A good test of a fair and just law is that the people who have to comply consider the rules fair and just.
Now and then a law sparks controversy and one such law is the US Foreign Account Tax Compliance Act (FATCA).
Five years after the law hit the statute books and a year into compliance, FATCA is still beset with protests, law suits and criticism.
FATCA is supervised by the US State Department and the Internal Revenue Service (IRS).
The aim is to collect data about US taxpayers from foreign financial institutions for cross-checking against tax filings to ensure everyone is declaring their full worldwide earnings and any tax due.
The unforeseen consequences of FATCA arise from the USA’s insistence that all citizens are taxed on their worldwide income regardless of if they are resident in the States or expats.
Around 8 million live and work overseas and FATCA has made their lives a nightmare. Banks and financial firms are shunning them as customers, accounts held for years are being closed and mortgages foreclosed.
FATCA opponents range from US expats to congressmen.
One of the most outspoken happens to be English – Nigel Green, chief executive of a leading network of international financial advisers, deVere Group.
deVere Group has more than 70 offices and 80,000 clients, many of whom are US expats suffering under FATCA.
The latest move – another indication of the unpopularity and unfairness of FATCA perhaps realised now in Washington – is that foreign financial institutions could be exempt from FATCA reporting information about US expats living in their countries under a Same Country Exception (SCE) amendment to the law.
Green feels this is one small step by the US government, but not one far enough in the right direction.
“I suspect that the ‘roughly eight million Americans who live abroad’ actually want a full repeal of this toxic law. I would suggest that the majority would consider Same Country Exception (SCE) as little more than a cop out and a thinly veiled attempt to try and sort out this disastrous tax law that as I have said previously is a “masterclass in the law of unintended consequences.”
“So strong is the support amongst American expats to have FATCA fully repealed, that in a recent deVere Group poll late last year, 73% of Americans who live outside the US are tempted to give up their US passports in response to the introduction of FATCA.”