US Treasury should be called to account on ‘economy-damaging’ FATCA

16 Nov

The U.S government owes it to Americans to explain why it remains committed to implementing the highly controversial and potentially damaging Foreign Account Tax Compliance Act (FATCA) .

Designed primarily, according to the US Treasury department, to catch tax evaders, FATCA will require all foreign financial institutions (FFIs) to report the activities of their American clients to the US Internal Revenue Service (IRS). The penalty of not complying with FATCA’s costly and complex procedure will be 30 per cent withholding’s of US source income.

However, many critics argue that it has “unintended consequences” for the American economy and it will not help substantially in the fight against tax evasion.

I agree and think the US Treasury Department must be called to account. It needs to justify to the American people why it is determined to proceed with FATCA when it threatens to financially negatively impact the US economy.

FATCA was slipped into the 2010 HIRE Act and wasn’t reviewed properly by Congress – indeed most in Congress are unaware of the legislation, let alone its unintended consequences.

FATCA will dramatically reduce foreign investment in the US– at a time when the economy is teetering on a knife edge – due to the threat of the IRS withholding 30 per cent of their funds.  Investors will simply take their money overseas.  Indeed, David Schwartz, the executive director of the International Bankers’ Association of Florida recently observed that “several hundred million dollars have left Florida for foreign jurisdictions” between April 19th, when FATCA regulations were passed, and the end of July.

The potential revenues that FATCA could generate will be outweighed by huge foreign investment losses.

In addition, FATCA will adversely affect US businesses operating in global markets because they have to have foreign bank accounts to facilitate payments from foreign clients and to pay local charges.  However, many foreign financial institutions are rejecting American firms as clients – even if they have worked with them for years – because becoming ‘FATCA compliant’ is too burdensome and far too expensive.

FATCA does very little to actively target tax evaders and it has a potentially devastating effect on the American economy.  The U.S government owes it to Americans to give public, in-depth justifications on why it remains committed to this highly controversial piece of legislation.

Nigel Green deVere Group

Blog written November 16th

3 Comments

  1. http://isaacbrocksociety.ca/2012/11/13/jim-jatras-stop-an-impending-massive-handover-of-canadian-sovereignty-to-the-united-states/
    http://www.newswire.ca/en/story/1071319/stop-an-impending-massive-handover-of-canadian-sovereignty-to-the-united-states-says-isaac-brock-society

    “STOP an Impending Massive Handover of Canadian Sovereignty to the United States!, says Isaac Brock Society
    — Tell the Government: Canada Must Say NO to the United States on ‘FATCA’ —
    Call or email Stephen Harper, Jim Flaherty, and Your MP Today!

    OTTAWA, Ontario, Nov. 14, 2012 /CNW/ – The following is released by the Isaac Brock Society:
    Recently the Department of Finance invited comments on what was characterized as “an agreement to improve cross-border tax compliance through . . . the provisions enacted by the United States commonly known as the Foreign Account Tax Compliance Act (FATCA).” This eleventh-hour invitation came as sources in both Ottawa and Washington announced that they were close to finalizing an intergovernmental agreement (IGA) that would, in effect, deputize the Canadian government to enforce this American law in Canada.

    The Department’s invitation is to “persons whose interests are affected by the provisions of FATCA” but does not spell out that each and every Canadian would suffer from FATCA and from an IGA to implement it:

    Canadian citizens have an interest in preserving Canada’s sovereignty against U.S. encroachment. However it is disguised, FATCA is a unilateral U.S. initiative. The U.S. didn’t negotiate a global tax scheme with Canada and other countries but instead enacted an unprecedented extraterritorial law and demands that Canada comply and bear the costs. An IGA simply puts a Canadian glove on the hand enforcing American law.
    …”

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