Fatca Changes Cautiously Welcomed
The US Treasury Department’s latest revisions to its highly controversial Foreign Account Tax Compliance Act (FATCA) are to be cautiously welcomed I think .
From 1st January 2013, FATCA requires all overseas banks, and other foreign financial institutions (FFIs), to report the financial affairs of their American clients directly to the US government – or face a 30 per cent withholding tax on all US transactions.
As the process of becoming ‘FATCA-compliant’ is extremely costly and overly complex, many foreign financial institutions have decided to simply reject American individuals and US businesses as clients.
However, the Treasury Department has recently released a modified version of its model Intergovernmental Agreement (IGA) that tries to counteract this discrimination against Americans wishing to open or maintain bank accounts outside the US.
This modification is a step in the right direction, although it is only designed for smaller foreign financial institutions and will not address FATCA’s wider and incredibly damaging implications.
The US is guilty of bullying overseas financial organisations and governments into acting as defacto snooping agents for the Internal Revenue Service, or having to face heavy penalties.
As a result, a growing number of non-US financial institutions have been closing Americans’ accounts and rejecting Americans who want to open a new one. Being denied banking services abroad is, of course, of enormous concern to the six million Americans who live overseas.
Additionally, it is affecting the many job and wealth-generating US firms which operate globally, as they too need foreign bank accounts to facilitate payments from foreign clients and to pay local charges, and they are increasingly finding that they are being turned away.
Whilst we at deVere welcome the new version of the model IGA, which will go some way towards helping the many Americans who are being denied banking services outside the US, the Treasury Department must do much more to address the unintended, adverse affects of FATCA.