When financial transparency becomes personal tyranny

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[Excerpts. Full text available at The Hill]

BY NIGEL GREEN

August 2, 2017

One of the most commonly used (and abused) buzzwords in public life is “transparency.” Transparency is good. Everybody’s for it. The problem is the different, even contradictory, meanings the word is given. [ . . . ]

“It is a practice of good government for institutions to be transparent and open to the people,” writes Brian Garst of the Center for Freedom and Prosperity. “It is a practice of tyranny for individuals to be made transparent to the government.”

For example, in 2010 the United States enacted the so-called Foreign Account Tax Compliance Act (FATCA). This law mandates that Americans’ private financial information on specified assets held outside the U.S. be automatically provided to the IRS. It’s indiscriminate — no suspicion of wrongdoing is required. This is justified as “promoting transparency.”

But historically, details of Americans’ private assets aren’t automatically reported to the government, just “taxable events,” which means realization of income. That’s why when you earn money, your employer sends you a W-2 Wage and Tax Statement. Your bank issues you a 1099-INT on interest paid (or would, if it weren’t for near-zero interest on consumer bank accounts). [ . . . ]

This distinction was thrown into sharp relief at a hearing earlier this yearbefore the House Committee on Oversight and Government Reform, Subcommittee on Government Operations, presided over by Freedom Caucus Chairman Mark Meadows. Elise Bean, a former Senate staffer widely considered one of FATCA’s architects, inaccurately claimed FATCA reporting was “simply a transparency measure” that matched a domestic 1099.

When Bean was forced to concede that was not the case, Meadows offered a compromise: If FATCA is supposed to be just like a 1099, why not change the law to do just that — drop the details FATCA now requires and only ask foreign banks to report on income, if any, just like U.S. banks.

Bean rejected that out of hand. Instead, she suggested that domestic 1099s be expanded to what FATCA requires on foreign accounts. [ . . . ]

The roadmap to [global FATCA] is provided by a series of legally dubious so-called FATCA “intergovernmental agreements” crafted by the Obama administration promising U.S. reciprocal reporting to other governments.

Those agreements have been challenged by Rep. Meadows and Sen. Rand Paul, who in April wrote to the Trump administration asking for action to block compliance with the agreements pending FATCA’s repeal. Meadows and Paul have introduced FATCA repeal bills, and the 2016 GOP platform also calls for dumping FATCA. So have almost two dozen taxpayer groups, including Americans for Tax Reform.

The time for complacency is over. As long FATCA remains on the books it hangs like a sword of Damocles waiting for the next Democratic administration to press forward on the wrong kind of “transparency.”

Nigel Green is founder and CEO of deVere Group, a worldwide financial consultancy.