May 7, 2013
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
Rami returned my email of this morning and said that Helen Burggraf was in touch with him yesterday. Also informed me that “Moveon.org won’t do anything with the petition unless it reaches a critical mass as well.
It’s up to we small activists to make it big!
In the meantime we have had some impact with the ways and means committees, writing letters directly. It’s a multi-pronged approach that turns the tides eventually, we hope :-)”
I am almost out of internet time this morning… ah it has already turned into afternoon.
I will try to headline the petition again, unless you want to do it. I have to run out for a few hours, so need to get away from this machine.. 🙂
I’ve just signed the MoveOn petition and posted in on FB. Hope this helps!
Thanks Rev Susi!
Thanks from me as well, RevSusi. I’ve updated the post at http://isaacbrocksociety.ca/2013/05/23/almost-there-if-you-have-not-signed-this-repeal-fatca-petition-please-help/. Yours may have been the turning point for the new goal of 3,000.
Reuters article “Blocked treaties a concern ahead of tax evasion law: Treasury”:
That is Patrick Temple-West west carrying the water for Treasury yet again… I think they just send him something directly, and it is cut and paste and send out. He is so full of crap. So much is Wrong with what he has to say, where to begin… This is Treasury propaganda, pure and simple
Crap is right:
“FATCA is aimed at curbing tax avoidance by Americans”. In America tax avoidance is the new tax evasion apparently. What a waste of mental energy dreaming up ways to end tax avoidance, when in fact it is congress that writes the roadmap to it!
FATCA Repeal? Get With the Program!
I’m not sure but did Sen. Paul get the memo? By that, I refer to the memo which highlights the changing world we are living in. Is FATCA perfect and will it completely eliminate tax evasion from the world? Probably not but it seems like the rest of the world has bought into the fact that it’s worth the try. FATCA has been steamrolling through the continents, picking up steam as it goes along. Bank secrecy? Not much will be left of that in the coming days.
Regarding the above article…
Note, this about the author… (he has vested interest in FATCA compliance. He has Skin in the Game)
or as a friend of mine said… “Hardly an “independent” legal opinion on the issue for sure. He was paid to figure out the entire cockamamie scheme! This is like getting Heydrich to write an “independent opinion” on Himmler’s “Final Solution” program!”
Here is Tanenbaum’s background:
Edward Tanenbaum is co-chair of the firm’s Federal & International Tax Group and a member of the firm’s Global Resources & Strategies Committee. Mr. Tanenbaum’s practice consists primarily of planning and structuring tax efficient solutions for cross-border business transactions and investments by foreign multinational corporations and high-net-worth individuals.
He has also advised on the various U.S. anti-deferral tax regimes in connection with the offshore investments of U.S. multinationals, U.S. citizens and resident aliens. He has also advised on numerous international joint ventures, acquisitions, restructurings and reorganizations.
Mr. Tanenbaum has made significant contributions in the drafting of the U.S. tax regulations affecting withholding taxes on payments of U.S. income to nonresident aliens and foreign corporations and has been instrumental in the creation of the IRS “Qualified Intermediary” regime applicable to foreign financial institutions.
He has counseled on the new FATCA regime and also advises on international cross-border tax enforcement matters.
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U.S. tax counsel to one of the largest, foreign multinational financial services groups.
U.S. tax counsel to a major European banking association on U.S. tax regulations affecting foreign member banks.
Represents a number of significant European, multinational companies with respect to U.S. structurings and operations in the U.S.
As commented on earlier, from Joanna Heiberg’s (Candidate for J.D., Washington and Lee University School of Law, May 2013) FATCA: Toward a Multilateral Automatic Information Reporting Regime
I have read that before, but can’t remember when it came out. I have seen it in the past 6 months, but not sure of the date. Your link isn’t working, so if you can resend, that would be great.
Thanks, Just Me. I’ve fixed the link: FATCA: Toward a Multilateral Automatic Information Reporting Regime
@Calgary….. Yup, definitely saw that before, but can’t remember where. It is probably posted on IBS somewhere, but date of publication, unknown.
I remember the conclusion well…
Finally, this Note argues that the United States should abandon its policy of citizenship-based taxation in order to facilitate a multilateral automatic information reporting regime.
Thanks Calgary411, one more voice of reason to add to the chorus!
Found this, haven’t had a chance to listen to it yet, but looks interesting:
“Monday, 8 July, 2013
U.S. Senator compares FATCA to Big Brother
A single U.S. Senator is continuing to block a major tax arrangement with Switzerland, objecting to what he describes as a “Big Brother” style of government in Washington. Senator Rand Paul is also being touted as a potential Republican presidential candidate. He chiefly objects to FATCA—a law which imposes a whacking penalty on any foreign bank not revealing details of its U.S. clients. He can’t stop FATCA, but the Senator is not taking it lying down. WRS’s Washington correspondent Daniel Ryntjes reports:”
@Badger… thanks for this…
Now when I hear a story like this on NPR, I will know the media is starting to pay attention.
Notice that this is summarized as the business community being against Ron Pauls efforts to hold up treaties, and interestingly enough, there was the final reference that the U.S and Switzerland have found a way to cooperate on FATCA without a need for approval from the US Congress. Of course, they are speaking to the IGA end run to avoid ‘advise and consent’
I haven’t had a chance to listen to it yet, but yes, it would be nice for an accurate story about this to get to NPR or the like. And where is a Canadian equivalent where TVO (TVOntario) or CBC features a thoughtful interview on FATCA or even just the US incursions into Canada via extraterritorial tax demands on those it decides are ‘taxable ‘persons’ ? Obama’s mouthpiece Ambassador Jacobson gets to appear in our public media and peddle his propaganda and meaningless drivel in amongst the warning messages about border control and pap about our ‘shared’ ‘friendship’. There has been enough about the problem with TFSAs and RESPs to warrant at least some Canadian media inquiry, but we hear nothing. It is hard not to feel that it is being deliberately treated as too tough or technical or delicate to report on.
All or most of the financial advice for the common person in Canada, as published in the major dailies is still being written as if there is no US defined ‘foreign trust’ and FBAR and FATCA danger for > 1 million Canadian households. Our federal government is NOT warning us to stop using registered savings TFSAs, RESPs, and RDSPs, and we’re still being fed that stale letter from Flaherty that is dated 2011.
Just a follow up 10 months later. With all the RNC repeal FATCA efforts, how is the bill progressing?
and check out Ron Pauls Repeal bill in the Senate. S887, if I remember correctly…
Where is ONE Republican sponsor for Rand Paul’s Senate bill? Where? Where? Where? NOT ONE FRIGGIN Republican in the Senate has the balls to sign on!, NONE, NADA, Zilch!
So what does that tell you about their Repeal effort?