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America is alone among industrialized nations in requiring citizens to pay taxes even if they live outside the United States. FATCA is an invasive law that will compel financial institutions worldwide to report on their American clients for tax purposes, or else risk seeing the US withhold 30 percent of their income on American financial assets. The institutions will incur substantial costs to find and keep up with American clients, far more than what the US hopes to rake in from the law, estimated at a paltry $8 billion over 10 years.
The legislation was supposed to be introduced in January 2013, but its complexity has compelled the Internal Revenue Service to delay implementation for a year. When it does go into effect, foreign financial institutions, above all banks, will be asked to send annual reports on their American customers with bank accounts of more than $50,000, a measure that would be unacceptable if adopted in the United States. Financial institutions will detail the balances, receipts, and withdrawals from Americans’ accounts. In this way, the IRS will know all the transactions of each individual living abroad.
Because such information is usually private, American citizens will be obligated to sign waivers suspending their rights under foreign laws that may protect their privacy. If an American has a joint account with a non-American spouse, the waiver will affect both account-holders, though the non-American should not be subject to American scrutiny. FATCA imposes that banks also acquire the names of the Americans’ relatives. Refusing to sign a waiver may compel banks to identify an account as delinquent and perhaps report this to the IRS.
The fiscal advantages of FATCA are limited. The heavy burden on foreign financial institutions is abusive—a case of America throwing its global weight around. And the civil liberties implications are profoundly disturbing. FATCA has already created problems for Americans, with many foreign financial institutions refusing to open accounts for them. Because FATCA treats companies in which Americans own more than 10 percent as American tax entities, it has become far more difficult for citizens to enter into partnerships internationally, representing a net loss for the American economy.
However, there is one aspect of FATCA that has not been sufficiently examined, but that remains potentially hazardous. The American government is effectively asking foreign institutions to prepare detailed data bases of American citizens, with no guidelines explaining how this information must be protected. For a country obsessed with the security of its citizens in the aftermath of the 9/11 attacks, such behavior is paradoxical, indeed astonishing.
Foreign financial institutions will effectively become vast repositories of information on Americans—including what they earn, the sources of their income, what they spend, where they live, who their family members are, and so on. In their zeal to implicitly label Americans living abroad as tax cheats requiring monitoring, the sponsors of FATCA have shown utter indifference to the safety of their citizens.
In some countries, the American authorities are well aware that their enemies have ready access to financial institutions. The Lebanese Canadian Bank scandal, in which bank managers were accused of helping Hezbollah launder money, showed that this was true in Lebanon. What is to prevent anti-American groups elsewhere from gaining access to data on American citizens, and possibly using this to their advantage? FATCA helps make it eminently possible.
Strangely, we have heard nothing about FATCA from the State Department, which is responsible for Americans overseas. At a time when American embassies regularly issue advisories to citizens to guarantee their safety, we are seeing the IRS asking institutions abroad to gather the most sensitive facts on Americans, with no oversight. The irresponsibility is breathtaking. Worse, because FATCA imposes pariah status on Americans abroad, whatever rightful protest they have against the legislation will sound suspicious.
No wonder that Americans across the globe are outraged. Even if they owe no taxes, they must adhere to stringent, and costly, reporting rules, failure of which can bring on severe penalties. That they should be additionally humiliated by seeing a wealth of personal information circulating freely among employees of foreign institutions sends a bad signal, one the IRS would not dare replicate in the United States.
But are you surprised coming from a country that has spent a decade whittling down domestic civil liberties in the name of allegedly compulsory security? Somehow this security has been swept away overseas, where some groups will welcome having access to everything about the Americans in their midst—their networks, financial habits, and much more. Evidently, raising tax revenue is a perfectly good reason to leave Americans in foreign climes vulnerable.
The legislation was supposed to be introduced in January 2013, but its complexity has compelled the Internal Revenue Service to delay implementation for a year. When it does go into effect, foreign financial institutions, above all banks, will be asked to send annual reports on their American customers with bank accounts of more than $50,000, a measure that would be unacceptable if adopted in the United States. Financial institutions will detail the balances, receipts, and withdrawals from Americans’ accounts. In this way, the IRS will know all the transactions of each individual living abroad.
Because such information is usually private, American citizens will be obligated to sign waivers suspending their rights under foreign laws that may protect their privacy. If an American has a joint account with a non-American spouse, the waiver will affect both account-holders, though the non-American should not be subject to American scrutiny. FATCA imposes that banks also acquire the names of the Americans’ relatives. Refusing to sign a waiver may compel banks to identify an account as delinquent and perhaps report this to the IRS.
The fiscal advantages of FATCA are limited. The heavy burden on foreign financial institutions is abusive—a case of America throwing its global weight around. And the civil liberties implications are profoundly disturbing. FATCA has already created problems for Americans, with many foreign financial institutions refusing to open accounts for them. Because FATCA treats companies in which Americans own more than 10 percent as American tax entities, it has become far more difficult for citizens to enter into partnerships internationally, representing a net loss for the American economy.
However, there is one aspect of FATCA that has not been sufficiently examined, but that remains potentially hazardous. The American government is effectively asking foreign institutions to prepare detailed data bases of American citizens, with no guidelines explaining how this information must be protected. For a country obsessed with the security of its citizens in the aftermath of the 9/11 attacks, such behavior is paradoxical, indeed astonishing.
Foreign financial institutions will effectively become vast repositories of information on Americans—including what they earn, the sources of their income, what they spend, where they live, who their family members are, and so on. In their zeal to implicitly label Americans living abroad as tax cheats requiring monitoring, the sponsors of FATCA have shown utter indifference to the safety of their citizens.
In some countries, the American authorities are well aware that their enemies have ready access to financial institutions. The Lebanese Canadian Bank scandal, in which bank managers were accused of helping Hezbollah launder money, showed that this was true in Lebanon. What is to prevent anti-American groups elsewhere from gaining access to data on American citizens, and possibly using this to their advantage? FATCA helps make it eminently possible.
Strangely, we have heard nothing about FATCA from the State Department, which is responsible for Americans overseas. At a time when American embassies regularly issue advisories to citizens to guarantee their safety, we are seeing the IRS asking institutions abroad to gather the most sensitive facts on Americans, with no oversight. The irresponsibility is breathtaking. Worse, because FATCA imposes pariah status on Americans abroad, whatever rightful protest they have against the legislation will sound suspicious.
No wonder that Americans across the globe are outraged. Even if they owe no taxes, they must adhere to stringent, and costly, reporting rules, failure of which can bring on severe penalties. That they should be additionally humiliated by seeing a wealth of personal information circulating freely among employees of foreign institutions sends a bad signal, one the IRS would not dare replicate in the United States.
But are you surprised coming from a country that has spent a decade whittling down domestic civil liberties in the name of allegedly compulsory security? Somehow this security has been swept away overseas, where some groups will welcome having access to everything about the Americans in their midst—their networks, financial habits, and much more. Evidently, raising tax revenue is a perfectly good reason to leave Americans in foreign climes vulnerable.
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