More unforeseen consequences of the controversial US Foreign Account Tax Compliance Act (FATCA) have emerged affecting hundreds of thousands of taxpayers worldwide.
A major concern is that financial institutions are sending the Internal Revenue Service (IRS) confidential details of thousands of accounts.
In Canada, the authorities have revealed that information about 31,574 accounts have gone straight to the IRS from financial organisations that must report under FATCA but bypass official communication channels.
The Canadian Revenue Agency has passed on reports about 469,827 accounts, but knows nothing of the other disclosures.
“There are entities that do not meet the technical definition of a reporting Canadian financial institution, as per the legislation. These same entities may have the obligation to report directly to the IRS under some circumstances,” said a CRA spokesman.
Cash and assets about to be frozen
“Therefore, the CRA would not necessarily be aware of them reporting directly to the IRS.”
The report follows other revelations that ‘accidental Americans’ living in Canada have also seen their financial data sent to the IRS.
These would include Canadians born in border hospitals who have never visited America as an adult.
Meanwhile, in India, thousands of account holders will see their cash and assets frozen on May 1 as they have failed to self-certify that their financial data should not be sent to the IRS under FATCA.
The Ministry of Finance has ordered financial institutions to shut any non-compliant accounts from that date.
“Queries are being received from financial institutions regarding the revised time lines for completion of due diligence. The financial institutions are advised that all efforts should be made to obtain the self-certification,” said a spokesman.
Repeal FATCA campaign
“Account holders may be informed that, in case self-certifications are not provided till April 30, 2017, the accounts would be blocked, which would mean that the financial institution would prohibit the account holder from effecting any transaction with respect to such accounts.”
To self-certify, account holders must provide proof of tax residency.
FATCA is a US tax law requiring financial institutions worldwide to tell the IRS about accounts held offshore by US taxpayers.
Campaigners led by Nigel Green, CEO of leading expat financial advice firm deVere Group, are calling for President Donald Trump to repeal FATCA as part of his promised tax review following his election win in the US.