[xml][/xml]
The Bahamas Weekly Facebook The Bahamas Weekly Twitter
News : International Last Updated: May 7, 2015 - 7:57:38 AM


American Citizens Abroad Blasts FATCA in Comment to House Working Groups, Calls for Repeal as Part of Tax Reform Framework
By James Jatras
Apr 5, 2013 - 1:16:34 AM

Email this article
 Mobile friendly page
fatca.jpg
Washington, DC - In an April 4, 2012, submission to the leadership of the International Tax Reform Working Group and the Financial Services Tax Reform Working Group of the Committee on Ways and Means of the U.S. House of Representatives, American Citizens Abroad (ACA) – the flagship association representing the interests of some seven million Americans residing outside the United States – has again called for repeal of FATCA (“the Foreign Account Tax Compliance Act”) as part of a comprehensive overhaul of the U.S. tax system.   While focusing on the particular damage FATCA does to U.S. citizens living abroad, ACA pulls no punches in spelling out the broader harm this 2010 law (now pending implementation) threatens to inflict on the American economy as a whole, while failing in its stated purpose of curbing offshore tax evasion.

Special attention should be paid to the international consequences of the U.S. Treasury Department’s attempts to implement FATCA via “intergovernmental agreements” (IGAs), which are nowhere mentioned in the law and have not been authorized by Congress.   IGAs threaten to compound the harm inflicted by this misguided legislation by repatriating FATCA’s costs on U.S. domestic institutions (and American consumers) under an unwise, unworkable, and unbalanced attempt at “reciprocity” with foreign governments:

“Foreign governments worldwide are furious that the U.S. Congress has the arrogance to exercise financial imperialism, to unilaterally impose its laws on the rest of the world, to require foreign financial institutions to spend tens of billions of dollars to comply with U.S. law and to require FFIs to break privacy laws in their own country in order to comply with FATCA, exclusively for the benefit of the United States, with no reciprocity, let alone any prior negotiation. Since FATCA has proved unworkable as legislated, the Department of the Treasury has been obliged to negotiate IGAs with foreign governments to circumvent the privacy issue and to introduce a limited form of reciprocity, but resentment abroad remains great. There will be a backlash and immediate consequences. The reciprocity agreements in the IGAs create a major burden for U.S. financial institutions now required to filter out by nationality all accounts owned by foreign residents and to report on those accounts to the respective governments.”

RepealFATCA.com applauds ACA’s position and calls on other impacted interests to engage directly in achieving FATCA’s repeal before the worst aspects of this misguided law go into effect.  The time to get behind the repeal push is now!

Visit www.RepealFATCA.com for more information on “ the worst law most Americans have never heard of”   

The full ACA text follows:

Source: http://americansabroad.org/ files/1813/6500/6764/ fatcasubmission.pdf

 
AMERICAN CITIZENS ABROAD THE VOICE OF AMERICANS OVERSEAS

American Citizens Abroad (ACA) was one of the first organizations to call for the repeal of FATCA soon after passage of the law in 2010 and maintains its recommendation that Congress should repeal FATCA within the framework of tax reform seeking an efficient, fair tax system. It is evident from the perspective overseas that:

    FATCA will not achieve its purpose of tracking down tax evaders;
    FATCA is destroying the community of seven million Americans abroad;
    FATCA creates serious damage to the United States and its economy.

FATCA will not achieve its purpose

FATCA is 1984 in the world of George Orwell. Big brother will have access to all personal information, disregarding personal privacy and risk of identity theft. But big loopholes are already apparent. FATCA will lead to a two-tier banking system worldwide - those countries which adhere to FATCA and those which refuse. Russia has already refused and rumour is that the Chinese will also either refuse outright or find an indirect path to circumvent FATCA reporting requirements. The position of other Asian countries, Middle East countries and Latin American countries is not yet known.

The costs of implementing FATCA are absolutely disproportionate to the expected additional tax revenue. The Joint Committee on Taxation estimates additional tax revenue of only about $750 million a year for ten years. Compliance, however, of foreign financial institutions (FFI) will cost tens of billions of dollars and U.S. financial institutions face similar costs due to administrative requirements on payments and the reciprocity measures introduced in the Intergovernmental Agreements (IGA). FATCA has already engendered enormous cost for the IRS and Treasury Department through the hundreds of thousands of hours spent by top tax specialists devoted to drafting regulations and negotiating with foreign governments. How many more millions will be required for the IRS to administer and analyze the mass of information flows scheduled to begin in 2014? Congress has never subjected FATCA to a cost/benefit analysis.

