FATCA: Will America’s toxic tax act come into effect on schedule?
In under six months’ time Washington is hoping to implement its highly contentious and, in my view, utterly toxic Foreign Account Tax Compliance Act (FATCA).
FATCA, as you’ve probably heard by now, will require every foreign financial institution (FFI) in the entire world to report all their American clients’ financial activities to the IRS. Failure to do so by any FFI will mean that they will face heavy penalties and effective exclusion from the US financial system.
Like many people – including Republican Senator and possible 2016 presidential candidate, Rand Paul, and James Jatras, a former US Diplomat, who runs a Washington-based legal firm that specialises in international affairs, amongst other high profile individuals – I have been publicly championing the campaign to have this damaging piece of legislation repealed by the White House.
So, with half a year to go, how likely is it that FATCA will be rolled out?
At the moment, it is a hard one to judge. The US Treasury Department is, alongside its FATCA allies, pushing ahead with the intergovernmental agreements (IGAs) that will force the foreign financial institutions (in those countries whose leaders have signed the IGA) to report on their American clients’ financial activities. There are now about a dozen countries worldwide which have agreed to FATCA’s, frankly, unreasonable demands.
However, the fact is that the process to have all the major nations, including the vitally important economic powerhouses of Russia and China, sign up to FATCA remains achingly slow. As a result of this, and because those who have rubber-stamped the IGA might still not be ready to effectively introduce what is required in January, it could mean that Washington will miss its New Year target.
At the moment, I would be inclined to agree with James Jatras, who recently argued that it is “50/50” whether the FATCA era will begin on 1/1/14.
Nigel Green deVere Group
Blog written 3rd July
Another significant glimmer of hope is that the House of Representatives could block the Treasury from promising the world’s governments a (supposed) ‘reciprocity’ for signing the IGA. If this ‘tool’ were removed then governments can no longer pretend that they are cowing to the US to get something back in return. Their spinelessness on this issue would, in effect, be exposed.
Read again here why I’m opposed to FATCA.