Subscribe free to our newsletters via your
. Military Space News .

Outside View: Why FATCA should be repealed
by James George Jatras
Washington (UPI) May 8, 2012

disclaimer: image is for illustration purposes only

For two years, much of the global financial community has been in an uproar about a pending U.S. law that has barely been noticed in the United States. That may soon change as the unacceptable costs of the "Foreign Account Tax Compliance Act" become fully apparent.

Enacted in 2010 as a supposed revenue-raiser pasted into an unrelated bill with almost no debate, FATCA requires every foreign financial institution in the world to collect data on U.S.-owned assets it holds and report them directly to the Internal Revenue Service. Any FFI failing to comply will have 30 percent of its U.S.-derived income withheld.

Together with additional complex rules, firms expect aggregate compliance costs in the tens of billions of dollars. In February, the U.S. Treasury Department released 388 pages of draft FATCA enforcement regulations, now being finalized.

At the same time, Treasury announced an agreement in principle with five major EU governments for a reciprocal "partnership": instead of requiring FFIs in "partner" countries to report U.S.-owned assets directly to the IRS, they will report to their own governments, which will pass the information on to Washington.

In return, the United States will require domestic American institutions (banks, stock and equity funds, pension funds, insurance companies, etc.) to report to Treasury on assets belonging to citizens of the "partner" countries for transmittal to their governments.

As additional countries join the initial five "FATCA partners," a multi-governmental, perhaps eventually a global, financial information-sharing structure is forming.

Draft regulations on U.S. institutions to implement the international "partnership" agreement have yet to be published and understandably most Americans have not yet noticed FATCA. But as the FATCA boomerang begins its return flight back toward the United States, myths already well-established abroad are beginning to shatter:

Myth 1: FATCA's costs will fall only on foreigners, not Americans.

The canary in the FATCA coal mine is the 5 million strong U.S. expatriate community, already being treated as financial lepers by FFIs afraid of the 30 percent withholding penalty.

If only a tiny fraction of $21 trillion in foreign investment in the United States were pulled out over FATCA fears, the impact on the U.S. economy and jobs could be devastating.

Now, with FATCA-like requirements also in the offing for U.S. domestic institutions, costs can be expected to be passed on to consumers, raising expenses for all Americans.

Moreover, the "partnership" agreement will require transfers of personal financial information of millions of Americans (starting with dual nationals) and foreign residents with uncertain data protection to foreign governments and, in all likelihood, eventually to a central international repository.

FATCA may also facilitate longstanding efforts to create a "global high-tax cartel" and even a supranational financial transaction tax.

Myth 2: By cooperating with the United States, foreign "partner" governments are rescuing their firms from a crushing compliance burden.

Many firms in the five "partner" countries are breathing a sigh of relief that they will report to their own governments, not to the IRS, and firms in other countries are demanding their governments join in. They are mistaken.

Upon examination, it's clear who really is being rescued here: the IRS.

Saddled with the Sisyphean task of extraterritorial enforcement on each and every financial firm (as broadly defined under FATCA) in the entire world, Treasury already had delayed by more than two months the release of draft FATCA regulations last year -- until it could unveil the "partnership" agreement, which in effect "allows" foreign governments to do IRS's job for it.

While it's possible the "partnership" may provide foreign firms with some modest respite (and eliminates their terror of FATCA's withholding provision), compliance costs -- under domestic laws and regulations that will parallel the IRS's 388 pages -- may actually turn out to be greater than just complying with the IRS's mandates.

If, as described in the "partnership" announcement, FATCA becomes the "common model for automatic data exchange of information," FFIs face the prospect of reporting on assets from multiple countries, not just one. In addition, under domestically imposed "partnership" compliance requirements, individual firms could be deprived of the ability to make their own business decisions about maintaining U.S. clients and investments weighed against compliance costs.

Myth 3: FATCA is only about making "fat cats" pay their fair share.

The congressional Joint Committee on Taxation estimates FATCA's revenue benefit to the U.S. Treasury at less than $1 billion yearly, out of yearly tax revenues of about $2 trillion a year. No cost/benefit study has been conducted about the comparatively trivial revenues FATCA stands to "recover" versus untold costs of compliance (soon to be extended to domestic U.S. firms and consumers under the "partnership"), administrative costs to the Treasury and foreign investment withdrawn from the United States (and consequence job loss and reduced tax revenues), not to mention the incalculable impact of creating an international financial data fishbowl.

