FATCA System Fails Government Probe, Threatens Privacy
Despite spending more than $8.6 million so far, with another $8 million projected to be spent on developing the online portal for handling the registration of foreign financial institutions for the Foreign Account Tax Compliance Act (FATCA), the IRS is still unprepared for the law, according to a report by the Treasury Inspector General for Tax Administration.
The delay threatens to compromise the information of both Americans and the foreign institutions that have been coerced into serving the IRS under the law.
The report reveals amazing disarray in the implementation process, as the IRS spent considerable resources developing the system before issuing the final regulations, which then had to be scrapped to accommodate new requirements. The process has also been marred by multiple delays, and the agency has gone well outside the bounds of the law’s authority in both negotiating directly with foreign governments and promising reciprocal information-sharing on foreign deposits within the United States, which will place additional burdens on U.S. financial institutions).
Worries Over Taxpayer Info
The recent and ongoing fiasco surrounding the rollout of the Obamacare Web site adds to the concern regarding the incompetence of the IRS in implementing its FATCA reporting system, on top of the possibility the IRS will handle private taxpayer information with the same poor proficiency as it has the rest of the FATCA implementation process. The fact that the Obamacare site almost lacks any security does not augur well for financial privacy rights under IRS oversight.
Even in the unlikely event that the Web site manages to keep from prying eyes all the new American taxpayer information the government will be collecting under FATCA, the IRS itself has already proven itself to be an untrustworthy steward of your private financial information. Leaks or unauthorized sharing between agencies to punish individuals for their political views are certainly not out of the question. Nations that stuck their necks out to partner with the U.S. Treasury on FATCA may reconsider, as their institutions are now at the mercy of the IRS and a system that is fundamentally unprepared for the law’s enforcement.
‘Deleterious Effects on Growth’
In introducing legislation to repeal FATCA (S. 887), Senator Rand Paul (R-KY) cited the “deleterious effects of FATCA on economic growth and financial privacy of Americans.” The implementation process, along with other multiple recent scandals involving infringements on the privacy of American citizens, has done nothing to allay these concerns.
For this and numerous other reasons, repeal of the disastrous FATCA law must be included as a part of tax reform. It remains vulnerable to challenge if the nations, institutions and individuals most affected stand up to fight it.
Used with permission of the Center for Freedom and Prosperity at freedomandprosperity.org.