Paul L. Caron

Wednesday, April 5, 2017

FATCA: A Corporate-Welfare Bonanza For Tax-Compliance Firms

FATCAWall Street Journal op-ed: A Corporate-Welfare Bonanza for Tax-Compliance Firms, by Nigel Green (Founder & CEO, deVere Group):

Recently I launched the Campaign to Repeal Fatca—the Foreign Account Tax Compliance Act. The 2010 law, which purports to track down tax cheats hiding money abroad, forces foreign banks and other financial institutions to disclose Americans’ accounts to the Internal Revenue Service.

Threatened with U.S. sanctions if they don’t comply, banks around the world have rushed to submit to Fatca. Foreign governments have hastened to abrogate their domestic privacy laws. Fatca, it seems, has been a big success. But who really benefits?

Not the U.S. budget. The IRS claimed last October that Fatca has helped it to collect $10 billion since 2009 from “taxpayers coming back into compliance.” But that figure lumps in penalties for filing deficiencies and money from all offshore enforcement programs. William H. Byrnes, a law professor at Texas A&M believes [Background and Current Status of FATCA] the actual net recovery attributable to Fatca (subtracting IRS enforcement costs) may be closer to $200 million a year and possibly as low as $100 million.

That isn’t enough to fund the federal government for more than half an hour. It is far less than was expected at Fatca’s enactment, since the law was scored as bringing in $800 million a year. Excepting penalties, writes Mr. Byrnes, Fatca could “soon cost more money than it brings in.”

That meager gain must be weighed against the law’s costs. Fatca adds one more onerous and expensive reporting obligation for American taxpayers who hold any asset abroad. It largely duplicates existing mandates, notably the Report of Foreign Banks and Foreign Accounts, and the penalties for error are draconian. The Tax Foundation estimated in 2016 that complying with Fatca each year takes almost 4.5 million hours and costs $166 million.

But the really big boodle goes to the accounting, law and software firms that help foreign financial institutions sift through millions of client accounts looking for American “indicia.” Although there is no official figure for the cumulative world-wide cost, the magnitude can be extrapolated from piecemeal disclosures by banks and the companies selling them services. These expenses, as Mr. Byrnes writes, are “staggering.” ...

Fatca was not subjected to a cost-benefit analysis before it was enacted, but the results are now in. As a revenue tool for the public purse, the law is a failure. Instead it offers a windfall of corporate welfare for the compliance industries. That’s no reason to keep it.

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The State. In all it's literal and figurative modalities. It's an extension of the surveillance state, making war on citizens in order to extract the maximum economic value and control behavior of individuals.

Posted by: ruralcounsel | Apr 6, 2017 4:05:15 AM