The Foreign Account Tax Compliance Act (FATCA) is not going away quietly although the limited bandwidth of the mainstream media is blocking a broader discussion of this very controversial effort by the U.S. Treasury Department and Internal Revenue Service.
The Foreign Account Tax Compliance Act (FATCA) is not going away quietly although the limited bandwidth of the mainstream media is blocking a broader discussion of this very controversial effort by the U.S. Treasury Department and Internal Revenue Service. However, it’s possible that one or more of the 19 or so Republican presidential candidates could bring attention to this issue.
In fact, Sen. Rand Paul, R-Ken., who recently launched his presidential campaign, re-introduced in March a bill to repeal parts of FATCA; he put forth a bill to repeal FATCA two years ago. It’s not a stretch to think that candidate Rand Paul could pick his moment and push for FATCA’s repeal.
Underscoring the point, Nigel Green, founder and chief executive of financial advisory firm deVere Group, wants to make FATCA’s global implications an issue in the 2016 U.S. presidential campaign. He’d like the growing crop of presidential candidates to “come clean” on a global tax law that he warns is “a blue print for worse to come” for nations beyond the U.S. Yet Green argues that FATCA has domestic impacts. (Green is the recipient of the 2015 FTF News Technology Innovation Award for Ops Business Person of the Year for 2015.)
“FATCA adversely affects millions of hardworking, middle class Americans around the world, plus U.S. companies that operate internationally — and, therefore, it impacts U.S. jobs and the American economy,” Green says in a recent statement. “Presidential candidates who support this tax act now need to justify to America why they support it; whilst those who want it repealed now need to articulate to voters why they believe it is fundamentally flawed and why they will move to repeal it. It is an issue that must play a major part in the national conversation ahead of the election.”
Green and other anti-FATCA advocates are arguing that the law has to be repealed because it is having unintended consequences because of its “dragnet, untargeted approach,” which labels 7.6 million Americans overseas, Green Card holders and “so-called ‘accidental Americans’ as financial pariahs. They are now routinely rejected from foreign financial institutions, such as banks in their country of residence, because FATCA’s costly and burdensome regulations mean they are now typically deemed more trouble than they are worth.”
Green reminds people that a deVere Group survey from earlier this year found that 73 per cent of Americans living overseas are considering relinquishing their U.S. passports to avoid the reach of the IRS. “In addition, U.S. firms which operate in international markets as well as in the U.S. are now often branded with a leprosy-like status,” Green says. “Of course, this can only be detrimental to America’s global competitiveness, and could, as such, seriously and negatively affect American jobs and the long-term growth of the economy.”
A major new concern of Green is that the U.S. government’s success with FATCA will lead to the Global Account Tax Compliance Act. “The Organization for Economic Cooperation and Development (OECD), which is based in France and is the de facto world tax authority, is proposing that accounts opened by foreign nationals be routinely reported to that individual’s homeland tax authorities. It is thought approximately 65 countries could ultimately be involved,” Green says.
“GATCA – which for Americans would arguably violate the Fourth Amendment – is FATCA on steroids,” Green says. “It would take authorized government snooping into innocent people’s financial affairs to a whole new level, it would lead to increased government and statism, it would lead to higher tax burdens for all, it would pose a risk to human rights and a serious threat to data protection, and it would trample all over time-honored sovereignty, amongst other serious issues.”
Despite the extremely interesting issues it inspires, it’s not certain that FATCA will get the attention of the media and presidential candidates although The New York Times ran an op-ed piece, “An American Tax Nightmare,” on May 14, that detailed some harrowing examples of Americans whose lives and businesses were hit hard by the FATCA reporting rules
“The only viable option is legal action to challenge the law’s constitutionality in the courts,” says Stu Haugen, the author of the piece who is an American marketing, sales and general management expert who has lived and worked overseas for 29 years. “We, a bipartisan group of Americans living overseas, have formed a group called FATCA Legal Action to fund and mount this challenge. The Republican National Committee and Republicans Overseas have endorsed the legal repeal of FATCA. To date, neither Democrats Abroad nor the Democratic National Committee has done so, but there is strong and growing support among rank-and-file Democrats living overseas, several of whom have agreed to be named as plaintiffs when the lawsuit is filed in the next few weeks.”
If, as Haugen suggests, there is a bipartisan groundswell for the repeal of FATCA, then it could become a hot issue in the campaign. Let’s hope the anti-FATCA efforts can spur illumination on a complex issue rather than a lot of hot air.
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