Fatca: Discrimination with no representation

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Fatca: Discrimination with no representation

Most peo­ple who spend their employ­ment years in the U.S. will never hear of Fatca, the For­eign Account Tax Com­pli­ance Act. Fatca was enacted in 2010 under the Obama Demo­c­rat administration.

How­ever, Fatca affects an esti­mated eight mil­lion Amer­i­can cit­i­zens work­ing over­seas. As the Wall Street Jour­nal points out (empha­sis added) there are com­pli­ance costs,

Fatca requires that for­eign banks, bro­kers, insur­ers and other finan­cial insti­tu­tions give the U.S. Inter­nal Rev­enue Ser­vice detailed asset and trans­ac­tion records for any accounts held by Amer­i­cans, includ­ing cor­po­rate accounts con­trolled by Amer­i­can employ­ees. If a firm fails to com­ply, the IRS can slap it with a 30% with­hold­ing tax on trans­ac­tions orig­i­nat­ing in the U.S. Fac­ing such risks and com­pli­ance costs, many for­eign firms have decided it’s eas­ier to dump their Amer­i­can clients.

And for­get about over­seas busi­ness part­ner­ships or future promotions,

Amer­i­can expats in the Fatca age are also less attrac­tive as employ­ees and busi­ness part­ners, as any finan­cial accounts they can access must now be exposed to gov­ern­ment scrutiny — not only from the U.S. but poten­tially also from more than 100 other coun­tries that have signed Fatca-​related information-​sharing agree­ments with Wash­ing­ton. Amer­i­cans up for exec­u­tive posts in Brazil, Sin­ga­pore, Switzer­land and else­where have been asked by their man­agers to renounce their U.S. cit­i­zen­ship or lose their promotion

Renounc­ing your cit­i­zen­ship is a momen­tous deci­sion that is never taken lightly; now it’s also more expen­sive since the fee went up this year to $2,350 (used to be $450), in addi­tion to exit taxes on cur­rent assets.

So the U.S. work­force, cur­rently at its low­est par­tic­i­pa­tion rate in 38 years, is fac­ing pres­sure from all sides, with (among others):

  • The unknown con­se­quences of the TPP, the Trans Pacific Part­ner­ship, of which even its staunchest sup­port­ers believe will result in job losses in the U.S.,
  • the huge influx of skilled and unskilled labor into the coun­try, includ­ing H1B visa work­ers which may get paid 40% less than the Amer­i­can work­ers who are forced to train them before they are laid off, as was the case with Dis­ney.

And now, for the mil­lions of Amer­i­cans who have found over­seas employment,

  • Increased finan­cial risks and com­pli­ance costs
  • Plus addi­tional gov­ern­ment scrutiny, “not only from the U.S. but poten­tially also from more than 100 other coun­tries that have signed Fatca-​related information-​sharing agree­ments”, infor­ma­tion which can be used against them by the 100 “other coun­tries,” many of which are not democ­ra­cies com­mit­ted to human rights.

But hey, the 8 mil­lion Amer­i­cans liv­ing over­seas are not here to com­plain, and the cur­rent admin­is­tra­tion is not inter­ested in a wel­com­ing busi­ness envi­ron­ment. It’s just one more instance, as the WSJ put it, of “U.S. tax and reg­u­la­tory poli­cies that ham­per the entire U.S. economy.”

Fausta Rodriguez Wertz writes on U.S. and Latin Amer­i­can pol­i­tics, news, and cul­ture at Fausta’s Blog.

Most people who spend their employment years in the U.S. will never hear of Fatca, the Foreign Account Tax Compliance Act. Fatca was enacted in 2010 under the Obama Democrat administration.

However, Fatca affects an estimated eight million American citizens working overseas. As the Wall Street Journal points out (emphasis added) there are compliance costs,

Fatca requires that foreign banks, brokers, insurers and other financial institutions give the U.S. Internal Revenue Service detailed asset and transaction records for any accounts held by Americans, including corporate accounts controlled by American employees. If a firm fails to comply, the IRS can slap it with a 30% withholding tax on transactions originating in the U.S. Facing such risks and compliance costs, many foreign firms have decided it’s easier to dump their American clients.

And forget about overseas business partnerships or future promotions,

American expats in the Fatca age are also less attractive as employees and business partners, as any financial accounts they can access must now be exposed to government scrutiny—not only from the U.S. but potentially also from more than 100 other countries that have signed Fatca-related information-sharing agreements with Washington. Americans up for executive posts in Brazil, Singapore, Switzerland and elsewhere have been asked by their managers to renounce their U.S. citizenship or lose their promotion

Renouncing your citizenship is a momentous decision that is never taken lightly; now it’s also more expensive since the fee went up this year to $2,350 (used to be $450), in addition to exit taxes on current assets.

So the U.S. workforce, currently at its lowest participation rate in 38 years, is facing pressure from all sides, with (among others):

  • The unknown consequences of the TPP, the Trans Pacific Partnership, of which even its staunchest supporters believe will result in job losses in the U.S.,
  • the huge influx of skilled and unskilled labor into the country, including H1B visa workers which may get paid 40% less than the American workers who are forced to train them before they are laid off, as was the case with Disney.

And now, for the millions of Americans who have found overseas employment,

  • Increased financial risks and compliance costs
  • Plus additional government scrutiny, “not only from the U.S. but potentially also from more than 100 other countries that have signed Fatca-related information-sharing agreements”, information which can be used against them by the 100 “other countries,” many of which are not democracies committed to human rights.

But hey, the 8 million Americans living overseas are not here to complain, and the current administration is not interested in a welcoming business environment. It’s just one more instance, as the WSJ put it, of “U.S. tax and regulatory policies that hamper the entire U.S. economy.”

Fausta Rodriguez Wertz writes on U.S. and Latin American politics, news, and culture at Fausta’s Blog.