Germany’s lack of urgency on the signing-up to an intergovernmental agreement (IGA) with the US on its problematic Foreign Account Tax Compliance Act (FATCA) is additional proof, in my opinion, that this dangerous US tax project is stumbling – even before it’s launched on 1st January next year.
The European powerhouse’s apparent ‘mañana’ attitude towards completing an IGA will be particularly frustrating for the US Treasury as it was hoped it would be one of FATCA’s five original ‘partners’- alongside France, Italy, Spain and the UK – and because it is the current economic and political master of Europe.
To date, of the ‘original five’, only Spain and the UK have agreed to IGAs.
Additionally, Washington will be worried by Germany’s non-hurried stance to sign its FATCA IGA, because another economic giant, China, looks like it is also ‘kicking the can down the road’ on the matter. This is probably due to the fact that FATCA is extraordinarily onerous and costly to comply with, it contradicts certain regional regulations, and, vitally, due to US financial institutions not having to report activities back to China on their Chinese clients’ financial affairs, reciprocity is virtually non-existent, meaning it would gain nothing from it.
I’d imagine that is a massive worry to the US that politically and economically influential Germany and China – the largest economy in Europe, and the world’s second largest and fastest-growing major economy, respectively – are, at best, being slow on the uptake, and at worst, showing signs of utter indifference to its misguided FATCA mission.
FATCA, I believe, should be repealed by the White House as, if it comes into effect, it will cut overseas investment into the US, killing American jobs; it punishes American expats and US firms which have dealings outside America; and it threatens important yet delicate international trade and diplomatic relations. Plus, of course, it’ll do almost nothing to address tax evasion.
Nigel Green deVere Group
Blog written 27th February