FATCA opposition continues as the list of countries becoming de facto IRS agents grows, with Kuwait joining the list of signatories to the U.S. Foreign Account Tax Compliance Act.
The official agreement between Kuwait and the United States was only recently signed, according to the Kuwait News Agency. Kuwait previously held an “agreement in substance” on FATCA compliance.
The news comes as FATCA opposition continues to push on, despite the law’s recent coming into effect. American Chambers of Commerce operating in various countries are actively lobbying against the law. Sharief Fahmy, chairman of AmCham’s public affairs committee for the United States and the United Arab Emirates told The Hill, “A lot of banks are finding it harder to support American businesses overseas.”
Republican U.S. presidential candidate Senator Rand Paul of Kentucky recently reintroduced a bill to repeal some anti-privacy provisions of FATCA. Another Republican, Senator Roger Wicker, recently introduced an amendment to fully repeal FATCA, though it failed to reach the Senate floor for a vote. In 2014, the Republican National Committee endorsed FATCA opposition, calling for a full repeal of the law.
Recently, the IRS’s own National Taxpayer Advocate Nina Olson told the agency something had to change. Olson suggested merging the overlapping reporting requirements on multiple forms into one form and changing the rules for identifying and reporting accounts for Americans abroad when they are resident in the country where their account is held.
FATCA was made law in 2010 and went live in January 2015 with its International Data Exchange Service, which links tax authorities in 110 countries and more than 145,000 financial institutions with the IRS to ensure that individuals and institutions are compliant with FATCA.
Banks must comply with IRS rules under FATCA, which means either reporting account information on American clients or signing a statement to the IRS that states they have no U.S. clients. Noncompliant banks will see a 30% withholding on U.S.-dollar wires to their bank. The law has caused many international institutions to simply close any American-held accounts and not take new American clients.
The United States is the only developed country that collects taxes based on citizenship instead of residency. The only other countries—developed or not—to tax nonresident citizens based on worldwide income are Eritrea and China.