The United States is the only country to levy taxes on citizenship instead of residence. FATCA forces banks around the world to provide inf...
The United States is the only country to levy taxes on citizenship instead of residence. FATCA forces banks around the world to provide information about customers linked to the United States to prevent tax evasion. The problem is that information is not only shared with the tax authorities, but with everyone, violating privacy and data protection.
The Foreign Account Tax Compliance Act (FATCA) was passed by the US Congress in 2010. This law aims to prevent Americans from circumventing the law, through investments in outside financial institutions. US territory to evade taxes. It ushered in a global revolution in financial transparency. FATCA forces banks around the world, through tax authorities, to provide information about customers linked to the United States. This law led to the creation of the Common Information Standard (CRS). Accordingly, more than 100 countries exchange data with each other to prevent tax evasion across borders.
However, those who oppose FATCA are not just tax evaders. Compliance with the US customer screening makes financial companies headache. Some have refused to serve Americans living abroad for fear of being fined under FATCA's harsh terms. Many of the 9 million Americans live abroad. They include people who are inadvertently US citizens - born in the US but living elsewhere, facing tax debts. They become lobbying groups to be treated less cruelly.
Some critics argue that FATCA has gone too far in transparency and invaded privacy. The United States is the only country to levy taxes on citizenship instead of residence. And they see potential for remediation in European Union data protection laws.
HMRC - the British tax authority is facing a legal battle to prevent the provision of British citizens' personal information to US tax authorities. The lawsuit is significant for tens of thousands of unknowingly American citizens at risk of freezing their bank accounts. Because not complying with US tax requirements.
A British resident has sought to use data protection laws to prevent the transfer of financial data. Jenny, represented by Mishcon de Reya, a British law firm, is trying to raise £ 50,000 ($ 62,000), opposing HMRC's right to transfer her information to the US Internal Revenue Service (IRS) ). Ms. Jenny, a researcher born in the US but living in the UK for nearly 20 years, declared that the transfer of information violates her privacy and data protection in accordance with EU General Data Protection Regulation year 2016. She argued that her information was not related to FATCA's goal of arresting tax evaders because she earned less than $ 104,000. Therefore, she is eligible for an exemption from income tax according to US regulations.
Jenny was not the first to challenge FATCA. A case in Federal Court of Canada by two Canadian / US citizens was abolished in July invoking the Intergovernmental Agreement. Accordingly FATCA enforced in Canada does not violate the Charter of Canada's rights and freedoms. Other efforts in France, the United States and Israel have also been unsuccessful, at least to this point.
A lawsuit against FATCA in the US, backed by Republican senator Rand Paul, was dismissed in 2017. The reason is that the U.S. Constitution has no privacy provisions in documents about finance.
However, other US data protection standards are significantly lower than those of Europe, according to Filippo Nosesa of Mishcon de Reya. EU regulatory, parliamentary and data protection authorities are all allergic to FATCA.
Officials in the United States and at the OECD, an organization of 36 countries monitoring CRSs, dismissed concerns that sharing information could compromise data security. But such fear is understandable. Bulgarian tax authorities were hacked, exposing the data of 5 million taxpayers, including information exchanged under the CRS. Meanwhile, in the US, with old computer systems, state tax agencies, including South Carolina, have been stolen data.
According to Nosesa, Jenny's request was an important test case. If successful, it will pioneer others in the fight against the harshness of FATCA.
Anti-corruption campaigners have countered these efforts. They see it as an act of anti-tax components. But Mr Nosesa insists, this is not just about reducing the tax bill: "There is a great tension between transparency and privacy and we need to find the right balance."
Reference from Economist
Translated and compiled by Hightechbrain.com
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