More signs that the FATCA project is weakening

06 Feb
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Last month, I commented that the implementation of FATCA, America’s new and toxic tax act which will negatively impact the seven million American expats around the world as well as the global economy, appeared to be “losing momentum.”

This week, I’m pleased to say, there is further evidence that this highly polemic piece of legislation is faltering before it is due to come into effect on 1st January 2014.

It’s come to light that the Obama administration might soon ask Congress for the power to demand that American banks provide information on their foreign clients’ financial activities to the home governments of those clients.

This will, of course, be extremely complex and costly for US banks – and the costs are likely to be passed on to their customers – and the proposal will, consequently, be met with fierce resistance from the financial industry and Congress.

So why is Obama set to pick such a politically dangerous fight?

It is because in order for FATCA to work effectively, the US Treasury has to secure intergovernmental agreements (IGAs) with every country around the world, which would require them to demand that their financial institutions report information about Americans’ accounts to the US Internal Revenue Service in a bid to catch tax evaders.

But some countries, including ‘big hitters’ such as China, France and Germany, are arguing that if they must ask their financial institutions to do this, then America must reciprocate the deal and force its financial institutions to provide details on their citizens who have accounts in the US for the same reason.

FATCA is, according to the Treasury, a “reciprocal agreement with partner countries”, although as an IRS official commented on 25th January, “Domestic banks are not subject to the same reporting requirements as their foreign counterparts.”  Perhaps the US Treasury has a different definition of ‘reciprocity’ to everyone else?

Either way, the Obama administration will have a battle on its hands if it intends to seek the right to have all US banks, and other financial institutions, sign up to an expensive and burdensome programme of declaring their foreign clients’ accounts.

And if a growing number of countries insist on real, functioning reciprocity –as some clearly are – and they can’t get it, FATCA will, ultimately, fail.

Nigel Green deVere Group

Blog written on 6th of February

 

4 Comments

  1. Mr. Green, you are always a breath of fresh air in the fetid FATCA swamp. While I would so much more prefer to see FATCA fail before it even gets started, I realize that there is not much likelihood of that happening. Individuals, institutions and, indeed, entire countries will likely suffer greatly before this folly can be completely halted.

    However, you remind us that there are many strong dynamics in play that should derail the FATCA train in short order as soon as the really fun stuff begins: the reciprocal reporting requirements faced by domestic U.S. banks (and the massive foreign disinvestment that will swiftly ensue), the withholdings war that now begins in 2017 (no doubt the day after the next election), and the growing potential that a worldwide anti-FATCA movement will continue to gain adherents and traction in public discourse and consciousness (with no thanks to the majority of mainstream media, of course).

    Thank you, sir, for helping to keep up the morale! As Blaze has suggested, may President Obama hear and understand the chorus of outrage and condemnation this ill-conceived law has given rise to. If Mr. Obama is indeed a good, caring and moral man, then he must eventually acknowledge his administration’s terrible misjudgement and ask Congress to repeal this repugnant and self-defeating law.

  2. Mr. Green, I second the earlier comment that your comments offer a breath of fresh air in this fetid swamp. Please DO keep us all posted with your clear, insightful comments. I and other Canadians are working hard at convincing the Canadian government to stand up for its privacy and sovereignty in the face of this coercive economic imperialism. With about a million affected US persons, Canada may well have the largest group at stake of any single affected nation. If Canada stands up for itself, it will be a FATCA shot hear round the world. This, along with the prospect of domestic US banks (and their US customers) being shouldered with the burden of reciprocal compliance, should grind FATCA to a halt. I have no illusions that the US will timidly admit they were gravely mistaken in launching this enterprise, but I trust that, like many other ill-conceived laws, FATCA would then languish unenforced into the future. What can one person do? Well, the major media are not doing their job reporting this issue, so world social networking must win this fight. Simply tell everyone you know.

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