried to educate and reason with the TLIL but its circuits are closed to all human based logic. It simply cannot and will not compute anything which lies beyond its ideological programming. It refuses to comprehend that the USA is the odd country out with its citizenship-based taxation and that this system is dysfunctional and fraught with unfairness. FATCA is just another absurdity of the US tax dys-system.
I would follow that with a smiley face blowing a raspberry at TLIL (if I knew how to do that). Thanks to all the grown-up Brockers who have made such excellent, information-packed, well-written comments, not just at Mother Jones but elsewhere too.
Why spend the time arguing with a national socialist (euphemism for nazi) like Mario Gonzalas at Mother Jones when that energy could be put into writing something with substance to the Senate Finance Committee and House Ways and Means Committee at:
https://TaxReform.gov/
We need to keep the priority on writing to the people who actually make the laws.
Has ACA organized a submission campaign for this Joint Committee (the Max and Dave show) like they recently did for the Ways and Means?
@AbusedExpat
I appreciate the reminder.
Can’t we do both? 🙂 Consider it part of Brock’s Educational Outreach Program.
@AbusedExpat, it only takes one person to cause the end of FATCA, citizenship-based Taxation or any other problem. The more that the word is spread around, the greater the chance that that one person will be found.
FATCA sucks for expats. Its like we are all automatically guilty of something just because we were born in the USA.
Thank you Rand Paul!
@ Bubblebustin & SwissPinoy
You are both right, the more comments on articles the better. I only think that we need to make sure we don’t overlook the high value targets like the Joint Committee.
This is where comments from expats will get the most bang for the buck and such opportunities don’t come around very often.
I just noticed this call for comments to the Joint Committee from ACA:
http://americansabroad.org/issues/taxation/another-avenue-americans-overseas-be-heard/
It would be great if another TEMPLATE FOR SUBMITTING COMMENTS could be provided to help organize the submissions like it was for the recent comments to the Ways and Means. This would help encourage expats who perhaps are not so adept in writing or under heavy time constraints.
Jamaica about to fall for FATCA:
http://jamaica-gleaner.com/gleaner/20130510/business/business4.html
Austria on deck?
http://www.tax-news.com/news/Austria_Eyes_US_FATCA_Deal____60701.html
Sorry, bubblebustin, I’ve been away from the computer for most of today.
Here’s my question to Mario in case he can help me out:
Mario Gonzales 5 hours ago
Living abroad is a choice. All choices have consequences, including tax treatment of income, wherever earned. If living abroad is a burden with FATCA, come home. Please quit exporting talents you acquired through education, training, or breeding in the USA, profiting from that, and then expect to owe nothing to those who gave it to you.
Rand Paul is a traitor to the US for what he is doing. He must be getting well paid, but I just wonder how much voter fraud will be committed to getting him illicit votes from abroad?
Luckily, he can’t count (see his ludicrous 17% flat tax), so nothing he does will come to account. But like every other dumb rock in the world, he can block progress for the rest of us. Until somebody picks up the rock and turns it into gravel.
Flag
calgary411 0 minutes ago in reply to Mario Gonzales
bubblebustin and AbusedExpat,
I agree we can do both and maybe someone, somewhere will understand. Awareness is vital wherever there is an opportunity.
And, I thank bubblebustin again for submitting my words to the Senate Finance Committee and House Ways and Means Committee as I won’t give them my name — the US IRS fear mongering reached its target in me as I don’t want to needlessly hurt my son.
@ WhiteKat
I just went to Mother Jones to up-arrow calgary411’s latest comment and any others which might have appeared recently. This person doesn’t mind a bit. 😉 My computer time is limited these days until my back pain subsides a bit more (getting there).
Thanks for putting Em’s sentiments up there, WhiteKat.
Thanks very much for those sentiments, Em.
I’m so sorry to hear that you’re having back pain — hope it is relieved soon. Take special care.
Thanks calgary411. You’d a thunk all this tax tyranny would have given me a pain in a somewhat different anatomical location though. Good for you for getting your 2012 FuBAR off so soon. My husband’s is still looming and that e-only thing for next year is going to bring more pain. Our notices of assessment from CRA (mailed T1s 3rd week of March) still haven’t come so it looks like I’ll have to phone next week to ask what’s up. There’s an 1135 in my husband’s T1 for the first time ever (inheritance from his mother still sitting in a US account) and the $25/day late penalty could be ticking away if something went amiss at the post office. There never seems to be a tax thought free day anymore.
https://now.mmedia.me/lb/en/commentaryanalysis/fatca-finally-comes-home
The Lebanon Star writes good FATCA articles, this one about Rand Paul finally taking FATCA to the Homeland
From the Lebanon article:
“Rand Paul has suddenly made FATCA an internal American affair. He may succeed in repealing the legislation, or he may not, but Americans abroad finally see that someone is speaking on their behalf. What a shame that their government has failed to do so.”
