America’s controversial global tax law, FATCA, has been slammed as ‘a masterclass in fiscal imperialism and the law of unintended consequences,’ by the boss of one of the world’s largest independent financial advisory organizations.
The comments from Nigel Green, deVere Group CEO and founder, come as it is revealed that, despite FATCA, America is increasingly secret in matters of financial data; and because of FATCA, a growing number of U.S. citizens are giving up their American citizenship. Under the Foreign Account Tax Compliance Act, which came into effect in July 2014, all non-U.S. financial institutions are required to report the financial information of American clients who have accounts holding more than $50,000 directly to the IRS.
The official aim of the legislation, part of the 2010 HIRE Act, is to try and combat tax evasion. However its opponents claim FATCA’s dragnet approach will be highly ineffective at achieving this serious and worthwhile objective.
Mr Green comments: “FATCA is becoming increasingly recognised in America and abroad as being a masterclass in fiscal imperialism and the law of unintended consequences. There are two recent sets of data which support this. First, by using its super power status, the U.S. has over the last few years been coercing foreign financial institutions (FFIs) around the world into accepting FATCA, or facing stiff financial penalties and, in effect, being frozen out of U.S. markets. Under FATCA, and the intergovernmental agreements that foreign governments were cowed into signing, FFIs have to hand over automatically to the U.S. authorities what would be private financial data on American depositors. In return, the U.S. promised to provide ‘equivalent levels of reciprocal automatic exchange’ to foreign ‘FATCA partners.’
“However, in its recently published Financial Secrecy Index 2015, a comprehensive report detailing global financial secrecy, the Tax Justice Network affirms that this is routinely not happening. The U.S. has moved up from sixth to third place in the secrecy ranking – ahead of the Cayman islands. Doesn’t this make America a bona fide tax haven? No longer can the American government claim that FATCA is anything other than a one-way, extraterritorial diktat that burdens other countries’ financial institutions and their clients, which violates other countries’ sovereignty, and which is detrimental to their taxpayers.”
The deVere CEO continues: “Second, the U.S. Treasury Department has recently revealed that an increasing number of Americans relinquished their U.S. passports between July and September – in fact it was more than in any previous quarter. It is forecast that by the end of the year, more people would have given up their American citizenship than at any point. It is widely accepted that there is a correlation here. There has been a steady and growing trend of citizenship relinquishments since FATCA was introduced. This is because this toxic legislation turns law-abiding Americans living overseas, of whom there are approximately eight million, into financial pariahs. For instance, many U.S. citizens cannot even now hold a bank account in their country of residence as foreign banks routinely feel Americans are too much trouble thanks to FATCA’s onerous and costly rules by which they would need to abide to take them on as clients.”
A deVere Group survey undertaken earlier this year revealed that a massive 73 per cent of Americans living overseas are tempted to give up their U.S. passports.
Mr Green concludes: “FATCA is misguided and ill-conceived. More must be done to have it consigned to the history books.”