FATCA: ‘Simple premise’ gone terribly wrong

This, he asserted, would “restore fairness and balance” to the U.S. tax code.

Then in 2010, Congress passed the Foreign Account Tax Compliance Act (FATCA) which was tacked on to the Hire Incentives to Restore Employment (HIRE) Act. Even today, many members of Congress remain unaware of FATCA and all its ramifications.

Yet, FATCA is a nightmare for “U.S. persons” living in countries outside the United States. In 2009, President Obama clearly stated this law “would require overseas banks to provide 1099s for their American clients, just like Americans have to do for their bank accounts in this country.”

“If (financial institutions) don’t cooperate with us, we will assume that they are sheltering money in tax havens and act accordingly,” Obama insisted.

Now, the U.S. Treasury expects banks in every country worldwide to report funds held by “U.S. persons” (not all are U.S. citizens) beginning in 2015. If they do not, foreign financial institutions (FFIs) face huge financial penalties and sanctions.

These accounts are normal banking, savings and checking accounts and other investment and financial vehicles. Just like Americans living in United States, these accounts are held in a bank in a community where the person lives to pay bills and mortgages and to save and invest in order to buy a home, fund children’s education and plan for retirement.

Those funds were entirely earned, saved, invested and taxed in country of residence. Often they are held jointly with non-U.S. spouses and family. Sometimes, the accounts belong to an employer or volunteer organization where the “U.S. person” has signing authority.

Under FATCA, banks will be forced to submit information on total assets, account balances, transactions, account numbers and other personal identifying information. This intrusion goes way beyond a 1099 and would not be accepted or tolerated by Americans living in United States.

Most Americans living outside the U.S. are not “tax cheats,” “tax evaders” or “traitors” though they are often characterized that way in the media or even by members of Congress.

Instead, they are honest, productive, contributing residents of other countries, which they call home. In many cases, they are also citizens of those countries.

Even the King of Thailand, the Mayor of London, England and the Premier of the Canadian province of New Brunswick are considered “U.S. persons” under American law simply because they were born in United States.

President Obama and members of Congress, how did the “simple premise” of “cracking down on illegal tax evasion and closing loopholes” become an attack on financial lives and personal integrity of millions of people living outside United States, their banks and laws and constitutions of their countries of residence?

Is this how “common sense measures” will “restore fairness and balance in the tax code?”

The U.S. Department of Treasury, IRS and Congress are not clear how much revenue might be generated from FATCA. The President suggested $210 billion over ten years. Others have projected $800 billion over ten years.

Where is the cost/benefit analysis that would answer the question of how much US taxpayers will save (if anything) due to these measures? Or, will costs actually exceed revenue?

How did the “simple premise” of combating offshore tax evasion through 1099s become:

More than 500 pages in complex regulations;

Billions of dollars in costs to financial institutions around the world;

800 new IRS agents promised by Obama;

Present and future closure of bank accounts of “U.S. persons” living in other countries;

Demands that banks in other countries violate their own country’s laws and constitutions;

Strained international relations due to U.S. intimidating expectations;

Arbitrary “negotiations” with allies and enemies for Intergovernmental Agreements (IGA);

Promises to foreign governments from US Treasury for U.S. banks and IRS to provide information to home governments on U.S. assets and income for non-U.S. residents; and

Lawsuits in U.S. federal court from two American banking associations?

Some members of Congress from both parties have predicted that promised reciprocity from IGAs could result in “the flight of hundreds of billions of dollars from U.S. financial institutions.” They further suggest reciprocity could “drive job-creating capital out of America and harm U.S. financial markets.”

Mr. President and members of Congress, is this what you intended?

Swanson is a retired Human Resources professional and freelance writer. Born and raised in Pennsylvania, she has been a Canadian citizen for 40 years. Ferauge is an information technology professional, a writer and blogger. An American citizen originally from Seattle, she lived in Japan and has lived in France with her French husband and family for nearly 20 years.