Opponents of the Foreign Account Tax Compliance Act, including a US group called RepealFATCA.com, are jumping on recent comments made by Florida Republican Rep Bill Posey.
Posey, a member of the House Financial Services Committee, is casting doubt on the Treasury’s ability to guarantee US financial institutions will be able to provide foreign governments with the sorts of data FATCA obliges foreign financial institutions to provide to the US.
At issue is whether the US Treasury will have the ability to impose on its own financial institutions the equivalent of the reporting requirements that the US is demanding of these institutions’ foreign counterparts.
Posey is reported to have sent a letter yesterday to the US Treasury Secretary Jack Lew in which he expressed these doubts.
There has not yet been much publicity about Posey’s observations, and no major publications are believed yet to have covered the fact of his letter to the treasury secretary. One London-based FATCA expert told International Adviser: "We do not think that this represents a widely accepted view, but would prefer not to comment [officially]". However, deVere Group chief executive Nigel Green has wasted no time in urging the UK to reject FATCA, citing Posey’s arguments.
“When the FATCA issue returns to the House of Commons, after it has been rubber-stamped in the Lords on 15th July, politicians must vote it down, because the US is unlikely to keep its side of the deal,” Green, who heads up the largest independent international advisory firm, said, in a statement today.
“FATCA’s supposed guarantee of reciprocity has been the ‘hook’ for many governments, including Britain’s coalition. The [UK’s coalition government] caved in to US demands over FATCA, on the understanding that the UK would benefit from a reciprocal exchange. Yet there appears to be no reciprocity that can stick.”
In an article on its website dated yesterday, RepealFATCA.com noted that Congress is all but certain, when it comes to a vote, not to grant the US Treasury the authority to "force FATCA-like regulations on US firms” – thus “knocking out a critical element of the [Treasury] department’s strategy in rescuing an already fatally-flawed law”.
‘Enticing foreign governments’
The root of the problem Posey identifies is the fact that because it lacks the resources and political mandate to globally enforce FATCA directly on hundreds of thousands of foreign financial institutions (FFIs), in hundreds of countries, it must, in the words of RepealFATCA.com, “pressure or entice foreign governments” into enforcing FATCA against their own institutions and citizens, “as effective deputies of the [US Internal Revenue Service]”, via so-called intergovernmental agreements (IGAs).
However, the quid pro quo of such deals is that the US would reciprocate, with “equivalent levels of reciprocal automatic exchange” with its “foreign FATCA partners”, RepealFATCA.com notes.
Posey’s central contention is that Congressional approval for such a mandate is unlikely.
Posey, who was elected to Congress in 2008, is also chief sponsor of a bill, HR 2299, which would abolish existing regulations mandating non-resident alien interest reporting by US banks and credit unions.
Latest glitch
Rep Posey’s observation about a potentially major problem with FATCA comes less than two months after another Republican Congressman, Senator Rand Paul of Kentucky, introduced a bill to repeal "anti-privacy" provisions of FATCA, arguing that it would infringe “upon basic constitutional rights".
Ironically, these actions are taking place even as a number of countries, including the UK, France, Germany, Italy and Spain, are increasingly embracing the principles of FATCA, as a means of cracking down on the use of offshore accounts for tax evasion purposes by their citizens.
