# "Fire FATCA"



## underation (Oct 25, 2018)

> A report issued by the French Parliament suggests Paris should pull out of its Foreign Account Tax Compliance Act treaty with the U.S. if it can’t be renegotiated to better protect dual nationals, Bloomberg reports. Congress passed FATCA, which requires foreign banks to divulge assets held by U.S. citizens to American authorities, in 2010 to aid the Obama administration’s efforts to tamp down tax evasion. FATCA critics have said the law goes over the top in its efforts to stop tax evasion, and they have pushed to both repeal the law and to move the U.S. toward residence-based taxation. The French report, co-authored by an ally of President Emmanuel Macron and a member of the opposition, seeks ways to reduce double taxation because of FATCA and calls for the law to apply only to those of certain wealth or income levels.


https://www.politico.com/newsletters/morning-tax/2019/05/16/retirement-hiccups-437185

:amen:


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## Nononymous (Jul 12, 2011)

"reduce double taxation because of FATCA"

Minor point of clarification: FATCA does not directly cause any sort of taxation, double or otherwise; FATCA reports account balance information to the US authorities, nothing more. 

FATCA does however scare previously unaware US persons into attempting tax compliance, often via tax advisors, which can lead to double taxation, or at very least fees for preparing returns. Most US persons outside the US are far better off remaining non-compliant, particularly if they are dual citizens with no US financial ties.


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## underation (Oct 25, 2018)

Nononymous said:


> "reduce double taxation because of FATCA"
> 
> FATCA does however scare previously unaware US persons into attempting tax compliance, often via tax advisors, which can lead to double taxation, or at very least fees for preparing returns.


As I understand it, the taxation of non-US-source income which can result from trying to comply with US tax rules, is not double taxation as defined by the tax treaties; but (IMO) certainly does seem like double taxation by any common-sense, rational view understanding of the term. The US taxes income arising in the residence country that hasn't been fully taxed by the residence country - such as interest earned by tax-free savings accounts, or income from an account which is classed under US law as falling under the punitive PFIC rules.

There is a logic to it. If a US expat files US tax returns, claiming US deductions and tax credits on their worldwide income; and also files (say) UK tax returns, claiming the UK tax-free allowance plus other UK tax breaks, the result can be that they end up paying less tax on their worldwide income than a non-dual resident of US or the UK in similar financial circumstances. One solution (if possible) is to move all income and assets to the residence country, and file residence-country taxes only, 



> Most US persons outside the US are far better off remaining non-compliant, particularly if they are dual citizens with no US financial ties.


Yes; or to put it another way, most US persons outside the US are far better off earning and investing only in their residence country, and filing tax returns only in their residence country.


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## Bevdeforges (Nov 16, 2007)

underation said:


> Yes; or to put it another way, most US persons outside the US are far better off earning and investing only in their residence country, and filing tax returns only in their residence country.


Though that is not really a choice for most US persons living outside the US. Applies, perhaps, to "accidental Americans" born overseas to one or more US parents. But even then there can be "entanglements" that make things difficult - those who attended university in the US (at the urging of their US parent) or who spent summers in the US that may have included a "summer job" or two, or doting grandparents who set up a US bank account for the kids, or willed money or property to the overseas grandkids, etc.


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## underation (Oct 25, 2018)

Bevdeforges said:


> Though that is not really a choice for most US persons living outside the US.


Not a choice for all, I agree, but very easily achieved by new emigrants and the natural state of affairs for anyone living outside the US who lives permanently in one country and doesn't engage in cross-border investment or US employment.

It doesn't, of course, solve the (entirely separate) FATCA/IGA problems of (a) loss of data protection rights and (b) potential difficulties with opening new accounts.


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## underation (Oct 25, 2018)

> The French report...calls for the law to apply only to those of certain wealth or income levels.


Actually, the IGA signed by the UK already allows banks to exclude accounts below the $50,000 threshold (Annex 1(A)), but the banks have opted to include them.

If the IGA signed by France also permits exclusion of accounts below $50,000, the report must be referring to making it compulsory for the banks to apply the threshold.

But actually, a residence country could make the exclusion compulsory without any negotiation with America, if the country's Agreement already states that that's acceptable to both parties. 

Easy peasy. 

Will they won't they? 

