US delegation calls for repeal of FATCA
(CS) As part of a European tour organised by Republicans Overseas, US Senator Mike Lee on Tuesday visited Luxembourg to rally support for the repeal of the Foreign Account Tax Compliance Act, more commonly known as FATCA.
Luxembourg and the US signed FATCA as an inter-governmental agreement in March this year, after talks began in 2012.
It obligates financial institutions outside of the US to submit data on their American clients, in a bid to curb tax evasion. However, the premise of FATCA, according to the Utah Senator, is flawed, as it undermines the presumption of innocence and assumes that Americans outside the US cannot be trusted to declare their assets as prescribed by the law.
Lee, who arrived from London on Tuesday and will travel onwards to Paris and Geneva this week, was elected to the Senate in 2010 and took office in January 2011 – months after FATCA was passed as part of the Hiring Incentives to Restore Employment Act. The law was rushed through Congress, according to Lee, bypassing most committee procedures and receiving little attention at the time.
The senator fiercely criticised that FATCA impinges on constitutional rights, saying that the government was “trampling” on the rights of Americans through this intrusive law, which he argued “invades the basic sense of privacy.”
Bad message for business
With between seven and eight million US citizens living outside of the country, Lee said that the issue “means nothing” to most Americans in the States, accusing the government of wanting to raise a pool of money from an underrepresented group of citizens.
The failure to comply with FATCA carries a 30 percent withholding charge, which Lee called a penalty, explaining that US tax law is notoriously complicated, leaving plenty of room for accidental error and giving “enormous discretion to the regulator,” the Internal Revenue Service.
So “enormous and cumbersome” is the paperwork associated with FATCA, that some financial institutions have stopped accepting American clients, the senator stated – a bad message to send for business.
Traditionally, Lee said, Americans value their privacy, adding that he is worried about the direction the government might take, warning that all Americans should consider the possible implications of this infringement on constitutional rights.
Acknowledging that a full repeal of FATCA is unlikely during this Congress or even the next, Lee said that you have to start somewhere.
The senator wants to see committee hearings take place, which were omitted four years ago, he said, with his four-city tour aimed at gathering information about how the law affects citizens and banks.
Democrats call for amendments
Despite being hosted by the Luxembourg branch of Republicans Overseas, Lee commented that he does not regard the repeal of FATCA as a Republican or Democrat issue, but as an American issue.
However, while not speaking out at the lunch event with US citizens and representatives from the financial sector on Tuesday, Democrats Abroad have issued a statement countering the Republican senator’s approach.
Rather than calling for a repeal of FATCA, they make a case for fixing some of its problems in order to provide quick relief for Americans abroad innocently penalised by the regulation. For example, they have suggested exempting accounts middle class Americans living abroad have in their country of residence, because of an issue of account closures by banks unwilling to comply with FATCA.
Accusing the Republican party of coming to Europe to raise support – and funds – to help tax cheats, Democrats Abroad said that FATCA should be able to continue doing what it was intended to do – “catching tax cheats who use secret offshore accounts to dodge taxes.”
For more information about Democrats Abroad click here, or click here to connect with Republicans Overseas Luxembourg.
Read more about Senator Mike Lee on lee.senate.gov
The Tuesday lunch event was hosted by the American Chamber of Commerce in Luxembourg, with Chairman Paul Schonenberg saying that the chamber does not do partisan politics, but got involved with the event because of its importance for the business community.
US ambassador to Luxembourg Robert A. Mandell was also in attendance.
