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
@ Bubblebustin re: Time to summon the Brock SWAT team over at Mother Jones to take care of one Mario Gonzales (please).
We beat the crap out of him! (and TLIL, and newcomer Jim as well). They make it too easy.
You haven’t seen this have you.
http://trendcartoons.blogspot.ca/2013/05/rand-paul-against-fatca.html
@Tim,
I saw it. That is Jim from the Mother Jones article.
@Tim…
That cartoon is exactly what I expected. Now, it would be interesting if we could get him to seriously read all the comments in Mother Jones. For a new comer to the subject on the Progressive spectrum, it would be an enlightening read with the brain was tuned to “receive”.
Oops, just saw the comment about Jim from WhiteKat … Never Mind. That one is closed shut!:)
@WhiteKat…
Re Mario Gonzales
My quick quip
https://twitter.com/FATCA_Fallout/status/333821098984628225
@RepDaveCamp @MaxBaucus @simplertaxes #Taxreform For good debate on bad FATCA tax policy read comments @MotherJones http://bit.ly/10Kgf0K
@ Just Me
Good one!
Just a question. From reading the comments, it seems to me that some politician should propose an amendment to FATCA that exempts US citizens who are permanent residents of other countries. Wouldn’t that solve most of the problems being discussed in these comments? Tax evasion by the rich is a huge burden on society. Couldn’t FATCA be used as a springboard to change citizenship based taxation?
Trend,
They “could” and “should” and perhaps they “will” but the only one who has done anything so far is Senator Rand Paul. Other countries politicians such as Canadian Green Party Leader and MP Elizabeth May along with a bunch of Liberal and NDP(Canadian too) MP’s have threatened to not go along with FATCA.
http://www.greenparty.ca/backgrounder/2013-01-28/backgrounder-canada-and-fatca
Given the Canada Revenue Agency ALREADY shares information with the IRS about US “Residents” who have Canadian source income and assets one might question why the insistence by the US to extending the full FATCA regime to Canadian financial institutions if not for the purpose of obtaining information on US citizens who are permanent residents of Canada and part of the domestic Canadian tax system.
@Trend Cartoons
It’s great to see that you agree that FATCA does not work in its present form. In Rand Paul’s press release he states:
“FATCA infringes upon basic constitutional rights, for under FATCA, private data of anyone considered a “U.S. Person” would have details of their financial assets provided to the IRS without a warrant requirement, suspicious activity report (SAR), or any allegation of wrongdoing at all. Stated in its simplest form, FATCA would require every non-American financial institution (such as banks, credit unions, pension funds, stock and investment firms, etc.) to register directly with the IRS and agree to provide specified financial data on the accounts of any “U.S. Person.” 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.”
Now if you really wanted to paint a more accurate picture of what’s wrong here, you would draw a FATCA tank crushing American men, women and children and the flags of the countries they live in. If you could portray the tank being fuelled by foreign and US currency, that would be better also.
@Trend Cartoons
Great to see a comment by an editorial commentator like yourself, thanks for your interest in this!
Focusing on Canada: much of the objection to FATCA here is based on its forcing banks and other institutions to discriminate against certain Canadians based upon nationality or birthplace. Most Canadians are opposed to tax evasion. However they object to a bank account reporting obligation that is based upon being born in foerign country, or being genetically related to someone who was, as opposed to residence or actual economic activity. And they strongly object to their personal Canadian financial data being sent to any foerign state.
Canada is home to more than 600,000 people who could be defined by FATCA as “US Persons”. This includes Canadians who were simply born in the US while their parents were visiting, or due to cross-border hospital arrangements. Also, there are many Canadian citizens who were born in the US but have been naturalized as Canadian citizens, lived their entire adult lives as Canadians, and have no US economic ties, residence or employment.
Like most other immigrants to Canada, US-born Canadians do not come here to escape taxes. Canadians generally pay more taxes then their US counterparts, both in marginal income tax rates and in sales taxes. However, we have public health care, low university turion fees, good infrastructure, and managable public debt. Canada is no tax haven, and Canadian banks report their account holders’ income to the Canadian Revenue Agency.
In contrqast, FACTA may criminalize the everyday banking activity of Canadian citizens who live and work in Canada, simply because they were born in the US, or are otherwise considered so-called “US persons”. The concept of “US person” is central to the enforcement of FATCA, However, in Canada, the term “US person” has no legal standing and is in fact discrimination based on nationality.
Canada is nation of immigrants and many of our citizens were born elsewhere. We have a robust Charter of Rights which prohibits discrimination based on place of birth, nationality, or any other immutable personal characteristic. If banks in Canada started asking their cusotmers in they were also “Pakistani persons” or “Italian persons” with the intent of discriminatory treatment, they would be sued. Peter Hogg, a leading Canadian constitutional legal expert oand one of Canada’s foremost lawyers, recently pointed this out in a now public opinion letter stating his objections to a Canadian government FATCA IGA.
