The hypocrisy of this is just so spectacular, I have to point to it:
I’ve lost the pointer to why I was looking at this… some article somewhere sent me down this rabbit hole…
FATCA is the acronym. What is it? Essentially it requires every single banking entity in the world to report to the U.S. I.R.S. on every single account holder who is of U.S. origin. The USA wants to track 100% of U.S. citizens everywhere in the world, but can’t be bothered to find any illegal aliens living in the USA. The hypocrisy, it burns…
The Foreign Account Tax Compliance Act (FATCA) is a 2010 United States federal law to enforce the requirement for United States persons including those living outside the U.S. to file yearly reports on their non-U.S. financial accounts to the Financial Crimes Enforcement Network (FINCEN). It requires all non-U.S. (foreign) financial institutions (FFIs) to search their records for indicia indicating U.S. person-status and to report the assets and identities of such persons to the U.S. Department of the Treasury. The FATCA was the revenue-raising portion of the 2010 domestic jobs stimulus bill, the Hiring Incentives to Restore Employment (HIRE) Act, and was enacted as Subtitle A (sections 501 through 541) of Title V of that law.
So a “jobs bill” has as a key portion, mandating what foreign banks must do, and assuring no penny escapes US control. Sheesh. And folks wonder why the voters are fed up with the crap from D.C. and want Trump to just go trash it. Please, keep telling me how horrible he is and how much he will break things and do damage and “doesn’t know how Washington works”. It is music to my ears.
I’m going to quote the “criticisms” part in toto as the size has an impact all on its own. I’ve bolded some bits.
Certain aspects of FATCA have been a source of controversy in the financial and general press. The Deputy Assistant Secretary for International Tax Affairs at the U.S. Department of the Treasury stated in September 2013 that the controversies were incorrect (myths). The controversy primarily relates to several central issues:
Cost. Robert Stack provided the Treasury position that “Treasury and the IRS have designed our regulations in a way that minimizes administrative burdens and related costs.” Estimates of the additional revenue raised seemed to be heavily outweighed by the cost of implementing the legislation. In March 2012 the Association of Certified Financial Crime Specialists (ACFCS) said FATCA was expected to raise revenues of approximately US$800 million per year for the U.S. Treasury with the costs of implementation more difficult to estimate. ACFCS claimed it was extremely likely that the cost of implementing FATCA, borne by the foreign financial institutions would far outweigh the revenues raised by the U.S. Treasury, even excluding the additional costs to the U.S. Internal Revenue Service for the staffing and resources needed to process the data produced. Contrary to established congressional practice, FATCA was not subject to a cost/benefit analysis by the Committee on Ways and Means. Perhaps not considered by Congress, the cost to the global financial institutions to implement FATCA has been reported to be range from Forbes’ estimate of US$8 billion a year, (approximately ten times the amount of estimated revenue raised) US$200 billion (based on per capita costs for Australia and the UK), to 1-2 trillion USD (chapter of the Chamber of Commerce)
Benefits versus cost. The intention of locating U.S. persons and their non-U.S. financial accounts was to increase tax revenues from the interest, dividends, and gains of those assets. The majority of assets located was expected be the international equivalent of standard checking and savings accounts, where the applicable interest was less than 0.5% during 2015. The majority of that income is already (by tax treaty) attributable to the country where it resides. (IRS form 1116 is normally used to credit foreign taxes upon passive income). Another source of revenue where FATCA intends to raise revenue is in the identification of a wider population of U.S. persons. However, the majority (82%) of U.S. persons filing owe no tax to U.S. (due to tax treaties).
Find EVERY SINGLE US CITIZEN GLOBALLY, but can’t find non-US Citizens inside the USA…
Possible capital flight. The primary mechanism for enforcing the compliance of foreign financial institutions is a punitive withholding levy on U.S. assets which the Economist speculated in 2011 might create an incentive for foreign financial institutions to divest or not invest in U.S. assets, resulting in capital flight. When implementing FATCA, Congress did not publish the source of the revenue data, neither had it performed a cost/benefit analysis.
