The Republican National Committee has adopted repeal of the Foreign Account Tax Compliance Act as part of its official platform.
FATCA became federal law in 2010 and began going into effect in 2013. Its stated aim is to reduce tax evasion, but the Congressional Joint Committee on Taxation estimates the federal government would take in only about $800 million a year as a result of the law. Opponents say the costs far outweigh the projected gains.
FATCA requires financial institutions around the world to comply with U.S. government demands to report to the Internal Revenue Service information about the accounts and assets of U.S. citizens. The information includes the names and addresses of U.S. clients, their account balances, and the total debits and credits from each U.S. account. Non-compliant institutions face severe penalties, including a 30 percent withholding tax on all financial transactions. These transactions include interest and dividend payments and proceeds from the sale of U.S. stocks or bonds.
Compliance also raises operating costs of the financial institutions and often means they must violate the banking practices and laws of their home countries.
Americans Turned Away
Many foreign institutions have balked at the imposition of U.S. law on their operations by turning away American customers.
“The costs of FATCA’s misguided fiscal imperialism are mounting. It is past time for elected officials to wake up to the unmitigated disaster that they have unleashed upon the world,” said Andrew Quinlan, president of the Center for Freedom and Prosperity, in a statement. CF&P has led the Coalition for Tax Competition in opposing FATCA. The Coalition includes 21 large and influential free-market, taxpayer protection, and grassroots organizations.
Quinlan noted Sen. Rand Paul (R-KY) has responded by introducing Senate Bill 887 to repeal FATCA and restore basic privacy rights.
Last year the Coalition signed a letter to senators requesting FATCA repeal.
Relations Strained, Investment Harmed
The letter argued FATCA will fail to significantly reduce tax evasion, is straining foreign relations because of the burdens placed on foreign financial institutions, and is reducing investment in the United States.
The letter also noted, “During FATCA’s implementation process, the Treasury Department has made a bad law worse. Without specific authorization from Congress, Treasury has sought to circumvent problems posed by foreign privacy laws through the negotiation of intergovernmental agreements (IGAs) that would obligate foreign governments to collect information from their institutions in order to pass it on to the IRS. The funneling of comprehensive financial information of U.S. citizens through foreign governments is a serious breach of privacy that potentially exposes Americans to identity theft, harassment, and other crimes.”
Organizations whose representatives signed the letter include the Center for Freedom and Prosperity, Americans for Tax Reform, National Taxpayers Union, American Commitment, 60 Plus Association, Institute for Policy Innovation, and Family Business Coalition.