The US Treasury has told the European Union that it is paramount that US expats comply with domestic regulation, since the United States’ taxation model is based on citizenship, in a letter seen by International Adviser.
The communication is a reply to a letter sent by the EU in December 2019, where the Commission expressed concerns about the impact of the Foreign Account Tax Compliance Act (Fatca) on European citizens.
“Fatca was enacted to provide the Internal Revenue Service (IRS) with additional tools to identify gaps in and reinforce our systems of voluntary compliance of US taxpayers with respect to non-US financial accounts or substantial investments in or ownership of certain passive non-UK entities,” said Chip Harter, deputy assistant secretary for international tax affairs, in the letter dated 12 March 2020.
“The Treasury department and the IRS have provided extensive relief to [foreign financial institutions (FFIs)] with US customers that have not provided a [tax identification number (Tin)] to the FFI.
“Further, the development of the Fatca [model intergovernmental agreements (IGAs)] established an alternative path for FFIs to comply with Fatca, removed legal issues that had been raised in connection with Fatca and provided simplifying rules for FFIs to document and report information,” he added.
Treatment of European citizens
Harper, however, was very sceptical about the impact the legislation has on Europeans, especially so-called ‘accidental Americans’ – people who acquired US citizenship either because it was passed on to them by their parents or simply because they were born in the United States.
He downplayed the issues facing accidentals as the Treasury had only received “anecdotal information about the extent of the situation”.
IA reached out to Fabien Lehagre president of the Accidental American Association, who believes the issue is much bigger than that.
He said: “Chip Harter is well aware of the problems encountered by accidental Americans, which are far from being anecdotal since they have been covered by the media around the world for five years now.
“It is clear that the objective of the American tax administration is not to fight against tax fraud but to collect money from citizens who had the misfortune of being born on American soil.
“Given the position of the United States in the latest ranking of the Tax Justice Network, I find it rather ironic to say that the United States is the leader in the fight against tax evasion.”
Representatives of the US and EU met in Washington in February to “exchange views” on regulation and taxation.
The outcome of the meeting is not yet known.