Relevance. United States does not have a wealth tax or any other tax upon financial assets. Without a tax upon wealth, it is questioned as to why wealth is required to be reported.
Fairness. Residents of the United States have not, in general, been required to report their financial assets to the Internal Revenue Service. Non-residents are required to report asset values.
Foreign relations. Forcing foreign financial institutions and foreign governments to collect data on U.S. persons at their own expense and transmit it to the IRS has been called divisive. Canada’s former Finance Minister Jim Flaherty raised an issue with this “far reaching and extraterritorial implications” which would require Canadian banks to become extensions of the IRS and would jeopardize Canadians’ privacy rights. There are also reports of many foreign banks refusing to open accounts for Americans, making it harder for Americans to live and work abroad.
Extraterritoriality. Robert Stack of the IRS said that extraterritoriality was incorrect (a myth) “FATCA has received considerable international support because most foreign governments recognize how effective FATCA, and in particular our intergovernmental approach, will be in detecting and combating tax evaders” The legislation enables U.S. authorities to impose regulatory costs, and potentially penalties, on foreign financial institutions who otherwise have few if any dealings with the United States. The U.S. has sought to ameliorate that criticism by offering reciprocity to potential countries who sign intergovernmental agreements, but the idea of the U.S. Government providing information on its citizens to foreign governments has also proved controversial. The law’s interference in the relationship between individual Americans or dual nationals and non-American banks led Georges Ugeux to term it “bullying and selfish.” The Economist called FATCA’s “extraterritoriality stunning even by Washington’s standards.”
Differentiation by national origin and discrimination. In each country of the world, those residents which are suspected to be U.S. citizens are separated out at their financial institutions for differential treatment, based upon their place of birth and nationality. Discrimination according to national origin is prohibited in most countries. For example, Article 14 of The European Convention on Human Rights specifies “Prohibition of discrimination: The enjoyment of the rights and freedoms set forth in this Convention shall be secured without discrimination on any ground such as … national or social origin, association with a national minority, property, birth or other status.” Those suspected to be of U.S. nationality are treated differently than any of the other residents. Few precedents exist in the last 70 years, where any particular nationality has been searched out to be identified strictly by virtue of nationality., Previous identifications by national characteristic have only occurred within regions. Other global instances have not been identified.
Effect on “accidental Americans”. The reporting requirements and penalties apply to all U.S. citizens, including accidental Americans, those who are unaware that they have U.S. citizenship. Since the U.S. considers all persons born in the U.S., and most foreign-born persons with American parents, to be citizens, FATCA affects a large number of foreign residents, who are unaware that the U.S. considers them citizens.
Effects on non-Americans. Persons who are not U.S. residents and are not U.S. persons and do not share accounts with U.S. persons still must self-certify said status when opening a bank account outside the U.S. at any FFI. According to the FATCA IGA, if such a person does not self-certify said status, that person cannot open a bank account at that institution. Canada and United Kingdom have interpreted the IGA’s differently and believe that non-U.S. persons who fail to self-certify shall not be refused a bank account. However, non-co-operating non-U.S. persons shall be FATCA reported in the same way as those persons who have U.S. indicia.
Robert Stack of the IRS presented the administration’ IRS position that renunciation due to FATCA are incorrect (a myth), because: “FATCA provisions impose no new obligations on U.S. citizens living abroad.” The statement ignores the FATCA self-certification processes and filings of form 8938. The U.S. State Department admits that the rise of renunciation figures are related to U.S. taxation policy. The State Department acknowledged the rise in relinquishments and renouncements, and expects them to rise further in the future.
