FATCA Critics Fears Arrest by US Authorities

The founder of a web-based platform which, amongst other expat issues, discusses the impact of the Foreign Account Tax Compliance Act (FATCA) on Americans who live overseas, says that he fears he could be arrested for not having filed US treasury forms whilst living in Canada, should he return to the States.

FATCA is a banking regulation which requires foreign financial institutions (FFIs) to report the activities of their American clients to the US Internal Revenue Service (IRS).  The penalty of not complying with FATCA’s “extremely complex” procedure will be 30 per cent withholdings of US source income.

The Foreign Account Tax Compliance Act legislation is described by Peter Dunn, who alongside five others created the Isaac Brock Society, as “a fishing expedition to catch those who have failed to report taxes and foreign bank accounts.”

Speaking to iExpats.com, Dunn, who renounced his American citizenship last year, says: “I could conceivably be charged with failure to file FBARs [a treasury form which needs to be filed annually] that the US required while I was still a US citizen.

“I for one feel it is improper for me to disclose my accounts—though many are doing this.  I have instead relinquished my US citizenship. I am therefore now wondering if I will be arrested if I return to the United States.”

Last year, like an increasing number of American expats, Dunn gave up his US citizenship because he believes the FATCA legislation makes an American passport become a burden.

“I relinquished my US citizenship because I will not allow this aggressive overreach to affect my Canadian-only wife.”

He asserts that more and more of those wanting to escape the FATCA reporting requirements are taking the same approach as him, and highlights an IRS report which shows that 1,788 people gave up their US citizenship – a record number – in 2011.  And this, he says, is likely to be “well below the actual numbers,” as many who have renounced claim they have not yet had their name published on the IRS list and, therefore, it represents “only the tip of the iceberg.”

“Wait until a few thousand wealthy folks living in Canada receive hefty tax bills from the IRS and FBAR fines as a result of FATCA reporting. Then you will see an avalanche of renunciations.

“Already in Switzerland, US persons are lining up at embassies and consulates in their droves and [recently] the staff couldn’t keep up with the requests because Americans are no longer able to open bank accounts or renegotiate their mortgages there.”

Isaac Brock Society

Isaac Brock SocietyIn an attempt to inform the public, especially the 6.2 million American expats, about why FATCA is, in his opinion, “fundamentally wrong,” Peter Dunn, and five other concerned Canadians who wish to rename anonymous, launched the Isaac Brock Society late last year.

Of their motivations, he says: ““Besides Eritrea, the United States is the only country in the world which has citizenship-based taxation.

“FATCA is an attempt by the United States to blackmail Foreign Financial Institutions (FFIs) into handing over their clients’ confidential information, if they happen to have US citizenship or some other association with the US for tax purposes.

He continues: “FATCA does not take into account where the person is resident or that they may actually be citizens of their second country.

So, for example, a million US citizens are said to live in Canada.  They live, work and pay their taxes here.  However, FATCA requires the FFIs ‘to rat’ on their clients or face extortionate 30 per cent withholdings.”

Adverse effects

FATCA, according to its opponents, will have long-term, adverse effects on the majority of Americans who choose to live overseas.

“A large proportion of American expats have never been in compliance with the IRS. They were unaware of their filing requirements and knew nothing of their FBAR requirements, partly because it was largely unenforced before 2009 when the IRS started propaganda campaign and opened the Overseas Voluntary Disclosure Program of 2009.  Before that, few had even heard of FBAR,” says Peter Dunn.

“The ultimate problem is that FATCA will result in FBAR fines of up to 50 per cent of their financial accounts’ highest balance. The IRS has threatened all US
persons who have undisclosed foreign accounts with FBAR fines and imprisonment under the Bank Secrecy Act.

“Some of the people we have met are absolutely gobsmacked by these efforts of the US government to make their citizens abroad come into compliance. At the Isaac Brock Society, we have countless testimonials from people who can’t sleep, who are taking anti-depressants, suffering marital discord, and have even experienced suicidal tendencies.

“As a result thousands – don’t believe the official numbers as Korea’s numbers alone exceeded the official 2011 report- are renouncing their citizenship.”

American economy & international agreements

The Isaac Brock Society argues that not only are individuals negatively impacted by FATCA, the US economy itself could be hit as foreigners and overseas firms start to take their money out of the US as they do not want their financial affairs in their home countries being affected by their activities in the so-called ‘Land of Opportunity.’

It’s a view which is supported by David Schwartz, the executive director of the International Bankers’ Association of Florida.  Speaking at the end of July, he observed: “Since April 19 [when the regulation was passed], we’ve heard that several hundred million dollars have left Florida for foreign jurisdictions.  Customers have said ‘we’re aware of what’s going on, and we prefer to take our money overseas’.”

Additionally, many argue that some US financial institutions, especially those which are exposed to a high proportion of foreign investors who withdraw from the States, might fail.  If that should occur, it would be US taxpayers who foot the bill and the government has a guarantee policy for bank deposits.

According to the Isaac Brock Society’s Peter Dunn, the controversial legislation also breaches several important international agreements.

He asserts: “FATCA is a violation of the doctrines of dual nationality such as the doctrine of Dominant and Effective Nationality; and it violates the spirit and the letter of the North American Free Trade Agreement (with regard to Mexico and Canada).

“FATCA and FBAR also breach Article 8 of the Universal Declaration of Human
Rights, which states that in a free country a citizen should have a tribunal which will hear their human rights grievances, because a constitutional challenge to an abuse of human rights violated by the FBAR law is a costly affair out of the reach of most citizens.”

FATCA Delay

Last month, the IRS published a notice on its website saying that the implementation of FATCA has been pushed back from 1st January 2013 to January 2014.  No explanation was given.

It is likely that for many American expats, this 12 month delay will now be viewed as a ‘window of opportunity’ to publicly challenge the legislation and/or take steps to mitigate its adverse effects.

You can find out more about the Isaac Brock Society here http://isaacbrocksociety.ca/ and join the discussion at their forum here http://isaacbrockforum.com/

FATCA Critics Fears Arrest by US Authorities
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6 COMMENTS

  1. I have many American friends living in Canada and they all tell the same story of horrendously difficult taxes. It’s unfortunate that things like FATCA drive people to renounce their citizenship.

  2. Renouncing is the only reasonable option if you want to protect your foreign spouse and children’s accounts. As for my family we simply do not have the money to pay to expensive cross border tax professionals every year on zero taxes owed. I am over whelmed with responsibilities and cash strapped as it is. This attack on average families who in some cases haven’t lived in the U.S. in decades is appallingly harmful. It is painful to me to have to renounce but, there’s no other option that keeps my family safe from this intrusion in the future. And god knows the U.S. doesn’t care one bit about any ex pat family at all so I can’t imagine going forward they intend to scrap FATCA or do anything remotely reasonable such as exempting those who haven’t lived in the U.S. for years and years.

  3. By the way, I did in fact enter the United States, only by urgent necessity however, to take part in the search of my father who went missing on July 12, 2013. I was not in fact arrested and I think this should be instructive for others who worry about going to the United States because they have un-filed forms that they never knew about. Also, it shows the insane cruelty of the Ex Patriot Act, the plan to punish ex-Americans, who renounce with a certain level of wealth, with permanent exile.

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