Foreign Account Compliance Act 'Losing Momentum,' Financial Expert Says
The implementation of a new and controversial piece of legislation, which critics say would damage the fragile U.S. economy and negatively impact the seven million American expats around the world, is “losing momentum,” according to the boss of the world’s largest independent financial advisory firm.
The comments from Nigel Green, chief executive of the deVere Group, came after the U.S. Treasury Department missed another deadline to publish final rules on FATCA (the “Foreign Account Tax Compliance Act”).
Designed, according to the Treasury Department, to catch overseas tax cheats, FATCA will require all foreign financial institutions to report the activities of their American clients to the Internal Revenue Service (IRS). The penalty of not complying with FATCA will be 30 per cent withholdings of U.S. source income.
Another Missed Deadline
“The U.S. Treasury Department’s failure to meet its own end-of-year deadline to publish the FATCA rules, one of the key steps in its implementation, underscores how this piece of legislation—which has a whole host of adverse, unintended consequences—is, thankfully, running out of steam,” Green explained.
“This is the second time that the Treasury Department has missed such a deadline—the first one came and went in September ,” he added.
He continued, “In addition, to date, only the UK, Denmark, Ireland, and Mexico, plus a handful of British Crown Dependencies, have signed FATCA’s required Intergovernmental Agreement (IGA). The Treasury Department had hoped to finalize IGAs with many others, including Canada, France, Germany, Italy, Japan, Spain, and Switzerland, among others, before the end of 2012. It failed on that too.
“These two factors clearly demonstrate that the implementation of FATCA is losing momentum,” he said.
Late last year Hong Kong finance officials announced they would not implement FATCA.
Hope for Repeal
Green added, “The optimist in me hopes that the FATCA machine stalling is the first sign that it could, ultimately, be repealed completely.
“FATCA would negatively impact seven million Americans who choose to live overseas, as well as all US firms who operate globally, as a growing number of foreign financial institutions - with which they have to work to function effectively abroad - are rejecting American business as they would have to become ‘FATCA-compliant,’ which would be extremely costly and highly complex.
“FATCA, which one expert dubbed ‘the worst law most Americans have never heard of’, would also drastically reduce foreign investment into the US, due to the threat of the IRS withholding 30 per cent of investors’ funds. Should FATCA come into effect, investors will simply put their money somewhere else, dampening US economic growth and slashing job creation in America.
“Not only all that, but FATCA would not even achieve its main aim of actively targeting tax evaders.”
Andrew Quinlan, president of the Center for Freedom and Prosperity, calls FATCA “an effort by the U.S. to con- script foreign banks as agents for the IRS, and to have them pay for the pleasure.”
George Prior (firstname.lastname@example.org) is founder of Prior Consultancy in the UK and Spain.