In 2013, Time magazine reported a sevenfold increase in Americans renouncing U.S. citizenship between 2008 and 2011, attributing this at least in part to FATCA. According to BBC Magazine, the act is one of the reasons for a surge of Americans renouncing their citizenship—a rise from 189 people in Q2/2012 to 1,131 in Q2/2013. Another surge in renunciations in 2013 to record levels was reported in the news media, with FATCA cited as a factor in the decision of many of the renunciants. According to the legal website International Tax Blog, the number of Americans giving up U.S. citizenship started to increase dramatically in 2010 and rose to 2,999 in 2013, almost 6-fold the average level of the previous decade. The trend has continued in 2014 with 3415 people reported by the Federal Register as having giving up citizenship or Long-term residency.
In 2014 Forbes wrote, that the numbers of those renouncing their citizenship are understated. According to a survey reported by Forbes, “5.5 million Americans eye giving up U.S. citizenship”. There are serious differences between the figures cited by the Federal Register (which include renunciations, relinquishments, and loss of long-term resident (green-card) status to the National Instant Criminal Background Check System gun control database (“NICS”) which only contain renunciations. Whereas the Federal Register stated that 3,415 people renounced or relinquished their citizenship or long-term residence, the IRS stated that 1,100 people renounced citizenship at only one particular U.S. consulate during the first ten months of 2014. This contradicted prior claims that such statistics are not maintained at the consulates.
FY2015: The State Department estimated 5,986 renunciants and 559 relinquishers during FY2015 This is despite the 422% hike in renunciation and relinquishment fees where the FY2015 data was released to the public.
It would seem it now costs a few $Thousand to stop being a U.S. Citizen and stop being financially terrorized when abroad… As my spouse holds Irish citizenship and I qualify for British, we have pondered moving to the UK or Ireland for a few years in retirement. This makes that painful. While there, should we do it and like it, I might well join the ranks of those paying a few $Thousand to get rid of my obnoxious Uncle Sam… (Dear I.R.S.: Please note that no one in my family, including me and my spouse, have any money overseas in any financial institution at all. For me, this “ick” is at present purely hypothetical.)
American citizens living abroad. According to CBC.cain January 2014, many Americans living abroad might face large fines as a result of this legislation. According to Time in 2013 magazine, American citizens living abroad would be unable to open foreign bank accounts. The Wall Street Journal reported in July 2014 that “FATCA worsens the already profoundly unjust tax treatment of millions of middle-class Americans living abroad.” “FATCA rules were intended to correct a tax loophole. Applied to Americans living abroad, they are absurd.” The Guardian reports that Americans living abroad feel financially terrorized by FATCA requirements. According to research by Democrats Abroad: “These survey results show the intense impact FATCA is having on overseas Americans. Their financial accounts are being closed, their relationships with their non-American spouses are under strain, some Americans are being denied promotion or partnership in business because of FATCA reporting requirements and some are planning or contemplating renouncing their U.S. citizenship.” Robert Stack stated the IRS position that “FATCA withholding applies to the U.S. investments of FFIs whether or not they have U.S. account holders, so turning away known U.S. account holders will not enable an FFI to avoid FATCA.”
Lack of reciprocity. Regarding reciprocity from USA, the model IGA states: “The Parties are committed to working with Partner Jurisdictions and the Organisation for Economic Cooperation and Development on adapting the terms of this Agreement and other agreements between the United States and Partner Jurisdictions to a common model for automatic exchange of information, including the development of reporting and due diligence standards for financial institutions.” There is no U.S. legislation to allow reciprocity. The president’s budget for year 2014 included a proposal to allow the Treasury Secretary to collect information which could be used for FATCA reciprocity. The proposal stated that its intent was to “would facilitate such intergovernmental cooperation by enabling the IRS to reciprocate in appropriate circumstances”, however the proposal did not request to allow the Secretary to have further transmittal authority. The president’s federal budget proposals of 2014, 2015 and 2016 did not list either costs or revenues for reciprocity implementation in any of the coming 10 years—thus assuming that this collection was either cost neutral or, more logically it would be interpreted as to not be budgeted in any of the coming 10 years. The President’s FY2014 budget was not enacted, rather a different version was passed. The President’s FY2015 budget was defeated in the House of Representatives on a vote of 2-413. The President’s FY2016 budget was defeated in the Senate on a vote of 0-97.
