It has been called the worst law that many Americans haven’t heard of, and now a growing campaign to bring FATCA to heel is building in strength.
The Foreign Account Tax Compliance Act (FATCA) is an American law aimed at making foreign financial institutions reveal the account details of its US tax-paying clients if they have assets of more than $50,000.
The law comes into effect from January next year and increasing numbers of countries have agreed implementation via intergovernmental agreements.
Those countries include the UK, Italy, Spain and Germany.
However, a growing number of organisations and politicians in America have realised that for other countries to implement the law, they are asking for information on their citizens holding accounts with US-based financial institutions.
Expat tax fears
Now, the Centre for Freedom and Prosperity (CF&P) has started a campaign to repeal FATCA because the law infringes the constitutional rights of Americans oversteps Congressional powers.
The group also claims that FATCA punishes Americans living and working overseas and the act will eventually lead to higher taxes and, possibly, international taxation.
The high costs of setting up FATCA on American businesses are also criticised, an issue flagged by financial institutions around the world.
The group, which has created the RepealFatca.com website, is now attracting the support of other powerful groups and politicians.
Among them is Senator Rand Paul, who has published a bill designed to repeal most of FATCA.
A CF&P spokesman said: “While tax evasion is a valid concern at home and abroad, FATCA is the wrong way to address it.”
He added that the law needs stopping before implementation, and then repealed.
Jobs at risk
The campaign says that FATCA will threaten the American economy by frightening off foreign investors which will cost American jobs and violate standing trade agreements between countries.
They also say that the cost of implementing FATCA will be passed on to American consumers.
Among those voicing their support for Senator Paul’s new bill is the Credit Union National Association which, it says, will cost billions of dollars for it to comply with FATCA.
The union is also flagging up concerns for a proposed ‘European FATCA’ which would impose similar constraints on all financial institutions within the European Union and would also affect US-based institutions.
However, critics of the RepealFatca campaign point to a previous attempt in the 1990s when the OECD tried to launch a crackdown on tax havens but were thwarted by the CF&P which launched a similar campaign to kill that ambition.