Proponents of the “Foreign Account Tax Compliance Act (FATCA) – a/k/a “the worst law most Americans have never heard of” – fell short at the end of 2012 on two key indices, further puncturing its air of presumptive inevitability:
- The Treasury Department had predicted that 17 countries (already a shamelessly padded list, with inclusion in that number of three tiny British Crown Dependencies) would finalize intergovernmental agreements (IGAs) with the United States to impose FATCA on themselves by December 31. The actual result at year’s end? Signed IGAs with the UK, Denmark, Ireland, and Mexico. Switzerland and Spain reportedly also have “initialed” agreements, whatever that means.
- The Department had also expected to finalize the draft regulations applicable to foreign financial institutions (FFIs) by year’s end – but that didn’t happen either.
Oh, to be sure, we can expect that sometime in the next few days or weeks the Department will announce another IGA or that they finally have the final regulatory language all worked out. At that point, we can expect the compliance vendors – for whom FATCA promises to be a goldmine – to turn up the volume of their chorus on the need for FFIs to pony up for very expensive and (at this point unnecessary) services. But that won’t change the increasingly evident fact that FATCA is in trouble as more people, both in the U.S. and elsewhere, take notice that FATCA is sheer idiocy and does almost nothing to police actual tax evasion while imposing crippling costs on, and violating the personal privacy of, innocent institutions and persons. As I observed in a recent interview with George Prior on iExpats.com: “FATCA is a law that doesn’t achieve its purpose but does manage to hurt the U.S. and global economy, and consumers worldwide, in almost any way conceivable. If that’s not the ‘worst law ever,’ what is?” (See full text of interview andlink below for additional analysis.)
Of particular note is the “fact-finding forum” in Toronto, Ontario, on December 15, 2012, hosted by the Progressive Canadian Party and its distinguished chairman, the Honourable Sinclair Stevens, and featuring presentations by Allison Christians, Professor of Law at McGill University, Abby Deshman of the Canadian Civil Liberties Association, and others (including me, on how FATCA can be defeated). (Commendably, the full video and transcripts have been posted by the Isaac Brock Society.) Make no mistake, CANADA is key, with other countries watching to see if Ottawa knuckles under to a unilateral, extraterritorial demand from Washington to impose billions of dollars of FATCA compliance costs on Canadian consumers and to violate the human rights guaranteed by the “True North strong and free” to citizens and residents. As Canadian media are now beginning to notice, and the comments by ordinary Canadians are showing, the “massive new layer of bureaucracy” Washington threatens to impose on our close friend and ally – backed up with the threat of sanctions – has “little to do with tax fairness or cutting the [U.S.] deficit.”
This year is likely to shape up as make or break for FATCA. With a little support for the anti-FATCA campaign – at a tiny fraction of what the compliance vendors are demanding – 2013 can be the year that FATCA collapses under the weight of its own flaws, before its worst ravages can take effect.
Now that would be a happy new year!