Trend cartoons. Good comment. Cart pushing horse. Citizenship based taxation and reporting should have been eliminated long ago. A citizen’s govt has no right to chase him around the world, asking him why he has left the country and what he is doing when he is not in the country.
@Trend Cartoons
Oh, and why not have the tank being passed by some guy in a fancy sports car with US plates, waving, with his trunk full of gold or some other non-currency asset? Maybe a bumper sticker that says “IRS: EAT MY DUST”. I could go on….
@Trend Cartoons
Thanks for weighing in and commenting here. I take it back, maybe your mind is NOT closed shut. 🙂
ACA, has been advocating long and hard against the negative impacts of FATCA since it was first passed buried in the Hire Act. We knew what the impacts would be on Americans Abroad, having already experienced how the IRS approaches enforcement of FBAR penalties without warning or educational outreach.
No one in Washington, or dare I say the Progressive Community has cared to listen, until something comes out with a Rand Paul name attached and then the stereotyped attacks start.
This non partisan group is currently advocating for a Residency Based Taxation proposal, that if passed, would undo the negative impacts of FATCA on Americans Abroad. Then, if Americans still think FATCA will stop Homelanders from evading taxes, go for it. It probably will be as effective as the War on Drugs, but never mind.
http://americansabroad.org/issues/
What will surprise you, is how many people who in the past identified themselves with the Progressive side of the equation, are Democrats, or voted for Obama have been effected by the offshore jihad, and have turned in opposition to how FATCA is destroying the lives of many…
Democrats Abroad, has also even made submissions against FATCA and ignored.
http://isaacbrocksociety.ca/2012/05/03/democrats-abroad-urgently-requests-expat-tax-stories-for-may-15th-irs-hearing-2/
Conservatives (republicans) who comment here, have been in the “I told you so” mode about Obama since this all started, and it is hard to rush to his defense, like it is hard to rush to his defense on the application of Drone strikes, GITMO, and Whistleblower prosecutions, just to name a few of the more serious disappointments. For a non partisan perspective, I am sure that many Republicans felt this way about Bushes War on Iraq, use of torture and deficit spending. Some of these issues should go beyond partisanship, and FATCA is one of those.
Thanks for reconsidering your cartoon editorials. It was cute, but it was EXACTLY what I expected, and the narrative is way too narrow. It plays to a partisan crowd, and in another time, I would have probably loved it! 🙂
Cheers
Hi Trend!
Thanks for posting here! Your short comment here is actually a reasonable response to the problem we face and not the short sighted knee jerk reaction represented by your cartoon. I’m happy though that FATCA is finally being discussed, and if enough people take the time to look at the facts, like you have done, we might achieve something.
We’re mostly normal people just trying to live normal lives without being persecuted by a far away country. A whole generation of Americans abroad are learning to hate America because of this. Before, when I thought about America, I’d think about my late father and grandparents, about childhood holidays to New Mexico, about driving from Denver to Seattle just before my dad died and listening to Led Zeppelin in the car. Whenever I found a can of root beer is think back to childhood times over there, and think about going there again some day.
Now, when I think of America, I think about how my non American mother became so stressed she could hardly eat, and how the banks were closing our accounts, and the stress I went through dealing with the banks and tax lawyers, not to mention the expense. I filled out the FBARs for the whole family, and getting all the account numbers and figures straight for 6 years of our family’s financial history took a while. But better to take your time when the fines start at 10’000$.
I feel deeply betrayed, and I warn people about the danger of any US ties. A Swiss woman even cancelled her wedding to an American once she found out about the consequences.
I want nothing more to do with America now, and and I’ll be returning my passport to you as soon as I can.
@Just Me, I ain’t no “Conservatives (republicans)”. I’m much more a pro-gay, feminist, atheist green fiscal conservative who currently votes pirate. FATCA would probably be fine with me as long as it excludes expats.
@just me
Uproarious laughter from my husband and me on your “insemination tax” comment! I’m sure that there have been more than just a few “accidental Americans” in this respect.
@SwissPinoy Good point, and that is one I want the Progressives at Mother Jones to hear. You don’t have to be Conservative T-Party type to be able to have a stand against FATCA. Frankly, if they modified it to exclude American’s abroad, you are probably right, more in your category would be just fine with it. I understand that. It could still be bad in application for its impacts on small financial institutions in America in the cost of reciprocal reporting on the citizens/residents of 193 countries in the world; it still raises question about BIG Government DATA collection activities and privacy with the IRS even now tracking credit card activity which is chilling, and it will raise barriers to economic activity which CAN NOT be good for the worlds economy, but those issues aside, I do understand your statement.