The IRS does not need FATCA to pursue tax evaders. Even prior to the passage of FATCA, the IRS had a whole basket of tools, including the QI program, the John Doe summons, Tax Information Exchange Agreements, Mutual Legal Assistance Treaties, the Swift Agreement and the whistleblower program. Furthermore, the IRS Overseas Voluntary Disclosure Program (OVDP) has already brought in over $5 billion in just four years. The OVDP requires participating taxpayers to provide all information on international networks facilitating tax evasion. Consequently, the IRS now has a vast data base to mine for efficient law enforcement, whereas FATCA requires the IRS to look for a needle in a haystack of a massive amount of irrelevant, disparate data, costly to administer and inappropriate for effective law enforcement.

FATCA is destroying the community of seven million Americans abroad

American citizens have become pariahs in the international financial community because of FATCA. The cost of administering FATCA and the perceived legal threats are so high that FFIs prefer not to retain or take on American clients, who represent only a tiny fraction of their total clientele. ACA has received multiple testimonies of Americans residing overseas who have had bank accounts in their country of residence closed, who have been denied entry into foreign pension plans and insurance contracts, who have had mortgages cancelled, who have been pushed off of joint-bank accounts held with foreign spouses, who have lost access to credit cards and who have been forced into a cash economy.

A few major financial institutions may still allow cash accounts, but certainly no investment accounts. PFIC reporting rules exclude investment in foreign mutual funds. Only the few wealthy with financial assets in excess of $1 million have access to SEC registered subsidiaries of foreign banks for investment purposes. In addition, U.S. financial institutions refuse to take on American clients with a foreign address because of the Patriot Act. The average American abroad is shut off from all avenues for personal investment.

In this environment, it is difficult and complicated for Americans to move overseas, establish normal banking relationships required for modern life and gain international experience.

Business opportunities for Americans overseas are blocked. Foreign partners no longer accept Americans in new ventures because FATCA requires reporting to the IRS of any U.S. person owning 10% or more of an unlisted foreign corporation or partnership. Some American-owned businesses overseas have closed down because of lack of access to banking facilities.

FATCA automatically categorizes any American abroad as suspect and ostensibly discriminates against Americans abroad. Americans overseas must report their foreign financial assets on Form 8938 with their 1040 under threat of heavy penalty for non-reporting, but in the eyes of Americans abroad, these assets are local, not foreign. Americans residing in the United States have no such comparable reporting on their U.S.-based assets.

FATCA is contrary to the Universal Declaration on Human Rights, to which the United States is a signatory, as it forces FFIs to discriminate against Americans on the basis of their citizenship.i

The rapid rise in renunciations of U.S. citizenship over the last four years is directly linked to FATCA. U.S. policy has indeed gone astray when it forces its own citizens to renounce their U.S. nationality, particularly at a time when the U.S. needs to reinforce its competitive position in the global economy.

To eliminate FATCA’s serious collateral damage on Americans abroad, the United States must adopt residence-based taxation, which would de facto eliminate applicability of FATCA to Americans residing overseas. American Citizens Abroad has submitted to the International Tax Reform Working Group of the Ways and Means Committee a detailed proposal for transition to residence-based-taxation for individuals.

FATCA creates serious damage to the United States and its economy

Foreign governments worldwide are furious that the U.S. Congress has the arrogance to exercise financial imperialism, to unilaterally impose its laws on the rest of the world, to require foreign financial institutions to spend tens of billions of dollars to comply with U.S. law and to require FFIs to break privacy laws in their own country in order to comply with FATCA, exclusively for the benefit of the United States, with no reciprocity, let alone any prior negotiation. Since FATCA has proved unworkable as legislated, the Department of the Treasury has been obliged to negotiate IGAs with foreign governments to circumvent the privacy issue and to introduce a limited form of reciprocity, but resentment abroad remains great. There will be a backlash and immediate consequences. The reciprocity agreements in the IGAs create a major burden for U.S. financial institutions now required to filter out by nationality all accounts owned by foreign residents and to report on those accounts to the respective governments.

