Trump needs to show backbone and abolish toxic FATCA
Donald Trump needs to show some backbone and revoke FATCA, Obama’s controversial global tax law, that has a negative impact on foreign financial institutions (FFIS), and that is forcing a record number of Americans overseas to relinquish their U.S. passports.
The president-elect must address the crucial issue of abolishing the Foreign Account Tax Compliance Act as a matter of utmost priority.
With Mr Trump already having stated that he will revoke some of Obama’s executive orders, I would strongly encourage him to make repealing FATCA one of those orders.
Indeed, FATCA negatively impacts millions of U.S. citizens, and as a direct result of this law, has led to a growing number of patriotic Americans giving up their citizenship.
Since the law came into effect in July 2014, official figures have shown that an increasing number of U.S. citizens are giving up their passports each year. This comes in line with a survey carried out by deVere in 2015, which showed that as much as 73 per cent of Americans residing overseas are, with a heavy heart, considering relinquishing their U.S. passports.
As is stands, this toxic law is, in effect, turning the eight million law-abiding Americans abroad into financial pariahs.
This is predominantly due to the fact that many U.S. citizens cannot have a bank account in their country of residence, as FFI’s consider them more trouble than they’re worth as a result of FATCA’s burdensome regulations. Naturally, this makes living a normal life somewhat challenging for these Americans overseas.
Under the law, all non-U.S. foreign financial institutions are required to report the financial information of American clients who have accounts holding more than $50,000 directly to the IRS.
Of course, tackling tax evasion is a noble and worthwhile objective, yet FATCA’s dragnet approach will be highly ineffective at achieving this, as well as being immensely costly.
Over the past few years, America has used its status as a global super power to strong-arm FFIs worldwide into accepting FATCA, or face hefty penalties and sanctions. As such, these FFI’s are working as de facto agents for the IRS.
Therefore, Mr Trump now has the ideal chance to show his true spirit and abolish what is a fatally flawed, imperialistic law that brings with it a host of misguided, unintended consequences.
However, until the law has been resigned to the history books, Americans must adhere to the rules.
Fortunately, there are some well-established solutions to help mitigate FATCA’s privacy-infringing demands.
These include supplementary overseas pension contracts which allow qualifying U.S. taxpayers to make annual contributions to a pension fund over and above US$51,000 – which is not possible within the current U.S. tax-approved regime. These products also allow tax-deferred investment growth and the opportunity to invest freely into Passive Foreign Investment Companies (PFICs), without incurring U.S. tax penalties and burdensome tax reporting procedures.
Consequently, once he’s in the White House, Trump must show some real gumption – as he claims he will on so many matters – and take steps to eradicate FACTA sooner rather than later.