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.