FATCA is a direct attack on 6 million Americans who live overseas, according to an expat group lobbying against the tax.
The Foreign Account Tax Compliance Act (FATCA) is aimed at taxing US expats and makes the States and the tiny African nation of Eritrea the only countries in the world that tax nationals who live elsewhere.
US expats argue complying with FATCA by filling in forms and gathering the paperwork to support the documentation is time-consuming and expensive.
As a result, American expats are finding they are shunned by banks who do not want the cost and effort of FATCA compliance.
Many are politely asked to close their accounts and take their business elsewhere – but if they do, they have to make sure their financial affairs are FATCA compliant.
Shunned and scared
Overseas opposition to FATCA includes the group American Citizens Abroad (ACA).
The ACA wants the US government to adopt a residency-based tax system, which means Americans are taxed at home, but not overseas.
“Many are furious about what FATCA means to them, and some are scared they will fall foul of the new rules unintentionally,” said Jackie Bugnion, an ACA spokesperson.
“Banks don’t want American customers anymore because of the hassles with FATCA. Expats are having accounts closed, and while they may find a bank offering a current account, deposit accounts are almost impossible to locate. Some expats have had their mortgages cancelled and many are refused loans.”
FATCA requires US expats to file a tax return, together with an extra report about income and interest from any assets worth more than $50,000 held outside the USA. Filing starts in January 2014.
FATCA goes global
Meanwhile, protesters against the law in Washington are battling in a last-ditch bid to encourage politicians to repeal FATCA.
Unfortunately, President Barak Obama is a strong supporter of FATCA, having introduced the law as part of a broader tax act in 2010.
The rest of the world is fast jumping on the FATCA bandwagon. The UK and Europe are drafting similar laws to automatically collect financial information about accounts held offshore by taxpayers.
More than 60 countries have signed up to FATCA – including many leading economies like the UK, Germany, France, Italy, Spain and Japan.
Many former tax havens are registering as FATCA compliant – including Switzerland.
All the signs are that FATCA-style tax laws will become the global norm, rather than an exception for US expats.