Presentation at the Nordic FATCA & Withholding Tax Conference, 12 June 2013

1. FATCA and Citizen-based Taxation:
the way forward
American Citizens Abroad
12 June 2013
www.americansabroad.org

2. March 10, 2010
• Foreign Account Tax Compliance Act
(FATCA) enacted into law
• Directed at tax cheats using foreign banks
to hide assets
• Congress delegated authority to craft
regulations to Department of the
Treasury

3. US Plays Hardball
• Ignores privacy laws of other countries
• One way flow of information to US
• Violates bilateral tax treaties
• Threat of 30% withholding tax on US source
income AND on sale proceeds of US assets
• FFIs required to withhold tax on passthru
payments to non-participating institutions

4. Intergovernmental Agreements (IGAs)
Model 1 (July 2012)
 Due diligence less onerous
 Withholding tax eliminated
 Passthru requirement eliminated
 Report via governments
 Reciprocity

5. Reciprocity
Model 1 IGA include a provision in which:
the government of the United States acknowledges
the need to achieve equivalent levels of reciprocal
automatic information exchange . . . [and] is
committed to . . . pursuing the adoption of
regulations and advocating and supporting relevant
legislation to achieve such equivalent levels of
reciprocal automatic exchange.
www.americansabroad.org

6. January 2013 : Final FATCA regs.
• Promulgated by US Treasury
• Nearly 3 years after passage of FATCA
• Only 11 months prior to FATCA fully
entering into force on January 1, 2014

7. February 2014 : Model 2 IGA
Announced by Switzerland and US
 Due diligence less onerous
 Withholding tax eliminated
 Passthru requirement eliminated
 Report directly to IRS
 FFIs must obtain written consent of clients
 Request for administrative assistance procedure for
recalcitrant clients
 No reciprocity – information flows only to US

8. Implementation - Reality
• Less than 7 months until implementation
• IRS favors IGAs, but few countries signed
to-date
• More reporting delays possible?
• Next 7 months will be full of surprises

9. Pandora’s Box
Will FATCA lead to worldwide
automatic exchange of
information

10. Wild Cards
• Can US provide reciprocity?
• Will Europe unite on issue?
• Will Europe be able to impose full
reciprocity on US?
• Complexity of implementation
• Will parliaments worldwide enact laws
necessary to implement respective IGAs?

11. AEI = Complexityn*m
U.K. France
Italy
GermanyIreland
Holland
Spain

12. One More Wild Card
• Senator Rand Paul’s bill (S. 877) which would
repeal:
– FATCA reporting requirements that infringe on
privacy of American citizens
– 30% withholding penalties

13. Impact on Americans Abroad
• Dramatic – renunciation, divorce, relocation…
• Treated as criminals - guilty until proven
innocent
• Financial pariahs:
 Bank accounts closed
 Insurance policies refused
 Job opportunities lost
 Investment opportunities shut off

14. The Solution:
Residence Based Taxation (RBT)
• FATCA impacts Americans abroad because
of US citizenship-based taxation
• Solve all problems not only with FATCA, but:
– Report of Foreign Bank and Financial Accounts
(FBAR)
– Double tax reporting
– Double taxation
– Taxation of fictive capital gains
– Taxation of retirement savings, and more

15. RBT = Win-Win
Will bring in as much, if not more, tax
revenue to US
Automatic tax collection with minimum
administrative cost
Americans abroad, and consequently US, will
be more competitive
US companies will be able to transfer
Americans abroad to promote US exports

16. RBT is on the Table
• House Ways and Means Committee and
Senate Finance Committee are fully
aware of ACA’s RBT proposal
• Chairmen Camp (in the House) and
Baucus (in the Senate) are committed to
getting tax reform done

17. Engage
• Visit taxreform.gov
– Latest info on tax reform in US
– Share your story or ideas
• Support RBT - ACA’s proposal is available at:
www.americansabroad.org
• Spread the word