2016 presidential elections are two years away, however, the campaign is gaining its speed. FATCA or Foreign Account Tax Compliance Act plays one of the key roles in this campaign. FATCA has been introduced to prevent tax evasion by U.S. citizens working abroad. The organization Republicans Abroad is pushing its opposition to the FATCA to get voters to join their ranks.
FATCA, Republicans Abroad and American Expats
FATCA has been perceived by many American expats living abroad as a violation of financial privacy. This law enables the Internal Revenue Service to demand the financial information of Americans working abroad from foreign, that is non-U.S, banks without any warrants or court orders.
The burden of this whole process falls on the foreign banks. If banks fail or refuse to do so, they can be penalized by the US government. As a result of it, some banks refuse to accept Americans as customers.
Currently the only way for American expats to avoid complying with these requirements is by becoming non-Americans, that is to give up the U.S. citizenship. Many have done so. According to Time magazine, 7 times more Americans renounced their citizenship if one compares the renunciations of 2008 with 2011. During 2013 year this number has increased again.
Many of those who renounce their citizenship directly cite the Foreign Accounts Tax Compliance Act as the motivating factor.
Mr Rand Paul of Kentucky, son of the former U.S. representative and Republican presidential campaign (2012) Ron Paul, has made his aim to have several provisions recalled. The Republican National Committee (RNC) goes further than this. They want the whole law repealed from the books.
Mr Paul’s effort is aimed specifically at scrapping those elements of the law that violates, as he sees it, the privacy of American citizens. He is building his argument on the fact that the IRS can demand the information of any U.S. citizen even if there is no indication of wrongdoing whatsoever.
Bruce Ash, chairman of Republicans Abroad, is working hard at this. He is using various aspects of FATCA that he argues is illegal to whittle away at the Democrats Abroad lead.
Solomon Yue expressed an opinion of RNC. Mr Yue’s resolution to have the Foreign Accounts Tax Compliance Act repealed in its entirety has received much support from within the Republic Party. The whole nine-seat RNC as well as seventeen other members have given this resolution their support.
The Democrats have a completely different take on the whole issue. According to them, the affect of the Foreign Accounts Tax Compliance Act on the number of Americans renouncing their citizenship, has been completely overstated, even exaggerated.
The Democrats main line of defense is that the law requires all Americans, irrespective of where they work to faithfully pay their taxes. They state that for a long time Americans have used offshore companies and other mechanisms to avoid this.
According to Robert Stack, deputy assistant Treasury secretary, this law is becoming the blueprint for international tax laws aimed especially at preventing tax evasion. According to Stack the uproar surrounding this law has more to do with the unhappiness of these tax evaders than the renunciation of one’s American citizenship.
Republicans Abroad are trying to catch up with Democrats Abroad. Democrats Abroad has been very active for more than fifty years. Democratic candidates often cite Democrats Abroad as an important component of their victories.
In fact, the whole idea of organizing voters abroad started with the Democrats back in 1964, even before Americans abroad where allowed to vote in federal elections. This right was granted in 1975.
Considering that there are 7.6 millions working abroad, it is clear that FATCA will influence the outcome of elections.
Someone like Solomon Yue has a vested interest in having this law repealed in its entirety. Yue was born in the People’s Republic in China. He stated “I escaped Chinese communist tyranny in 1980 and worked hard to earn my U.S. citizenship as an international trade economist. My American passport is my freedom. I just can’t imagine giving up my U.S. citizenship since I have no place to go.”
For an outsider it is easier to see the validity of the arguments used by both camps. American expats, what do you think about FATCA?