Links to each country's IGA (and related documents) can be found at https://www.treasury.gov/resource-center/tax-policy/treaties/pages/fatca.aspx


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## underation (Oct 25, 2018)

The French proposals can be seen at https://www.laurentsaintmartin.fr/a...accidentels-menee-avec-le-depute-marc-le-fur;

-- three directed towards the French authorities; three which would require successful renegotiation of the IGA; one very interesting recommendation for the EU Council; and two suggestions for US law reform.


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## Bevdeforges (Nov 16, 2007)

I'm getting a 404 error on that link.


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## underation (Oct 25, 2018)

Sorry. It must be a copy-pasting error on my part, but I can't spot it. Trying again:


https://www.laurentsaintmartin.fr/a...-accidentels-menee-avec-le-depute-marc-le-fur


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## Bevdeforges (Nov 16, 2007)

OK, the second link works. Thanks.

Personally, given the current state of affairs worldwide, I think the best option is to try and work through the EU to get some sort of agreement to "lighten up, for chrissake!"


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## underation (Oct 25, 2018)

It’s residence-country law, not US or EU law, that would have to change, and there’s no sign of any European country feeling inclined to make the necessary changes.

Such is life. Fortunately, for US-born individuals in IGA1 countries who don’t want the passport, remedies are available. Those who can put together the fee can renounce; those who can’t, can hand over their W-9 forms and SSNs and complain to their government if unreasonably refused by a bank.


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## underation (Oct 25, 2018)

It's not clear to me that the residence-countries even _could_ change their AEOI laws with respect to accounts held by US Persons, even supposing they wanted to. Susie Q., US citizen with no US income is in the same boat as Apple Corp, US Person with $billions. There's a fair bit of tax revenue at stake, and no single country can decide how the international taxation-tug-of-war between source, residence and consumption should be determined. US Persons really are tax-resident in the US, and the residence countries can't change that.

The US has just ripped off the European countries (and others of course) by "requiring" US Persons owning or part-owning corporations (those owned by the expat Susie Qs as well as those owned by the US-resident tech billionaires) to pay back tax on non-US-source undistributed corp earnings for the past 30 years, to generate a nice little windfall to pay for the Tax Cuts and Jobs Act. No wonder M. le Fur wants to talk to America about tax credits.  

As a former Susie Q, with absolutely no financial links with America, I was outraged to find that suddenly, because of my birthplace, I could no longer open a bank just like any other law-abiding citizen, as I had always been able to do in the past. But I've gradually come round to understanding that if not cancelled out by a CLN, the birthplace _is_ a financial link, and a tax link, with America. I never made use of it - didn't even know it was there for me to use - but there's no way for HMRC to know that, or there wasn't, before FATCA came along. 

So now that I've cottoned on, at long last, I find my outrage has dissipated. It's not unreasonable. I just wish I'd got my head round it before the renunciation fee went up.

Though I would be glad if the UK, and all the other IGA1 countries, would give low-income USCs (who can't renounce) a chance to give voluntary consent to the reporting of their domestic accounts to their national tax agency, rather than be forcibly reported to the IRS. Wishful thinking, probably.


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## underation (Oct 25, 2018)

> As a former Susie Q, with absolutely no financial links with America, I was outraged to find that suddenly, because of my birthplace, I could no longer open a bank [account] just like any other law-abiding citizen, as I had always been able to do in the past. But I've gradually come round to understanding that if not cancelled out by a CLN, the birthplace is a financial link, and a tax link, with America. I never made use of it - didn't even know it was there for me to use - but there's no way for HMRC to know that, or there wasn't, before FATCA came along.


Nowadays, of course, there is not only FATCA, but also CRS, which the EU would like the US to join.

If EU Member States were to withdraw unilaterally from FATCA, as suggested by the report, the DAC-CRS due diligence requirements could presumably be adjusted in accordance with EU rights so that (a) USC accounts would be reported by banks to the national tax agency only if the USC was _actively_ tax-resident in the US (that is, receiving US-taxable income or holding US assets); and (b) none would be passed on to the IRS unless the US joined CRS and reciprocated.

So - the need to pay $2350 for a CLN would disappear, and so would the birthplace discrimination. And if the EU Council worked out a way to assist EU banks with the risks associated with accepting US-born customers, as the report seems to suggest, any bank-access problems should also be solvable.

Would be very satisfying, if that were to come to pass. But whether it's likely, is a different question. Probably not.


