A vote in favor of repealing FATCA sends a message: a message to foreign banks that they can get back to helping wealthy Americans hide their assets and use offshore accounts to evade tax.
In anticipation of yesterday’s Senate’s budget resolution “vote-o-rama,” Sen. Roger WickerRoger Frederick WickerTop Republican: General told senators he opposed Afghanistan withdrawal NY Democrat tests positive for COVID-19 in latest House breakthrough case Florida Democrat becomes latest breakthrough COVID-19 case in House MORE (R-Miss.) has introduced an amendment to repeal the Foreign Account Tax Compliance Act (FATCA). Passed in 2010 and effective in July 2014, FATCA requires foreign financial institutions to file information returns with the IRS about their U.S. customers’ accounts.
Accounts like the ones exposed in last month’s “Swiss Leaks” which revealed how officers and employees of HSBC were helping customers from around the world evade taxes in their home countries. Accounts like the 52,000 U.S.-related ones at UBS that is the subject of a deferred prosecution agreement for facilitating tax evasion.
The U.S. loses an estimated $150 billion in tax revenue each year to tax haven abuse – a revenue shortfall that honest taxpayers have to make up. About $40-70 billion of that revenue loss is from individual tax evasion. In light of those numbers, the virtues of FATCA become exceedingly clear.
At the very heart of the matter, FATCA is an enforcement tool. It exists to give the U.S. government the information it needs to determine ownership of assets in foreign accounts and make it harder for taxpayers to hide assets and evade tax. Voting to repeal FATCA is a vote in favor of allowing tax evasion to continue—and escalate.
While some members of Congress want to turn the clock back to the days when hiding assets offshore was easier, the rest of the world is embracing global cooperation against tax evasion. While FATCA was heavily criticized by foreign governments and financial institutions when it was first enacted, now it is being hailed as the catalyst for change and an example for inter-governmental agreements around the world. More than 80 countries have signed on, including China and Russia. The G20, G8, and the OECD have used FATCA as a model for the development of automatic information exchange agreements.
To oppose FATCA is to oppose transparency and cooperation and take the United States out of its leadership role in combating tax evasion. The United States Congress is faced with a choice. It can stand for openness, transparency, and honesty – or for tax evasion, secret bank accounts, and subterfuge.
In the geeky tax world, we often refer to FATCA as FATCATS. It helps us remember the acronym. The FATCATS are the ones with those offshore bank accounts. Will members of Congress protect them? Or will they stand with American people?
Wilkins is the executive director of the Financial Accountability and Corporate Transparency (FACT) Coalition.