FATCA would require every bank in the world to report to the IRS on accounts associated with US citizens. The IRS, figuring that it would only be fair to return the favour, proposed a new regulation that would force US banks to report to foreign countries on any interest paid on investments to their citizens.
The proposed law, REG-146097-09, would address the fact that the US is, in fact, considered to be a tax haven. You just can’t make this sort of stuff up…
What’s interesting is the reaction to this proposed regulation.
Charles Boustany, member of the US House of Representatives and Chairman of the Ways and Means Subcommittee on Oversight, asks if the IRS has “considered the administrative burden of this proposed regulation on U.S. banks?” Don’t worry, Mr. Boustany. According to a US Treasury Department official speaking about the same concern from Canadian banks, “complaints about the burden of financial institution reporting are overblown.”
He continues that REG-146097-09 “serves no compelling tax collection purpose” for the US, but is merely about helping “foreign governments collect their own taxes abroad.” One can’t help but to wonder if Mr. Boustany is aware of FATCA and, if he is, whether he is just as vocal in opposition to it. Or is Mr. Boustany comfortable with one rule for the US and another for everyone else?
You read read Mr. Boustany’s full letter here.
R. Bruce Josten is the Executive Vice President of Government Affairs at the US Chamber of Commerce. He has also written a letter of complaint regarding REG-146097-09. Like Mr. Boustany, he is concerned that complying would place “additional reporting requirements and expenses upon financial firms” and that this would be done “without any real benefit stemming from the collection of this information.” Similarly, Canada would derive no benefit from FATCA compliance, and would incur significant costs. One wonders where these gentlemen were while Congress was passing FATCA.
You can read Mr. Josten’s letter here.
The last letter I would like to mention comes from the “Coalition for Tax Competition,” signed by various individuals including a representative from the Center for Freedom and Prosperity Foundation, the Citizens Against Government Waste, and the American Family Business Institute. While these signatories clearly lack the indictment of a member of the House, I wanted to include it because it succinctly lists the arguments against REG-146097-09.
The authors address the argument that the proposed regulation would help the US better comply with tax treaties, but that “there is no obligation to impose additional regulatory burdens solely for the purpose of enforcing other nation’s laws.” Does Canada get to use that excuse too?
They also mention that “the proposed regulation endangers human rights.” And yet, the right to privacy has been seen as protected by the Canadian Charter of Rights and Freedoms (although not explicitly stated, Section 8 has been seen to be applicable). And let’s not mention the very real physical danger posted by FATCA’s penalties to people who are, for example, close to retirement.
The full letter may be found here.