Why FATCA Litigation Always Fails | Insider expertise with John Richardson and Anthony Parent
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The Foreign Account Tax Compliance Act (FATCA) is a wildly unpopular law with a dubious pedigree. While the claimed author of the bill is tax professorsElise Bean, she does not appears to be the author as we have pointed out previously she doesn't understand her own law and the legal environment in which is operates. We reported on her ignorance previously – here are 15 things Professor Bean gets wrong.
The Foreign Account Tax Compliance Act (FATCA) has been subject to various criticisms, highlighting several issues with its implementation, implications, and effects on both U.S. citizens abroad and foreign financial institutions. Here are some of the most valid criticisms:
1. Privacy Concerns: Critics argue that FATCA infringes on privacy rights. By requiring foreign financial institutions to report detailed information about U.S. account holders to the IRS, it's argued that this could lead to unnecessary surveillance or misuse of personal financial data.
2. Global Banking Discrimination: There's been a noted increase in banking difficulties for U.S. citizens living abroad. Some foreign banks have either closed accounts of U.S. persons or have imposed additional fees or requirements, citing FATCA compliance costs. This has led to what some refer to as "banking discrimination," where being a U.S. citizen can significantly complicate or increase the cost of maintaining foreign bank accounts.
3. Compliance Costs: The burden of compliance for foreign financial institutions is substantial. These institutions must implement new systems or modify existing ones to identify and report on U.S. accounts, leading to significant costs. Critics argue that these costs are disproportionate to the revenue gained in tax compliance, especially considering that a significant portion of U.S. expatriates might not owe taxes due to foreign tax credits or the Foreign Earned Income Exclusion.
4. Oversight and Errors: There's a concern over the accuracy of the reported data. Given the volume of information and the complexity of compliance, errors in reporting are inevitable, which could lead to wrongful accusations or penalties for individuals who might not fully understand or comply with U.S. tax laws while living abroad.
5. Economic Impact on U.S. Citizens Abroad: FATCA potentially discourages entrepreneurship and investment by U.S. citizens abroad due to increased scrutiny, potential lack of banking services, and the complexity of complying with U.S. tax laws. This could stifle innovation and economic activity where U.S. expatriates are involved.
Inefficiency and Redundancy: Some argue that FATCA's mechanism for identifying and taxing foreign assets overlaps with other international tax treaties and agreements, leading to redundancy in efforts and potentially inefficient use of resources for both governments and individuals.
Unfair Targeting of Middle-Class Expatriates: While FATCA aims to catch high net worth individuals avoiding taxes, it also affects middle-class Americans abroad who might have little to no U.S. tax liability due to various exemptions and credits. This group faces disproportionately high compliance burdens relative to their tax exposure.
Sovereignty and International Relations: From an international perspective, FATCA has been criticized for imposing U.S. law extraterritorially, which some nations view as an overreach. This has led to discussions on sovereignty, especially when foreign governments agree to FATCA through intergovernmental agreements, potentially at the expense of local privacy laws.
Potential for Double Taxation: While FATCA aims to prevent tax evasion, its implementation can sometimes lead to scenarios where individuals might face double taxation if not carefully navigated, especially in countries with less clear tax treaties with the U.S.
Lack of Reciprocity: Critics point out that while the U.S. demands information on its citizens worldwide, it does not offer the same level of information sharing on non-U.S. persons in U.S. banks to other countries, which some see as an imbalance in international tax transparency.
So if FATCA iust so awful, why is it all litigation against it has failed?
Join us live with host Anthony Parent, John Richardson and Keith Redmond as the three discuss live on Oct 2nd at 7:30 am EDT as they discuss the reasons why and hopefully why FATCA litigation fails.
Here are the reason given:
• Complexity of the Law.
• Broad Jurisdiction and International Agreements
• The Burden of Proof
• Lack of Standing or Clear Harm
• Cost and Resource Intensive
• Precedent and Judicial Reluctance given
Buy maybe there is more going on. Elise Bean appears to be a cutout for the people who really wanted FATCA. So who are Ms. Bean's bosses. Why did they want FATCA? Why did they. want her to claim responsibility?
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