By Emma Smith
A coalition of 23 groups has called for the US congress to include a repeal of the Foreign Account Tax Compliance Act (FATCA) in any tax reform package sent to president Donald Trump.
Signed into law by Barack Obama in 2010, and aimed at curbing tax non-compliance, the FATCA legislation requires non-US financial institutions in jurisdictions worldwide to submit data on accounts held by US taxpayers to the Internal Revenue Service. Institutions that fail to meet the reporting requirements are subject to a 30% withholding tax on certain US-source payments made to the institution.
In a letter addressed to key members of the US congress, including speaker of the house Paul Ryan, the coalition highlighted the following five key points in support of a FATCA repeal:
- FATCA fails in its objective to target wealthy individuals who use foreign accounts to avoid tax
- It traps “innocent Americans” with excessive reporting requirements and penalties
- Following FATCA’s introduction, US citizens living overseas are now perceived as “toxic” by foreign financial institutions
- FATCA compliance costs are higher than the revenue collected under the legislation
- It encourages other jurisdictions and international organisations to introduce “aggressive tax grabs”, creating additional burdens for US businesses
The coalition said that while it supported “vigorous means to combat and punish” tax evasion, penalising the innocent through measures aimed at targeting the guilty was “unacceptable and un-American”.
“FATCA violates our most-cherished principles of due process, presumption of innocence, personal privacy, and national sovereignty. It does not accomplish its stated objectives but does inflict untold collateral harm at great cost,” the letter said.
Nigel Green, founder and CEO of deVere Group and co-leader of the Campaign to Repeal FATCA, one of the participating groups in the coalition, 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. It’s time for citizens in other countries to show the same kind of backbone and help get this costly mistake off the statute books.”
In addition to the Campaign to Repeal 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.