Wednesday, July 17, 2013
Wall Street Journal op-ed: FATCA: How to Lose Friends, Citizens and Influence, by Colleen Graffy (Pepperdine):
Beware the sledgehammer used to crack the nut. In this case, the nut
is the U.S. government's laudable goal of catching tax evaders. The
sledgehammer is the overreaching effect of legislation that is
alienating other countries and resulting in millions of U.S. citizens
abroad being forced to either painfully reconsider their nationality, or
face a lifetime of onerous bureaucracy, expense and privacy invasion. The legislation is FATCA, the Foreign Account Tax Compliance Act. ...
A particularly alarming aspect of FATCA is that it seeks to co-opt
foreign banks as long-arm enforcement agencies of the IRS—even when it might contravene that country's own privacy or
data-protection laws. If financial institutions don't report U.S.
citizens holding accounts with them, these institutions face a 30%
withholding tax on securities transactions that originate in the U.S. Given this threat, why allow an American, or even suspected American,
to bank with you? The reporting costs, and the consequences of a
mistake, are too onerous. ...
The core injustice in America's tax policy is that it is based on citizenship rather than residency. This novel approach is practiced by only two countries in the world: the U.S. and Eritrea. Ironically, then-U.S. Ambassador to the U.N. Susan Rice condemned this practice by Eritrea in 2011 as "the extortion of a 'diaspora tax' from people of Eritrean descent living overseas." Many would describe U.S. practice in similar terms. ... Let's find another way to crack this nut.