American Citizens Abroad (ACA), an advocacy group of US citizens living abroad, has sent a strongly worded letter to the U.S. Treasury Department and to the IRS to point out the extremely negative effect that the new FATCA legislation will have on Americans living overseas, as banks refuse to provide accounts and services to U.S. citizens because of the overwhelming reporting and compliance requirements
Geneva, Switzerland (PRWEB) June 21, 2010 -- American Citizens Abroad (ACA) recently submitted its strongly worded comments to the U.S. Treasury Department and to the IRS with regard to the regulations now being drafted concerning the implementation of the Foreign Account Tax Compliance Act (FATCA) legislation. The FATCA legislation was imbedded in the HIRE legislation signed into law on March 18h.
ACA pointed out in its letter how this FATCA legislation will have a severely negative impact on the community of Americans residing abroad, largely denying them access to banking facilities overseas – facilities which they absolutely need to function in a modern society. This negative impact on Americans abroad will affect the United States as a country in many ways, through reduced trade and investment from overseas, and an erosion in the image of the U.S. throughout the world.
The full letter sent by ACA to Treasury and IRS is available at the ACA website, http://www.aca.ch/joomla/images/pdfs/treasury.pdf
The aim of the FATCA legislation is to catch tax evaders by requiring massive reporting to the IRS on two fronts – first from all foreign financial institutions, defined in the largest sense of the term, and secondly from all U.S. persons who have a foreign bank account, foreign investments or a foreign trust.
This means that all U.S. citizens residing abroad, who by necessity have a foreign bank account, will have to report on their 1040 all assets held, controlled or signed for in foreign institutions. The U.S. Congress has created a reporting monster with FATCA. It will cost billions of dollars for foreign financial institutions to comply and it will significantly increase the reporting compliance costs of individual U.S. citizens residing abroad.
Worse yet, the ACA letter points out that FATCA will create a two-tier banking system worldwide – one which is “qualified”, including those foreign financial institutions which enter into agreement with the IRS to undertake the reporting, and one which is “non-qualified”, including those foreign financial institutions which decide not to enter into agreement with the IRS. Since the legislation carries a 30% withholding tax on U.S. source income transferred to “non-qualified” foreign financial institutions, this group of “non-qualified” institutions will simply stop investing in the United States.
"U.S. citizens residing abroad are absolutely enraged by the FATCA legislation", said MaryLouise Serrato, Executive Director of ACA, "not only because of the compliance costs and discrimination, but also because the law de facto treats us like criminals, simply because we reside overseas."
Ron Banks, Vice Executive Director of ACA, added, "because of this FATCA legislation and the U.S. citizenship-based taxation system, we U.S. citizens residing abroad are subject to unfair double taxation. Anyone living in the United States pays taxes only to the U.S., while we U.S. citizens living overseas have to pay taxes to our country of residence and also to the United States, in spite of double taxation treaties."
The United States is the only country in the developed world which has a system of taxation based on citizenship rather than residence, and this system systematically penalizes U.S. citizens residing abroad.
The ACA letter calls for the exclusion of U.S. citizens who are long-term overseas residents from FATCA reporting, so as to encourage foreign banks to maintain banking relationships with the hard-working community of U.S. citizens abroad, who contribute so much to the United States in terms of trade, investments and image. In addition, ACA calls for the complete abolition of U.S. citizenship-based taxation.
American Citizens Abroad (ACA), the Voice of Americans Overseas, is an non-partisan group founded in Geneva, Switzerland over 30 years ago to defend the rights of US citizens living all over the world. ACA now has members in over 90 countries, and Country Contacts in about 50 countries. Top issues of concern to ACA include banking, taxation, citizenship, Social Security, Medicare and education.
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[Via Legal / Law]