— U.S. Citizen Abroad (@USCitizenAbroad) January 18, 2014
This strong indictment from a Washington based lawyer Eileen O’Connor (who once headed the tax division of the U.S. Department of Justice) Includes:
Lost in the bewilderment about the Obama administration choosing which parts of Obamacare it would apply to which people and when, has been that it has been doing the same thing with the Foreign Account Tax Compliance Act (FATCA). The Administration has time and again delayed effective dates that were set in the statute. Nobody is complaining, though, because nobody can comply. Not the government, and not the financial institutions subject to the law.
Embedded in the charmingly-named HIRE Act, FATCA requires any financial institution anywhere in the world to report to the US government the results of any dealings it has with any person or entity subject to US tax laws. Just as nationalizing activities amounting to one-sixth of the national economy was a pretty tall order, so too was requiring global financial reporting.
Another problem with FATCA implementation is the intergovernmental agreements Treasury has been trying to negotiate around the globe. A few are in place; more are in the works.
Under the agreements, the foreign government agrees to require its financial institutions to provide information on US persons either directly to the IRS (a Model 2 agreement), or to the foreign government, which will then provide it to IRS (a Model 1 agreement). To entice foreign governments to enter into these agreements, Treasury has been promising to reciprocate, to the extent allowed by law.
The catch is that the reciprocation is not presently allowed by U.S. law. This is clear from the Administration’s budget request for 2014, the “Analysis and Perspectives” for which asks, on page 202, for the authority to reciprocate.
Rep. Bill Posey, R-FL, wrote to Treasury Secretary Jack Lew last summer, asking him to stop negotiating FATCA-implementing intergovernmental agreements with foreign governments, because his promise of US reciprocation is one on which he cannot deliver. Even if providing this information to foreign governments were permissible under US law, Posey believes doing so would discourage foreign investment in the US, thus depriving the US of capital that would otherwise be available for business formation and growth.
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