The campaign for the Trump administration to repeal what has been described as “the worst law most Americans have never heard of” reached a monumental milestone last week.
Sen. Rand Paul and Rep Mark Meadows have written to Treasury Secretary, Steven Mnuchin, and Office of Management and Budget Director, Mick Mulvaney, asking them to “mitigate the ongoing damage” caused by the Foreign Account Tax Compliance Act (FATCA), ahead of its much hoped-for eventual repeal.
This bold, principled stance is the latest and most important stage in groundswell of anti-FATCA feeling in the U.S. and around the world.
It heralds what I hope will be the beginning of the end of a global tax law, rushed through Congress in 2010 and signed into power by Obama, and which has a host of devastating, unintended consequences.
Purportedly, FATCA was designed to catch tax evaders stashing cash offshore. This might be a heroic and worthwhile move, after all tax evasion is a serious global problem. But there is not one word – yes, not one word – of this law that actively tackles tax evasion. Bizarre.
What it does do though is turn all American citizens who happen to live and/or work outside the U.S., and American firms operating globally, into financial pariahs – which is leading to record numbers of U.S. citizenship renunciations.
This is because FATCA requires all non-U.S. financial institutions to report all their American clients’ financial activities directly to the IRS, or be subject to a mammoth 30 per cent withholding tax. This can only be damaging to the U.S. economy and American jobs.
In addition, and equally damaging to the economy, it breaks important international trade deals, violates other countries’ sovereignty and invades the privacy of ordinary hardworking Americans by the warrantless seizure of personal financial information without reasonable suspicion or probable cause.
All this to collect revenue that isn’t enough to fund the federal government for more than half an hour.
Indeed, research from William Byrnes, a law professor at Texas A&M now shows that FATCA will end up costing more than it ‘recovers’.
As Sen. Paul says: “FATCA is a textbook example of a bad law that doesn’t achieve its stated purpose but does manage to unleash a host of unanticipated destructive consequences.”
Therefore, the fact that Sen. Rand Paul and Rep. Mark Meadows are bringing this to the national conversation must be applauded. All Americans who care about seemingly old-fashioned issues such as prosperity, sustainable long-term economic growth, and freedom will champion their position.
Not only because FATCA is, arguably, one of the most toxic and potentially damaging laws passed in recent times, it is I suspect a blue print for worse to come. Much, much worse.
FATCA is expected to be the foundation for GATCA, a global version of this fatally flawed and imperialistic law. It would be, as I have said before, “FATCA on steroids.”
GATCA would insist that all accounts opened by foreign nationals would have to report their financial information to their homeland tax authority. Not only does this infringe upon the Fourth Amendment for Americans, but we would inevitably see tax hikes, sovereignty rights crushed and data protection severely threatened. Plus, wrapping all that important data up into nice little packages would be a gold mine for organised criminals and terrorists.
With this in mind, it’s easy to see why this week’s Rand-Meadows letter is such an important step forward. We must have this nonsensical piece of over-reaching, economy-stunting legislation scrapped, because if it is, GATCA looks significantly less likely to happen.
Nigel Green is founder and CEO of deVere Group. One of the world’s largest independent financial advisory organizations, de Vere does business in 100 countries and has more than $12 billion under advisement.