Possible presidential candidate Republican Senator Rand Paul of Kentucky has reintroduced a bill to repeal anti-privacy provisions of FATCA.
“FATCA is in complete violation of every Americans’ constitutional right to privacy and adds burdensome regulations that negatively impact our economy. It is a defective law which disregards the mutual respect of sovereignty among nations and drains money from the federal treasury, on top of discouraging overseas investment in the United States. My bill will reverse the negative aspects FATCA has on the economy, prevent the government from bulk collecting U.S. Citizen’s financial data, and preserve the constitutional rights for all Americans,” Paul said.
FATCA was made law in 2010 and went live in January 2015 with its International Data Exchange Service, which sends reports on Americans’ international financial accounts to the IRS. The data exchange 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.
Paul’s bill was initially introduced in 2013 but was left to languish in the Democratic-led Senate Finance Committee.
As the IRS tightens its restrictions on offshore banking by Americans, more and more Americans are renouncing their citizenship. According to the Treasury Department, 3,415 Americans renounced their citizenship in 2014, up from 2,999 in 2013.