Comments on Foreign Account Tax Compliance Act (FATCA) Provisions incorporated in the Hiring Incentives to Restore Employment Act (HIRE)

Disconnect between tax evaders and American citizens residing overseas
ACA represents U.S. citizens residing abroad. The vast majority are long-term residents
overseas, whether because of marriage, working for an ONG, teaching in English speaking
schools, missionary work or employment with a U.S. or foreign company. These average
American citizens – 5 million in number - are not the target group that Congress is looking for
with FATCA.
There is no reason to believe that there are more, or fewer, tax evaders among U.S. citizens
residing abroad as in a group of similar size of citizens residing within the United States, say in
Kentucky or Minnesota.
The target of FATCA is tax evaders, who are mostly resident in the United States and who tend
to use a wide range of vehicles, foreign or domestic, to escape U.S. taxes, and who may also
use foreign financial institutions for this purpose.
There is a significant difference between tax evaders and U.S. citizens residing abroad - the
former being actively and willfully involved in tax evasion and the latter simply living and
working overseas, in many cases for the benefit of the US economy and government. And yet,
the latter will bear the brunt of the negative consequences of this recently enacted legislation.
FATCA as politically perceived from abroad
By unilaterally imposing its legislation on the rest of the world, the United States is bound to
create serious backlash from other governments, foreign companies and foreign financial
institutions. It is feared that FATCA will violate privacy and confidentiality laws of many
countries; in fact, FATCA explicitly requires FFIs to obtain waivers to foreign law which are in
contradiction to providing the information requested. And yet this enormous reporting
requirement will probably be ineffective in finding the real culprits – the big money tax evaders
residing in the United States.
Imagine the consequences for the United States if other nations decided to adopt similar
policies and require U.S. banks to file, for instance, with the German or Indian government all
information concerning Germany or Indian citizens residing in the United States. There would
be an up-roar among U.S. banks. The number of foreigners in the United States is a large
multiple of the number of U.S. citizens residing abroad. The financial drain out of the United
States would be enormous and the bad-will worldwide due to overwhelming reporting
requirements would be not only unproductive, but dangerous – a form of reporting war.
This unilateral extension of the U.S. laws on other nations is furthermore hypocritical. When
Mexico requested the United States to furnish information on U.S. bank accounts of Mexican
citizens resident in Mexico, the U.S. government refused to provide the information.1
Practical consequences of FATCA
1) FATCA will negatively impact the economic and financial life of the entire community
of American citizens residing abroad.
Foreign nationals coming to the United States maintain bank accounts, mortgages and credit
cards with U.S. financial institutions. Nobody expects an Indian engineer working in California


Final June_14_2010_FATCA ACA letter to Treasury and IRS.pdf (281,8 kB)


American Children Abroad

Ben and Helena Henderson

Prague, Czech Republic

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