US expats' lobbying group demands repeal of FATCA

24 October 2011

The lobbying organisation American Citizens Abroad has begun a worldwide campaign for repeal of the USA's Foreign Accounts Tax Compliance Act.

Geneva-based ACA claims to represent the interests of the five million expatriate Americans. All such persons are required to declare all their foreign income to the Internal Revenue Service, and pay US tax on it. The new Act will force foreign banks and other financial institutions to identify clients who are US persons and disclose that information to the IRS. Institutions that do not comply will see a heavy tax levied on their earnings from US assets (see STEP News passim).

There is already much opposition to FATCA from foreign governments and the financial sector, both outside the USA and inside it. The most common criticism is that foreign investment institutions will desert US securities en masse, triggering a huge loss of inward investment.

ACA echoes this complaint. But as a lobbyist for individual Americans, it has an extra angle of its own. It says FATCA will "transform American citizens into pariahs in the international world of finance", and lead to widespread discrimination against American citizens residing overseas. In particular, it will make it even harder for millions of US expats to maintain bank accounts.

Already, says ACA, it has received hundreds of reports from Americans abroad being refused entry into foreign pension plans, insurance contracts or mortgage agreements based on their nationality. Moreover, expat Americans cannot easily operate bank accounts in the USA itself, because anti-terrorist legislation (the so-called Patriot Act) compels US banks to treat them with extra caution.

"The FATCA law will only make this situation worse for Americans who live and work overseas", the ACA's executive director Jackie Bugnion told a meeting in London earlier this month.

Bugnion says FATCA will not even achieve its purpose, because many foreign banks will simply refuse to comply on grounds of cost. US persons who do not welcome the IRS's attentions will then naturally gravitate towards these institutions.

"This fact alone makes the legislation self-defeating", said Bugnion, who has already written to the IRS and the US Treasury demanding repeal of FATCA.

 

Sources

 

ACA (Bugnion's speech, PDF)

ACA (Call for repeal, PDF)


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