Already facing “pariah” status worldwide due to onerous IRS requirements, millions of Americans living and working abroad are preparing to deal with a deluge of even bigger problems in 2014, when a byzantine new tax regime starts going into effect. Known as the Foreign Account Tax Compliance Act, or FATCA, the deeply controversial and incredibly complex scheme is supposedly aimed at preventing tax evasion and gathering extra funds for the federal government. In reality, it will prove to be devastating, experts say – especially for middle-class Americans overseas and the U.S. economy.
Opposition to the draconian scheme, however, is mounting quickly even before FATCA has been fully implemented. Among the growing chorus of critics: the business community, bankers, Americans abroad, some members of Congress, investors, and even the Republican National Committee. More than a few trade associations and voluntary organizations are now either urging lawmakers to repeal FATCA entirely, or at least calling on the Obama administration to delay implementation and enforcement until the fiasco can be sorted out.
Around the world, outrage about the scheme is mounting as well, with foreign governments and financial institutions pointing out that the new tax regime essentially makes them unpaid agents of the IRS. About a dozen national governments have inked unconstitutional “agreements” with the Obama administration so far, laying the foundation for a global tax-information sharing regime. International bureaucrats working fiendishly for planetary taxation are celebrating, along with some attorneys and accountants hoping to profit, but serious concerns about the pseudo-treaties are growing.
At the same time – seeking to avoid entanglements with the IRS and massive compliance costs – more than a few foreign banks have simply stopped doing business with American citizens and companies. Indeed, financial institutions worldwide have even started shutting down U.S. accounts as the Obama administration works to make them all into arms of the federal tax-collection regime. Some international businesses are also reportedly refusing to consider Americans in job applications due to increasingly complex IRS reporting requirements.
Despite millions of taxpayer dollars squandered on the scheme, implementation of FATCA thus far has been an unmitigated disaster. According to a recent report by the Treasury inspector general for tax administration, the IRS remains unprepared to implement the scheme. “Their incompetence threatens to compromise the information of both Americans and the foreign institutions coerced into serving the IRS,” observed Center for Freedom and Prosperity chief Andrew Quinlan, adding that the agency has gone “well outside the bounds of the law.”
“FATCA is pound-for-pound the single worst tax law on the books,” Quinlan argued. “Any serious reform must start with FATCA repeal.” Among other concerns, Quinlan said the scheme is harming the U.S. economy, “devastating Americans abroad,” alienating the global community, “violating fundamental privacy rights,” and being used to undermine the separation of powers via “intergovernmental agreements.” It will also do little to combat tax evasion, he said.
While the mountains of regulations needed to enforce FATCA have not all been released by the Obama administration yet – indeed, the deadline for penalties to begin has twice been postponed – some of the disastrous effects are already being felt. As The New American reported recently, for example, record numbers of U.S. citizens and permanent residents are severing their ties with Uncle Sam. Thousands of Americans have renounced their citizenship already, and the trend is expected to accelerate.
Of course, there is a long and troubling history behind FATCA and the recent efforts to crack down and collect even more taxes from Americans living abroad. The U.S. government is one of only two in the entire world – the other being the regime ruling Eritrea – that seek to extract wealth from citizens no matter where on the planet they reside. According to experts, analysts, and victims of the schemes, the consequences have been devastating for Americans and the U.S. economy.