Myth 4: FATCA is set in concrete -- all we can do is live with it.

Absolutely not! FATCA's vulnerabilities are increasingly evident as a clearer picture emerges of the long list of oxen that will be gored: American expatriates, dual nationals, resident aliens, U.S. consumers of financial and investment services of any sort, workers in foreign investment-dependent industries and anyone and everyone who doesn't want their private financial data shared with who-knows-who -- not to mention U.S. and foreign firms (notably those in countries inclined to resist joining the "partnership") saddled with costs completely out of balance with FATCA's supposed revenue purpose.

To the trained Washington eye, FATCA presents what military planners call a "target-rich environment," for first rendering unenforceable the "partnership" agreement and the FATCA regulations (slated to be phased in beginning in January) and then for final repeal of this monstrosity.

During this election year, presidential and congressional candidates need to be put on the spot where they stand on FATCA.

(James George Jatras is a principal of Squire Sanders Public Advocacy, a Washington government relations firm, and specializes in international issues. He previously served as a policy analyst for the U.S. Senate Republican leadership and as an American Foreign Service Officer. He can be reached at

(United Press International's "Outside View" commentaries are written by outside contributors who specialize in a variety of important issues. The views expressed do not necessarily reflect those of United Press International. In the interests of creating an open forum, original submissions are invited.)


Related Links
The Long War - Doctrine and Application

Comment on this article via your Facebook, Yahoo, AOL, Hotmail login.

Share this article via these popular social media networks DiggDigg RedditReddit GoogleGoogle

Memory Foam Mattress Review
Newsletters :: SpaceDaily :: SpaceWar :: TerraDaily :: Energy Daily
XML Feeds :: Space News :: Earth News :: War News :: Solar Energy News

Qaeda kills 22 Yemen troops after death of leader
Aden (AFP) May 7, 2012
Al-Qaeda gunmen on Monday launched spectacular attacks on two army posts in south Yemen, killing at least 22 soldiers, to avenge the death of a top militant in an air raid, a military official said. Jihadists attacked the military posts outside the city of Zinjibar, which they have controlled since May last year, said the official, speaking on condition of anonymity. Four officers were among ... read more

House panel OKs $1B for Israel's missiles

US to conduct 'largest ever' missile defense test - Pentagon

Russia warns it may target US missile shield

Russia warns of 'dead end' in US missile talks

Safran announces the creation of Herakles, merging SME and SPS

Israeli helicopters get missile shield

London apartment block set to host missiles for Olympics

N. Korea 'missiles' at parade were mock-ups: experts

Indra launches UAV; market growth forecast

Boeing Provides First Tactical Cross-domain Capabilities for Predator Reaper RPV

Lockheed Martin's Shadow Hawk Munition Launched from Shadow UAS for the First Time

Camcopter S-100 First UAS Ever to Fly from an Italian Navy Ship

Second AEHF Military Communications Satellite Launched

Fourth Boeing-built WGS Satellite Accepted by USAF

Raytheon to Continue Supporting Coalition Forces' Information-Sharing Computer Network

Northrop Grumman Wins Contract for USAF Command and Control Modernization Program

Boeing KC-46 Tanker Program Completes Preliminary Design Review

Citing safety, two F-22 pilots refuse to fly: report

Lockheed Martin Delivers Final, Historic F-22 Raptor To USAF

Lockheed Martin to Deliver New C-130J Training Technology

Brazil, Turkey agree on more defense links

Key US ally Australia slashes military spending

Israeli arms exports stir controversy

US military orders troops to fall in line after misconduct

Clinton sees quiet progress on Asia tour

Walker's World: After me, the deluge

China's defense chief visits Pentagon amid diplomatic row

'Mammoth' tasks ahead for Hollande: World press

New technique uses electrons to map nanoparticle atomic structures

Light touch keeps a grip on delicate nanoparticles

Next-Generation Nanoelectronics: A Decade of Progress, Coming Advances

Nanotech gets boost from nanowire decorations

The content herein, unless otherwise known to be public domain, are Copyright 1995-2014 - Space Media Network. AFP, UPI and IANS news wire stories are copyright Agence France-Presse, United Press International and Indo-Asia News Service. ESA Portal Reports are copyright European Space Agency. All NASA sourced material is public domain. Additional copyrights may apply in whole or part to other bona fide parties. Advertising does not imply endorsement,agreement or approval of any opinions, statements or information provided by Space Media Network on any Web page published or hosted by Space Media Network. Privacy Statement