@Mark Twain, absolutely. America can only be ashamed.
Oh yes, Michael Young. He wrote the good one about FATCA and its potential for security breeches for American’s abroad. It made the rounds here last December:
https://now.mmedia.me/lb/en/commentaryanalysis/fatcas_security_problem
“Shameful” is a word I used only yesterday in a discussion I had with my husband about how the US treats its citizens abroad. Rand’s bill’s success has everything to do with those in power being able to admit that they made seriously damaging mistakes and oversights in the creation and passing of FATCA.
I suspect that Michael Young is using this source as his source, and his work is then again referenced here. So, he can also get his compliments here.
…intriguing.
It’s kind of interesting to note that on some of these comment threads, the majority of those who support the status quo are those whose “minds are like concrete, all mixed up and permanently set”. Their arguments against those of us who object to it to me seem completely irrational, not what I’d consider a cross section of America. Look, even the Congresscritters may be starting to get it!
It was noted that there was not one submission on Tax Reform that argued in favour of citizenship based taxation. Who in their right mind would do that? (No one tell Diane Francis where to write to, please).
Unless all of the rest of America is completely off their nut like DF and these folks are, change will surely come.
@bubblebustin, my experience is that most of the time whenever there is a news article on the issue, it is first commented with insults against expats combined with support for citizenship-taxation, as generally encouraged by the article or its title. Then, IBS joins the discussion and these voices run for cover. Our opponents are disorganized and unable to support their views. The best that they have been able to do so far is to troll.
However, we only win in the comments sections where we are allowed to speak and are thus at odds with America until they read our comments. 🙁
Good observations, Swisspinoy.
Here’s a peculiar line:
“Paul is far from the only American who has criticized FATCA for both privacy issues and it’s potential impact on foreign investment. Additionally, several countries have shown resistance to implementation of the regulations, making it unlikely that FATCA’s troubles will be ending anytime soon.”
http://www.convey.com/2013/05/senator-rand-paul-continues-to-block-fatca-implementation/#axzz2T6gsDdBV
An oldie but goodie article on FATCA:
“Coerced Foreign Tax Compliance Is Killing American Jobs”
http://www.forbes.com/sites/realspin/2012/11/20/coerced-foreign-tax-compliance-is-killing-american-jobs/
“The legislation was intended to crackdown on illegal tax evasion, but in reality places heavy burdens on law-abiding Americans living abroad…”
“Major banks like HSBC, Deutsche Bank, Credit Suisse and Commerzbank are dropping their U.S. clients. This not only causes a huge inconvenience for Americans living and working overseas who can’t even find an institution where they can deposit their paychecks, but because these banks are also avoiding the penalties for non-compliance by disinvesting in U.S. assets, it is a hit to the economy as well.”
“…FFIs and their clients will pull capital from the U.S. even if they have to invest in smaller and less lucrative markets. This is because FFIs and/or their clients want to avoid increased compliance costs. Even more important, they can’t take the risk that withholding might occur for whatever reason – since withholding is not only on periodical payments but also gross proceeds.”
“Without authorization from Congress, Treasury has embarked in setting a new course for international tax policy and relations. They are selling promises to deliver for foreign governments the same information FATCA demands from foreign institutions – meaning Treasury wants American banks to comply one day with the same onerous rules that Congress placed on FFIs, only instead of monitoring and reporting on citizens from one country our institutions would have to do so for all. This means imposing many billions in compliance burdens on domestic institutions, in hopes that the IRS may extort less than one billion in new annual revenue from the rest of the world.”
“the law in many cases arrogantly requires them to violate domestic human rights laws regarding privacy, placing FFIs between a legal rock and a fiscal hard place. But governments are doing themselves and their financial industries a disservice by contemplating entering into FATCA agreements with the U.S. Backlash against the law is growing, and Treasury is in a race against time to lock it into place before a repeal effort can gain steam.”
“…so many consultants and compliance industry experts are… interested in feathering their nests, as one compliance company’s representative revealed when stating that, “Everyone’s trying to make money on FATCA.”
Original press release from Senator Paul:
http://www.paul.senate.gov/?p=press_release&id=793