An immediate impact of FATCA is a serious reconsideration by foreigners of the risks and dangers of investing in the United States. Foreign insurance companies have already pulled back. Private bankers are advising their foreign clients to reduce U.S. investments, if not totally divest. Foreign investment groups that had been providing fresh capital to small and medium-sized U.S corporations have stopped this activity. Latin American money is retreating from U.S. banks. The threat of FATCA confiscatory 30% withholding tax not only on all U.S. source fixed or determinable annual or periodical gains, profits, and income (FDAP income) but also on the sale value of U.S. assets creates great uncertainty and reserve among foreign investors.

FATCA creates a new barrier to U.S. exports. The President’s Export Commission has recognized that the major export potential of the country comes from small and medium-sized U.S. companies. How will they be able to initiate export activities overseas if they cannot even open a bank account abroad?

Finally, FATCA creates systemic risks for the entire international financial community, through potential processing errors, chain effect, misinformation, etc. One measure of the law – the passthru deemed essential by Congress for an air-tight system – has been defined as unworkable by the British Bankers’ Association and even by one of the authors of FATCA legislation, J. Richard Harvey, of Villanova University.ii FATCA is bad law on all fronts and should be repealed.


Disclaimer: The views expressed here are solely those of the author in his/her private capacity and do not in any way represent the views of TheBahamasWeekly.com



Bookmark and Share




© Copyright 2013 by thebahamasweekly.com

Top of Page

Receive our Top Stories



Preview | Powered by CommandBlast

International
Latest Headlines
NASA Telescopes Find Clues For How Giant Black Holes Formed So Quickly
IRENA’s 11th Council Meeting Kicks Off in Abu Dhabi
Bahamas Environment Minister named Chairman of new IRENA Council
Husband and Wife Team Having Tremendous Success with Innovative Teaching Method
The Bahamas Forges Diplomatic ties with South Africa
Bahamians abroad register to vote in upcoming referendum
Bahamas Environment Minister in Abu Dhabi to speak at IRENA
Bahamas Christian Council Group on visit to DC
MOU Signed Between Caribbean Export and The Latin Chamber of Commerce
Bahamas Delegation Participates in Seventh Meeting of CAROM-US Trade and Investment Council
Caribbean’s fisheries and tourism linkages highlighted at Geneva forum
New Calculations of Conch Catch Can Add Up to a Healthy Fishery
‘Business as usual’ approach in Caribbean will see debt soar
Rahming chairs CRULAC meeting
Bahamian top model meets the Prime Minister of Canada
Bahamians voting for Canada
PAHO/WHO urges transformation of nursing education in the Americas
Critical NASA Science Returns to Earth aboard SpaceX Dragon Spacecraft
Bahamas PM Christie attends Energy Summit in Washington
ECLAC and ILO: Latin American and Caribbean Unemployment Seen Rising in 2016 Due to Regional Economic Deterioration
Movie about Derek Walcott to have a St. Martin premiere
NASA's Kepler Mission Announces Largest Collection of Planets Ever Discovered
Caribbean Mosquito Awareness Week launched to raise awareness on preventing Zika
College of The Bahamas Choir robbed on tour in South Florida
Cost of fishing in the Caribbean to be assessed under CRFM and FAO study
Michael Dingman to bring remarks at Dingman Center for Entrepreneurship’s 30-Year Anniversary and Awards Celebration at U of Maryland May 5
Pew Commends Broad Global Support for Proposed Shark and Ray Protections
Bethel and Booker Meet with All Parliamentary Group for The Bahamas
Building the Caribbean’s muscle to ensure safe seafood and to protect and grow US$400 million in fisheries exports
CARICOM Secretary General Thankful for UK-Caribbean Forum; Expresses the Issues
Bahamas elected Chair of Inter-American Committee on Education for 2016-2018L: Will host 9th Inter-American Meeting of Ministers of Education
Bahamas Passport Clinic Set for Western Canada in June
Expo 2016 Antalya opened with world class ceremony
Mary Lightbourne appointed as Turks and Caicos’ Deputy Director of Tourism
Special emphasis directed at flyingfish fishery in the Eastern Caribbean
(Video) PM Christie Speaks at UN High-level Signature Ceremony for the Paris Agreement, National Statements
World Leaders Sign the Paris Agreement
Turks and Caicos mourns the loss of music legend Prince
Bahamas Embassy hosts "Things to Do D.C." Washington event
Stakeholders set path for establishment of regional creative industries body