Utah Senator Mike Lee, who is on a European tour organized by Republicans Overseas, was recently in Luxembourg to garner support for the repeal of FATCA or Foreign Account Tax Compliance Act. Earlier this year, Luxembourg and the US signed FATCA as an inter-governmental agreement. Under the Act, financial institutions outside the US are obligated to submit data on their American clients.
Regulations Hurting Quality of Life
This has had an impact on many expatriates who now face the prospects of being refused services by banks that do not want the hassles of dealing with US tax returns. Lee’s tour will take him from London to Paris and Geneva.
According to Senator Lee, FATCA is flawed and was simply rushed through Congress, and bypassed most committee procedures. He said the law undermined the presumption of innocence and portrays that overseas Americans could not be trusted to declare their assets.
Government Run Amuck
The senator also criticized the government for passing the intrusive law, which he said trampled on the rights of Americans and invaded their basic sense of privacy. He accused the government of looking to raise money from an underrepresented group of Americans which consists of around seven to eight million living outside the country.
Under FATCA, financial institutions that fail to comply with the regulations will be subject to a 30 percent withholding charge. Senator Lee said that US tax law is complex, which leaves plenty of room for errors and gives enormous discretion to the corrupt and biased Internal Revenue Service. The paperwork alone is a deterrent to some financial institutions who find it easier to stop accepting American clients than deal with US tax matters. This, the senator said, sends out a bad message to businesses. There were also concerns about the direction the government may take amidst fears of the possible infringement on constitutional rights.
While a full repeal of FATCA was not likely, Lee said his initiative was a good way to spread awareness. He called for committee hearings on the issue and looked forward to gathering information on how FATCA affected overseas American and banks while the tour. He said the issue was not a Republican or Democrat one, but concerns Americans as a whole.
On the other hand, Democrats Abroad has countered Lee’s approach. They have called for amendments instead of repeal and have put forward suggestions such as the exemption of accounts held by middle class Americans overseas in their country of residence. Democrats Abroad have gone as far as blaming the Republicans of coming to Europe to raise support for people who are just trying to secure what they earned. They said FATCA was a way to catch tax offenders with secret offshore accounts that are used to evade taxes but giving this much power to the IRS which lacks credibility over steps the line on what made America great: limited government.
America is Punishing Good People
Former IRS acting commissioner Steven Miller was of the opinion that FATCA would not be a complete cure for tax evasion. Several tax attorneys also share the same view. Miller said that noncompliance could never be completely eliminated but others believe if America had a flat tax life would be easier on everyone. Other individuals to express doubts about FATCA include National Taxpayer Advocate Nina Olson. She questioned the imposition and nature of penalties underlying the Act.