US bankers join ‘call to arms’ to repeal FATCA
There appears to be a new threat on the horizon for the Foreign Account Tax Compliance Act, or ‘FATCA’, America’s highly contentious new tax act which Washington is aiming to implement from 1st January 2014. And this time it seems the enemy is coming from within the US.
Repealfatca.com, the website launched to inform people of this odious piece of legislation – that requires every single financial institution in the world to report all their American clients’ financial activities directly to the US Internal Revenue Service (IRS), or be hit with a 30 per cent withholding tax – has recently posted the lawsuit being brought against the US Treasury and IRS by Florida and Texas bankers. It can be seen here.
The site’s founder, a former US Diplomat and US Senate staffer, who now runs a legal firm in Washington DC specialising in international affairs, tells me that this suit strikes at the heart of what could cause FATCA to ultimately unravel: the lack of a genuine reciprocity between the so-called ‘FATCA partners’.
Previously, I’ve commented that economically and politically influential countries such as China and Russia (who so far have shown complete indifference to signing up FATCA because they understand that they would get little, if anything, in return from doing so) could be the major stumbling block for this controversial and far-reaching project. But now, it would appear that American bankers could also represent a serious challenge to it.
The US Treasury is keen to stress that to date 75 countries, including the likes of the UK, Denmark, Mexico, Norway, Ireland, Spain and Switzerland, have signed an intergovernmental agreement (IGA) to implement FATCA. However, what the Treasury is less forthcoming with, is the fact that all these nations also need to implement the agreements within their own domestic laws too – which could be complex and time-consuming.
So, whilst it is disappointing that these 75 have caved in to the unreasonable demands of the US, it’s also encouraging that other governments, such as China and Russia are – so far – standing firm and refusing to be bullied into accepting that their financial institutions should act as snooping agents for the American tax authority.
And what’s perhaps even more heartening is that US bankers are also now backing the growing campaign for the Whitehouse to repeal FATCA, a piece of legislation which will do very little – if anything at all – to achieve its original objective of catching tax evaders, but that will turn American expats into financial pariahs around the world, slash foreign investment and job creation in the US, impose unnecessary costs and burdens on foreign financial institutions worldwide, contravene a host of local laws, and potentially damage important international trade relations.
Nigel Green deVere Group
Blog written 25th April