FATCA repeal on agenda of US Republicans
Credit: Cayman Compass
Washington’s Foreign Accounts Tax Compliance Act, known as FATCA, will be assailed afresh as lawyers and lobbyists renew efforts to repeal the law as part of President Donald Trump’s tax reform.
Washington-based Jim Jatras, a Republican and co-leader of the Campaign to Repeal FATCA, says “lots is happening,” and his group expects a Republican Congress to repeal the 2010 law by the end of this year.
“The Republican leadership in both House and Senate, as well as the Trump administration, all know that their fortunes for 2018 depend on keeping a few do-or-die promises, such as repealing Obamacare, an infrastructure program and tax reform,” Mr. Jatras says. “They will find a way to do it. Our job is to make sure when that train leaves the station, FATCA repeal is on it.”
Previous efforts to persuade the Obama administration were ineffective, he concedes, but says the November election of Mr. Trump and a Republican Congress have dramatically changed the landscape.
“The legislative situation was very different from what it is today,” he told the Cayman Compass. “With both chambers of Congress and the White House controlled by the GOP, and strong language in the 2016 [Republican Party] platform favoring repeal, there’s a clear roadmap to repeal this year.”
As early as January 2014, the Republican National Committee called for FATCA repeal.
“There are questions about timing and what will be in the package, not whether there will be one,” Mr. Jatras said, calling it “a top priority” for “many interests.”
Mr. Jatras was at the center of 2012 and 2013 lobbying efforts to repeal the law, which requires U.S. citizens and a broad range of U.S.-affiliated individuals and companies to declare their overseas income, paying taxes to the U.S. Internal Revenue Service.
Up to 9 million people living overseas are estimated to be affected by FATCA, and as many as 6,000 in Cayman – more than 10 percent of the population – have obligations of some kind to the IRS.
Mr. Jatras said, however, that looks set to change.
In mid-February, Mr. Jatras and committee co-founder Nigel Green – head of U.S.-based financial adviser deVere Group – met members of Congress and “two influential assemblies of tax activist groups,” seeking to shape a tax package anticipated to be passed by the Congress this year.”
He declined to name the groups, but said his committee had “been in touch with” both the House of Representatives’ powerful Ways and Means Committee and officials in the administration.
“We are in contact with both. That’s all I can say for now,” he said.
The organization’s repealfatca.com website says the five-member deVere delegation met Sen. Roger Wicker, Republican from Mississippi and co-sponsor of a previous repeal bill; Republican senator and 2016 presidential candidate Rand Paul of Kentucky, also sponsor of a previous repeal bill; Republican Rep. Mark Meadows of North Carolina, sponsor of a House repeal bill in the previous Congress; and Republican Rep. Thomas Massie of Kentucky, who joined Mr. Meadows in the repeal bill.
According to repealfatca.com, the delegation also met with the Senate Budget Committee, described as “important for scoring FATCA repeal.”
“The fight is now well and truly on to repeal this toxic, imperialistic and fatally flawed tax law,” Mr. Green said in a press release.
“FATCA has wrecked [sic] havoc on the global financial system, turned 8 million Americans overseas into financial pariahs, violates other countries’ sovereignty, and is damaging for American jobs and therefore the American and global economies,” he said.
He vowed immediately to submit a letter, signed by “numerous tax reform groups, spearheaded by the influential Americans for Tax Reform,” to “key Congressional leadership.”
“FATCA repeal legislation,” he said, “will now definitely be introduced in the current Congress, in both the House and the Senate, in the next few weeks.”
Mr. Jatras anticipates the tax-reform package would be introduced by July 4, although he conceded that efforts to repeal the Affordable Care Act are dominating congressional attention at the moment.
“Repeal and replacement of Obamacare is, as they say, sucking all of the air out of the room right now. That doesn’t necessarily mean it will be prolonged. In any case, we need a little time to get FATCA repeal into a tax bill, so this is somewhat favorable to our campaign,” he said.
Congress originally passed FATCA as part of a 2010 job stimulus package, Hiring Incentives to Restore Employment Act, created in the wake of the UBS banking scandal in 2009 that revealed U.S. citizens evading taxes by hiding deposits in Swiss accounts.
The legislation required U.S.-affiliated persons and all foreign financial institutions to report U.S. depositors to the IRS under penalty of a 30 percent withholding “tax” on all transactions with the U.S.
An online IRS database said Cayman registered 28,559 financial institutions under FATCA, nearly one-fifth of the global total.
“We have confirmed that Sen. Rand Paul and Rep. Mark Meadows will soon reintroduce their repeal bills from earlier Congresses,” Mr. Jatras said. “We are conducting outreach to leadership and committees of jurisdiction on next steps. We are also looking at executive actions to nullify the IGAs. These initiatives are still in the early stages.”
An IGA is an “intergovernmental agreement,” between the IRS and nearly 120 jurisdictions authorizing collection of tax information. On Nov. 29, 2013, Cayman became an early IGA signatory. The agreement can be unilaterally abrogated by either side with one year’s notice.
“When the IGAs are nullified, or when FATCA is repealed,” Mr. Jatras said, “I think a lot of people are going to have some explaining to do,” including, he added, “why did they so meekly abrogate their domestic privacy laws … for many of their own citizens, not just Americans?”