@bubblebustin… Glad you had a laugh. I had all kinds of additional flippant comments I was going to make about how it would be applied and penalties for failure to comply, but decided to let others to see and add to the joke… 🙂 I was trying to make a serious point, and I am noBorowitz
@Just Me, you have a good point and I agree, but I’m prohibited from being a US citizen and thus local US issues are outside of my jurisdiction. As long as Americans abroad can have fun working in Switzerland, and as long as Switzerland continues to have a small government without excessive taxation, then all is good. 🙂
One more comment for our Progressive Friends at Mother Jones…
So my dear Progressive Friends, this is what BIG government does
Phone Records of Journalists Seized by U.S.
http://nyti.ms/10o04dI
Maybe you support the “PATCA” that makes all of this possible.
We know Kim Jong-un would love it…
http://nyr.kr/16xrcLN
So, why do you think FATCA is any different?
At its core, it is about rounding up all the innocent to catch a few thieves. A global stop and search ALL Persons. A GATCA if you wish.
You think it is great, because you are pre-programmed to believe what you are told that it is only about stopping tax evasion, and the only way to do it is make everyone a victim of more government intrusion
But wait until the effort targets you, and you will all be running to the ACLU to protect you, and they should!
@Just Me, and @bubblebustin, the term US ‘insemination tax’ is very apt. Remember that those children who were born to US parents, as a result of in vitro fertilization must prove that the egg or sperm were from US citizen donors.
http://video.ca.msn.com/watch/video/in-vitro-twins-caught-in-citizenship-flap/17yggwasp?cpkey=04877f1c-e3da-4e8d-8503-26a189a38987%257c%257c%257c%257c
http://usatoday30.usatoday.com/news/world/story/2012-03-19/in-vitro-citizenship/53656616/1
Thus, only those zygotes abroad who can prove the US citizenship status of the gametes involved in their conception win the US tax lottery. On one hand they are lucky they aren’t ‘US taxable persons’, but on the other hand, their parents living abroad cannot claim any US child credit for them since the children aren’t US citizens.
Now, I’m wondering. Is the reverse true?
If non-US couples in Canada or elsewhere in the world, use donor sperm from US sperm banks, are the resulting children born outside the US, with a US citizen sperm donor now ‘US taxable persons’?
I read that most of the sperm that is available to couples in Canada comes from US donor banks.
http://o.canada.com/2011/10/24/yet-another-reason-not-to-be-a-sperm-donor/
Has the IRS and Treasury considered offering free US citizen sperm to the world for free – in order to spread the ‘US insemination tax’ even wider – thus increasing the pool of ‘US taxable persons’ to even more of the globe than they already currently claim as US taxpayers?
Has the IRS and Treasury crafted the FATCA regulations to include that all the world’s banks must demand the identification of all those who were born of US sperm donor DNA – and who have bank accounts outside the US, and forcing them all to prove that their donor parent is not also a bona fide US citizen? Will all zygotes have to fill out a W-8BEN Form?
http://www.tddirectinvesting.co.uk/help/faqquestions/w%208ben%20form%20what-is-it/
@badger, don’t forget transplants using US organs. US organs are property of the US government and thus anyone with US organs is US taxable. This includes hair that was cut from US citizens and placed on someone else’s head. Need a loan? Prove first that your eyelashes are not of US origin.
Never thought of that @swisspinoy. Good point! Perhaps a recipient of a US donor organ has to pay US taxes in a ratio – proportionate to the weight of the donation. Or how vital to life. Or what the heck – just deem them UStaxable and let them contest it and prove the contrary.
@badger
This topic has been bantered around here before:
http://isaacbrocksociety.ca/2012/03/29/attention-in-vitro-americans-you-may-not-even-be-american/#comments
I too have voiced my concern over whether the reverse could be true, if the US would lay claim to children born of US sperm as tax serfs. With the US being the world’s largest exporter of human sperm, it’s a frightening concept. There are way too many Mario Gonzales’s in the world to ever assume they won’t!
A good many people are unaware of the ramifications of adopting children from the US too, as this Canadian adoption agency has warned:
http://www.sunriseadoption.com/adoptive-parents/what-all-adopting-parents-in-canada-need-to-know/important-information-for-all-canadians-who-have-adopted-a-child-from-the-usa
I think Jon Stewart is starting to get it about IRS and Government
I just pasted this at Mother Jones. Maybe some of the Progressives will too…
http://www.thedailyshow.com/watch/mon-may-13-2013/barack-trek–into-darkness