The US Treasury is stepping up Foreign Account Tax Compliance Act (FATCA) negotiations with nations outside the tax network despite heightening pressure from opponents in the States.
The opposition Republican Party is trying to derail FATCA before the law comes into force for taxpayers on July 1.
But financial ministers are dismissing their efforts as a play to gain political support from expats and financial firms rather than a serious attempt to stop FATCA.
The party has passed a resolution at the highest level to work to repeal the law.
Meanwhile, small but influential offshore financial centres are ready to sign up to FATCA.
Mixed messages
The Isle of Man has already inked a similar agreement with the British government and signed an inter-governmental FATCA agreement with the US in December.
Now, Treasury minister Eddie Teare has the backing of the Isle of Man parliament, the Tynwald, where members have voted through a new law to allow financial institutions on the island to report financial information about US customers holding bank accounts and investments to the tax authority for onward transmission to the Internal Revenue Service (IRS) in America.
“We are getting mixed messages from the Republicans,” said Teare. “However, we don’t feel FATCA will be repealed even if a rift in the US between President Obama’s Democrats and the Republicans leads to same delay in implementing the procedures.”
Meanwhile, finance ministers in Barbados and Bermuda – both formerly favourite tax shelters of wealthy Americans – are both edging closer to joining FATCA.
And regulators in the Gulf State of Oman are urging banks and other financial institutions to register with the US government’s online portal to directly give banking and investment information to the IRS.
FATCA reporting delayed
Several leading financial nations, like Britain, Canada, France, Japan, Spain and Italy have already joined FATCA.
FATCA demands foreign banks and financial institutions should report each year on US customers with more than $50,000 in their accounts.
If the organisations fail to do so, they face a withholding tax of 30% on all transactions they make which pass through the US financial system.
US taxpayers at home and overseas have to declare the same information on their tax returns.
The US government has already delayed implementing FATCA twice due to technical problems with the web portal and opposition at home and abroad to the law.
Yes, the Canadian government capitulated to the USA’s FATCA law. It did so under duress and took its primary counsel from the CEOs of the “Big Five” Canadian banks plus the CBA (Canadian Banking Association). It half-heartedly appeared to solicit opinions from ordinary Canadian citizens and residents but, in the end, it pretty much ignored their input. HOWEVER, there are people in Canada (more informed than many of their government representatives) who recognized early on that FATCA is an extortion plot and it is a blatant ploy to bring financial institutions worldwide under the control of the USA. These people tried in vain to warn the Canadian government about this and pleaded with it to not sign any agreement with the USA but on February 5, 2014 it did just that. These people will not stop fighting FATCA and are organizing a legal challenge. A leading Canadian constitutional expert, Peter Hogg, contends that FATCA violates the Canadian Charter of Rights and Freedoms. The link to the Canadian Charter Challenge Fund (CCCF or C3f) can be found at the Isaac Brock Society website. Americans living in the looming nightmare of FATCA, both as emigrants to other countries and immigrants to the USA, might want to help the FATCA fighters in Canada. Winning a charter challenge in Canada would set the dominoes falling and be a big step towards bringing about the demise of FATCA, a bad law designed to enforce a bad taxation system based on citizenship instead of residence.