A coalition of 23 US taxpayer protection and grassroots organisations is campaigning for the repeal of the Foreign Account Tax Compliance Act (FATCA), labelling the regulations ‘unacceptable and un-American’ on the grounds they fail to tackle tax avoidance by US citizens based overseas while making it harder for them to live and work abroad
The group has written to Congress urging action as part of the new administration’s planned comprehensive tax reform. The letter makes five points, the first of which is that FATCA is not proving effective at catching ‘wealthy tax cheats’.
It goes on to claim the legislation ‘ensnares innocent Americans with excessive reporting requirements and draconian penalties for the slightest oversights’, and also ‘makes US citizens living and working abroad toxic assets in the eyes of both financial institutions and employers’.
In addition, the coalition asserts that FATCA compliance costs far outstrip the revenue it collects, while the act ‘encourages other nations and international organizations to pursue aggressive tax grabs that threaten American businesses and the global economy’.
Introduced in 2010 under the Obama administration, FATCA requires non-US financial institutions around in the world to report data on all specified US accounts to the Internal Revenue Service (IRS). Institutions that fail to meet the reporting requirements are subject to a 30% withholding tax on certain US-source payments made to that institution.
During last year’s presidential campaign, the Republican party’s official platform included a pledge to rescind FATCA, saying it had resulted in ‘government’s warrantless seizure of personal financial information without reasonable suspicion or probable cause.’ Republicans said they favoured a change to residency-based taxation for U.S. citizens overseas.
The new campaign is being co-led by the Center for Freedom and Prosperity (CF&P) and the Campaign to Repeal FATCA, one of whose founders is Nigel Green, the CEO of international wealth management company deVere Group.
Green said: ‘FATCA is an extraterritorial diktat that burdens other countries’ financial institutions and their clients, which violates other countries’ sovereignty, and which is detrimental to their consumers and taxpayers.
‘FATCA turns law-abiding, middle-class Americans living overseas, of whom there are approximately eight million, into financial pariahs.’
Green also argued that the provisions of the act had resulted in record numbers of US citizenship renunciations.
Andrew Quinlan, CF&P president, said: ‘It’s time to turn the page on this failed experiment in global financial surveillance. Congress should acknowledge the overwhelming evidence which shows that low, pro-growth tax rates and a simplified tax code are the proven ways to encourage greater tax compliance. America, and the world, will be better off without FATCA.’
Other groups in the coalition include the American Commitment, Taxpayers Protection Alliance, Competitive Enterprise Institute, Institute for Policy Innovation, Citizen Outreach, and Small Business and Entrepreneurship Council.
Green said: ‘FATCA has been ruining the lives of Americans abroad and pulling money out of the global financial system for no benefit. It’s exactly the kind of counterproductive and burdensome regulatory scheme Donald Trump has pledged to get rid of. I am thrilled to see US taxpayer advocate groups weighing in with Congress to repeal the Obama-era FATCA.’
The Campaign to Repeal FATCA is here.
The letter to Congress is here.