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## underation (Oct 25, 2018)

underation said:


> If a US expat files US tax returns, claiming US deductions and tax credits on their worldwide income; and also files (say) UK tax returns, claiming the UK tax-free allowance plus other UK tax breaks, the result can be that they end up paying less tax on their worldwide income than a non-dual resident of US or the UK in similar financial circumstances.


Democrats Aboard point to this potential for abuse as the main obstacle to finding Democratic sponsorship/support for the Holding bill:



> It is our view (and the view of others) that Rep. Don Beyer (D-VA 8th district), is an ideal partner in fighting for RBT given his service on the Ways and Means Committee and his years of experience living abroad. We understand discussions have occurred between Holding and Beyer and we continue to encourage Rep. Beyer as well. When we met with the Congressman in March his support for RBT was in evidence. When we met on Thursday with the Rep. Beyer’s Legislative Director (3rd time in 12 months) he voiced reasonable concerns. The benefits of the 2017 Tax Cuts and Jobs Act (TCJA) were highly skewed towards large corporations and the wealthy; many Ways and Means Democrats have this same concern about RBT - in addition to the concern that RBT will be exploited by wealthy Americans to use real or faux offshore residency in order to move assessable income out of the reach of the IRS. We describe the anti-avoidance provisions in the RBT proposal to address the latter and use our research on the Americans abroad community to address the former. Unlike the TCJA, the key beneficiaries of RBT will be predominantly middle-class Americans living abroad, as they vastly outnumber overseas earners making more than the Foreign Earned Income Exclusion.


https://www.democratsabroad.org/car...ing_the_way_forward_for_rbt?recruiter_id=1448


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## underation (Oct 25, 2018)

Politico says:



> Government officials in Europe are starting to more openly complain about the U.S.’s Foreign Account Tax Compliance Act and its burden on so-called “accidental Americans,” but the U.S. government doesn’t seem interested in negotiating any breaks from the law anytime soon, Law360’s Natalie Olivo reports. Republicans have been far more critical of FATCA, which was passed under former President Barack Obama. But even with Trump in the White House, experts say it’d be out of character for Treasury to roll back FATCA reporting requirements, especially if Congress doesn’t change the law that requires American citizens to pay taxes on their worldwide income. “Very few instances in history have I ever seen the Treasury Department decide as a policy matter that they're just not going to collect tax,” said Kat Saunders Gregor of Ropes & Gray.


https://www.politico.com/newsletters/morning-tax/2019/06/06/to-the-floor-443931

Ms Gregor implies that the Treasury is actually _able_ to collect tax on the worldwide income of US expats.


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## underation (Oct 25, 2018)

“US Expats, Dual Nationals Seek Protection From Tax Law They Call Unfair”

https://www.voanews.com/europe/us-expats-dual-nationals-seek-protection-tax-law-they-call-unfair

Commenting on the report, the difficulties FATCA causes for French citizens who have US citizenship, and the one-way unfairness of FATCA.



> FACTA is intended to fight tax evasion. However, the U.S. Congress never voted to help other nations track their citizens' tax obligations, so foreigners can open bank accounts in the United States without their own country being notified.


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## Bevdeforges (Nov 16, 2007)

Same comment as on the other thread - not one, but two instances of them erroneously referring to FACTA instead of FATCA. Think FATCAT, and just drop the T.


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## underation (Oct 25, 2018)

Bevdeforges said:


> Same comment as on the other thread - not one, but two instances of them erroneously referring to FACTA instead of FATCA. Think FATCAT, and just drop the T.


Comments appear to be open. Just below the article.


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## Moulard (Feb 3, 2017)

> ... However, the U.S. Congress never voted to help other nations track their citizens' tax obligations


They may not have voted for it but I do believe the IRS is actually sharing information with foreign tax agencies under the mutual exchange clauses of their dual taxation treaties. I will have to see if I can dig out an old Australian FOI request I saw a while back.


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## underation (Oct 25, 2018)

Moulard said:


> They may not have voted for it but I do believe the IRS is actually sharing information with foreign tax agencies under the mutual exchange clauses of their dual taxation treaties. I will have to see if I can dig out an old Australian FOI request I saw a while back.


Yes, I think you’re right. Some information is shared by the US with the countries which signed “Model 1 (Reciprocal)” IGAs.


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