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Tuesday, July 9, 2013

Christians: The Dubious Legal Pedigree of IGAs

Tax AnalystsAllison Christians (McGill), The Dubious Legal Pedigree of IGAs (and Why it Matters), 69 Tax Notes Int'l 565 (Feb. 11, 2013):

When Congress enacted the Foreign Account Tax Compliance Act in 2010, it made no mention of any internationally-agreed alternative to its enforcement, and Congress has made no authorization since then for the president to override FATCA’s statutory provisions by international agreement. Yet due to difficulties in implementing FATCA, Treasury has entered into several ‘‘intergovernmental’’ agreements (IGAs) to essentially bypass the hurdles, even going so far as to draft model IGAs with the intent of streamlining their enactment globally. This column examines the nature of these agreements and concludes that their legal pedigree is tenuous as a constitutional matter. It argues that this pedigree implicates the rule of law in two ways: first, if the IGAs are not "good" law in the U.S., then FATCA partners incur the risk of penalties should the statute they seek to override apply in default. Second, and more fundamentally, the IGAs violate the rule of law by ignoring established procedural requirements for binding the US internationally. This undermines the legal system in the US domestically as well as hurting U.S. credibility in the international community. The column concludes by arguing that there is no benefit to be had in skirting the normal legal process for concluding international agreements in the rush to implement FATCA. Instead of jeopardizing the important and complex project of global tax compliance with such a legally dubious procedure, the obvious and straightforward approach to making FATCA work internationally is to follow the normal treaty-making procedure, time-tested through 100 years of US tax treaty-making history.

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