Reciprocity not authorized by Congress. FATCA as implemented by Congress included no mention of reciprocity. FATCA as being implemented with the Executive Branch’s IGA implementation has made reciprocity promises to foreign governments.
The FATCA IGA is no treaty under U.S. law. A treaty requires two thirds consent in the U.S, Senate in order to become applicable in U.S. law. The applicability of IGA’s is being challenged in U.S. court. The plaintiffs state that the IGA’s are not valid Executive Agreements. The IGA documents are all signed by officials lower than the President. Philippines has delayed FATCA data transmittal, citing that the IGA “Treaty” has not yet been ratified by the U.S. Senate.
IRS not ready. According to The New York Times, it is unclear whether the IRS is ready to handle millions of new complicated filings per year. On May 2, 2014, the IRS issued Notice 2014-33 providing that 2014 and 2015 will be regarded as a transition period for purposes of enforcement and administration relating to entity but not individual investors.
Complexity. Doubts have been expressed as to workability of FATCA due to its complexity, and the legislative timetable for implementation has already been pushed back twice. According to U.S. national tax advocate Nina Olsen in regards to FATCA: “This is a piece of legislation that is so big and so far-reaching, and [has] so many different moving pieces, and is rolling out in an incremental fashion (…) that you really won’t be able to know what its consequences are, intended or otherwise,’ Olson said. “I don’t think we’ll know that for years. And by that point we’ll actually be a little too late to go, “Oops, my bad, we shouldn’t have done this,’ and then try to unwind it.” Bloomberg reported in 2015 that the IRS help center is not able to provide adequate taxpayer customer service.
Identity theft. The IRS reports that identity thieves are using fraudulent compliance requests as a “phishing” ruse to obtain sensitive account-holder information. As of April, 2015, more than 150,000 financial institutions throughout the world are storing social security numbers and asset values of U.S. citizens.
Account Closures. Due to the costs and complexity of implementing this legislation, many banks have been excluding U.S. persons from holding financial accounts at their institutions. These closures, based upon ethnic characteristics, have not been halted by government authorities. In fact, the E.U. had validated the practice of closure based upon ethnic characteristics, by stating “Banks have the right, under the contractual freedom principle, to decide with whom they want to contract. They can in any event refuse clients for sound commercial reasons.” These closures are despite that those countries who have signed intergovernmental agreements, had also promised to not close the accounts of U.S. persons.
Additional Complexity for U.S. Persons U.S. Persons were already forbidden by the Securities Act of 1933 to make investments in U.S. Securities at banks which are not certified inside U.S.A. by the Securities and Exchange Commission. This disallows U.S. persons from participating in any product which may contain U.S. investment products. If a financial institution is not able to segregate non-U.S. investments from other investment products, a bank may place a total ban upon U.S. persons using their investment products. Since non-U.S. institutions located outside U.S.A. cannot acquire sufficient competence of U.S. law, non-U.S. institutions often find no exemption allowing resident U.S. persons to purchase any financial products from their institution.
