In a report released yesterday and published on its website, the group says failure to repeal the act before it is implemented in January 2013 will “have a devastating impact” on the US economy, as well as its overseas-based companies and citizens.
American Citizens Abroad says it supports FATCA’s goal of fighting tax evasion, but disagrees with certain measures set out in the act. Chief among its concerns is the requirement for foreign financial institutions (FFIs) to comply with US law.
“Pursuing this illusory track will lead to a massive reporting bureaucracy of very high cost – billions of dollars – for foreign and US financial institutions, as well as for Americans residing overseas,” it warns.
In addition, American Citizens Abroad says the proposed 30% withholding tax on all US-source transfers to non-compliant FFIs will cause foreigners to sell out of US securities and investments. The organisation cites data from the US Bureau of Economic Analysis which indicates that foreign investment in the US exceeds $21trn (£13trn), and says the country should not “play with fire” in encouraging outflows.
American Citizens Abroad also warns that FATCA is already causing FFIs to turn away US clients, because of costly Internal Revenue Service (IRS) reporting requirements, and perceived legal and financial risks. The organisation claims to have received numerous testimonies from overseas Americans who have had bank accounts closed, been refused entry to pension funds, or who cannot enter insurance contracts.
“The cumulative effect of this legislation will be a major blow to US economic interests and prestige,” it concludes. “At stake for the United States is the potential loss of trillions of dollars of investment, the opportunity for American companies and financial institutions to compete in a competitive global environment and the possibility for American citizens residing overseas to survive and thrive.”
