US senator submits game changing bill to repeal FATCA

The hated and feared Foreign Account Tax Compliance Act came under attack a few days ago in Congress as a violation of expats’ privacy and sovereign nations’ laws.

Republican senator Rand Paul, representing Kentucky, introduced the bill, stating in a letter to the house that the new law is destructive and unsuitable as a legitimate tool against tax evasion. Known as FATCA, the law has been causing confusion and worry to American expats across the globe.

Senator Paul’s letter to his congressional colleagues spelled out the downsides of the bill both to expat Americans and the economies of the countries in which they reside. FATCA compels overseas financial institutions to release a tranch of information about expat bank accounts and other holdings, even although the US citizens involved are not suspected of evading US taxes.

The sting in the tail which has forced many countries’ financial institutions to cooperate is that failure to comply results in the withholding by the US government of 30 per cent of all US-derived revenue. One immediate consequence has been the high number of foreign financial institutions which have dropped out of business with US customers or the US in general.

The senator points out that US economic growth is tied to overseas investment, with FATCA now a threat to the $25 trillion foreign capital at present invested and to unspecified amounts which will now be invested elsewhere. He adds that the permission given by FATCA to the Treasury Department now allows it to undermine the privacy of US citizens and make decisions undermining the sovereignty of foreign nations.

Senator Paul isn’t alone in his fight, as a federal lawsuit has been filed against the IRS by two state bankers’ associations. The associations believe their members will lose billions due to withdrawals of investment and compliance costs.