Security. As piracy, kidnapping, and global terrorism dominate the political and media climate, some thinkers have questioned the entire FATCA mentality, where non-U.S. banks and non-U.S. governments are entrusted with the private data of U.S. citizens. The following countries have been entrusted with FATCA’s private data of U.S. persons: Brazil, Croatia, Israel, Kosovo, Mexico, Qatar, Uzbekistan, Algeria, Azerbaijan, Bahrain, China, Columbia, Georgia, Serbia, Thailand, Turkey, Ukraine, UAE, Angola, Cambodia, Kazakhstan, Tunisia. FFI’s are required via FATCA to identify U.S. persons and store their asset values and U.S. Social Security numbers. There are many countries which have been, could be, or are at war or cold war, where FFI’s have implemented FATCA. There is no control over which government or which individuals at these locations have control of the identity of U.S. persons. Here are some examples of the quantity of FFI’s registered in troubled areas: Afghanistan: 15, Chad: 5. China: 1,021. North Korea: 1, Nigeria: 92. Iraq: 16. Russia: 1,117. Ukraine: 217. Venezuela; 179. Yemen: 13
Makes you feel nice and safe, doesn’t it…
Many countries have U.S. sanctions upon the country and the country’s leaders and their assets. Many of those countries have FATCA programs in their banks, where U.S. person customers are being identified, such as these countries and the quantity of FFI’s: Côte d’Ivoire (35) Zimbabwe (12)
Minimum requirements without limits on the upper end. FATCA has minimum standards in its methodology of finding U.S. persons. For example, the accounts with minimum end balance of 50,000 USD must be investigated with at least the U.S. indicia criteria specified. The FATCA rules do not require any FFI to not investigate or report or FATCA-process accounts as low as zero. The FFI’s are not prohibited from using any indicia to identify U.S. persons. There are no restrictions in FATCA regulations as to what is not allowed to be used against U.S. persons.
Marketability of American Financial Products. European Parliament’s Economic and Monetary Affairs Committee public hearing on FATCA May 29, 2-13, Robert Stack stated “, I believe the, the members here present today and the participants understand that the United States, ah, put its markets at risk in doing FATCA”
Income Tax Complications. For the 2014 tax year, National Bank of Canada Inc. issued 1099’s for investments to US residents that only covered the 6 months prior to FATCA. With a 1099 in hand, many residents filed income taxes not knowing the 1099 was incomplete. Subsequent years without 1099’s leave residents guessing whether their dividends are ‘qualified’ for tax purposes.
FATCA and the European Union: Robert Stack of the IRS stated the administration position that it was incorrect (a myth) “that legislation could force foreign banks to violate laws in their own countries: [Instead,] Treasury’s decision to implement FATCA through IGAs that are respectful of the individual laws and customs of partner jurisdictions has contributed to the significant international interest in participating in FATCA compliance efforts.”
Privacy and data protection legislation in Europe. Civil rights such as the right to privacy, or the right to data protection as a taxpayer are said to be compromised. There is no provision in FATCA for the protection of taxpayer rights, complains legal researcher Leopoldo Parada. The association of data protection supervisors is working on the case. As for other data protection legislation in Europe, for instance, the Swedish law Personuppgiftslagen (PUL) or personal data law, requires (unforced) consent of the individual in order to send data to a third country. The need for the information must also be greater than the need for the persons integrity. It is forbidden to deliver data that is not protected to a level adequate to EU standard
FATCA and the ECHR: All of parties to the European Convention of Human Rights (which includes all EU member states) are bound by its provisions including the interpretation through the case law of the European Court of Human Rights. Each law must have respect for an individual’s private life except in cases of the state’s or population safety, or the country’s economic health. FATCA’s data is not used for the benefit of any EU member state. An EU member’s economic health is not improved by FATCA, it only avoids the threatened 30% tax sanctions by complying with FATCA.
E.U. requirements limiting data-sharing. FATCA does not fulfill the E.U. requirements limiting data-sharing which allow sharing to be done only with organizations following the (now invalidated) Safe Harbor Principles. The IRS is not listed as meeting this demand.
E.U. member state requirements that bank accounts be opened. Many EU countries require banks to open accounts for applicants (because this is the only method to receive salary). FATCA’s mechanism to close bank accounts if FATCA demands are not met violates such laws (see insättnings garanti in Sweden). New FATCA IGA requirements demand that banks shall not open accounts for U.S. persons or accounts for non-U.S. persons if the individual refuses to declare U.S.-person status upon bank account applications.
E.U. laws? Other country sovereignty? Bow down and grovel before the I.R.S. …