Fabien Lehagre of the French organisation of FATCA-victims [*] on 31 August published on LinkedIn the report (pdf) of the delegation of the European Parliament, visiting the US. The essence of the problem:
FATCA currently captures in its regulatory net the vast majority of regular, real European residents with US or dual citizenship and ‘accidental Americans’ and burdens them with a byzantine bureaucracy in order to achieve compliance.
The content of the report:
On our delegation to Washington DC, we were reassured by our counterparts in the US Congress that efforts are underway to correct the injustices caused by the Foreign Account Tax Compliance Act (FATCA) to US citizens, dual EU-US citizens living and working in the EU, as well as to the so-called ‘accidental Americans’, who were born in the USA, but have no other links to the country.
Our delegation comprising seven Members of the European Parliament, met with stakeholders, experts on the matter, academia, US legislators and Government officials in a series of meetings all in order to address the plight of EU resident US citizens, dual citizens and ‘accidental Americans’. Representatives of those affected stressed the severity of the problems involved, whether it is the financial penalties, or being rejected by EU financial institutions (which are also subject to such penalties in case of non-compliance), the almost impossible bureaucracy, the total lack of assistance and the lack of representation. Some of them advocate the renunciation of US citizenship as the only viable solution, but even this is an expensive and cumbersome process.
Throughout our meetings, we stressed that we do not advocate in any way to enable tax avoidance and tax evasion of US citizens or to enable money laundering and asset dissimulation done through EU financial institutions. We are here to voice the concerns of regular, low-and medium-income citizens who face many obstacles in accessing banking services in foreign countries, and to highlight the immediate need to address this.
In our meetings with Committee Chairman Richard Neil and with Congressmen Lloyd Doggett and Eric Swallwell we were shown a draft legislative bill aimed at correcting the unintended effects of FATCA and a letter to Treasury Secretary Yellen highlighting the need to correct FATCA. The Congressmen all commended the Delegation as in their view it is very much needed to raise awareness in the Capitol about this issue and delegations such as PETI’s are the best way to achieve this. We were also informed that even if legislative efforts fail in the near term, there are possibilities for corrective measures at the administrative level.
We also discussed the idea of tax attachés at the US embassies in European countries as part of a solution, which would help to channel the communication between citizens and US authorities and to provide assistance in complying with tax matters.
FATCA currently captures in its regulatory net the vast majority of regular, real European residents with US or dual citizenship and ‘accidental Americans’ and burdens them with a byzantine bureaucracy in order to achieve compliance. This causes that the financial institutions, fearing the withholding tax on their US assets at the slightest case of non- compliance, reject to provide services to these citizens, including basic payment accounts, which is a right enshrined in EU law.
In addition, to clear deficiencies in being a punitive tool causing collateral damage, there is no data on the efficiency of FATCA in improvement of tax collection and thus in its effectiveness in tackling tax evasion or curbing tax avoidance, there is no data even on the number of non- resident Americans. Estimates of this latter range from six to nine millions.
We stressed the need to enact the administrative changes needed in the application of FATCA, in our meeting at the US Treasury Department with Deputy Assistant Secretary for International Tax Affairs, Jose Murillo, as well as with Doug O’Donnell, Deputy Commissioner of Services and Enforcement at the Internal Revenue Service. In all our meetings, we highlighted that in the information exchange mandated by FATCA, there is no reciprocity with the EU, and that although the Inter-Governmental Agreements with EU countries to apply FATCA are exempted from having to comply with the General Data Protection Regulation, these clearly go against its provisions, mainly because the amount of data being transferred lacks the proportionality.
It is also notable that FATCA is the reporting requirement of non-residents for the US citizen-based taxation (as opposed to residence-based) which is only applied in the USA and Eritrea. As a person becomes US citizen including by virtue of the birth on the US soil, it creates a group of persons with only limited ties to the US, for whom it is extremely difficult to get Tax Identification Number required to comply with FATCA, one of the reasons they are being rejected by foreign banks.
Legislators on both sides of the Atlantic have to continue working hard to ensure that the unintended effects and collateral damage of FATCA is eliminated. On our end, we will produce a mission report with concrete recommendations, which will be voted on by the committee itself. We had also agreed with our US counterparts to create channel for active dialogue to work together on this matter in order to find effective common solutions.
It is positive that in the penultimate paragraph there is a comment on the illegality of the US system of Citizenship-Based Taxation (CBT). Unfortunately, no consequences are drawn from this.
[*] Association des Américains Accidentels (AAA).
Addition 5 September 2022
Filippo Noseda, who represents a British FATCA-victim (correspondence page), wrote an e-mail on 31 August (not yet published) to the PETI-committee. He disagrees with the remark in the PETI (draft?)press release:
Although the Inter-Governmental Agreements with EU countries to apply FATCA are exempted from having to comply with the General Data Protection Regulation, these clearly go against its provisions, mainly because the amount of data being transferred lacks the proportionality.
This statement is worrying, as it goes against formal conclusions reached previously by the European Parliament, notably:
• the PETI study on FATCA according to which FATCA violates various articles of the GDPR, as well as Art. 8 of the European Convention on Human Rights – the relevant sections of the report are attached for ease of reference;
• the European Parliament’s formal resolution on FATCA (P8_TA(2018)0316), which was taken two months after the adoption of the GDPR; and
• The European Parliament’s formal resolution following the Schrems II judgment (P9_TA(2021)0256), which singled out FATCA as one of the problematic areas of transatlantic transfers under Art. 46 GDPR.