America’s greatness is her policy of equality to all and nondiscrimination. Rosa Parks is famous for her stance on refusing to give into racial discrimination. Who will be the Rosa Parks and stand up against America’s policy of geographic discrimination?
FATCA discriminates against American citizens living offshore since these expats (who by and large file and/or pay taxes without having direct representation) are required to file the form, while an extremely small minority of Americans living on the mainland is subject to its regulations.
As IRS regulations show, FATCA singles out Americans living out of the country and demands information from them that citizens living on American soil have no requirements to report to the government. FATCA requires Americans abroad to report their assets to the government.
But why doesn’t it require such reporting of local Americans?
Americans living in the U.S. aren’t required to report their assets for tax purposes… only their income. After all, income tax is levied on income and capital gains. Why the disparity and forced accounting of assets of some Americans solely on basis of their address? Why is Uncle Sam able to snoop in your living room in Paris or Madrid, but not LA or NYC?
Innocent until proven guilty
America’s legal system works on the presumption of innocence… unless you happen to live abroad. FATCA assumes unless you file its forms (in addition to the FBAR required) you’re a tax evader.
And since the United States is treating Americans abroad as guilty, so are foreign banks and financial institutions. Many foreign institutions are refusing to open accounts for Americans. Indeed, recently I went to change banks and couldn’t open the account on the spot; I had to wait for special approval.
FATCA also creates the risk of unfair punishment. If innocent people make innocent errors in reporting, the fines for improper reporting are costly. The fines could wipe them out…even if they don’t owe any taxes.
Doesn’t the government have better things to do than bully its citizens?
Resources should be used efficiently. While the government is dedicating money to implement FATCA, the projected $9 billion to be raised in taxes over the next decade may come close to the estimated cost of implementation. Furthermore, how will the IRS deal with the thousands of foreign banks reporting information?
Tax enforcement tools already exist. Why impose additional ones which discriminate against Americans based solely on their address? One must ask whether FATCA’s mission is not to catch tax evaders but expand the scope and power of the government. FATCA is fiscal imperialism, aimed at both American citizens and foreign financial institutions alike.
Rosa Parks sat in the front of the bus to fight racial discrimination. What American will fight geographic discrimination and fiscal imperialism?
Read more about the obligations of American citizens living abroad in The Expatriate’s Guide to Handling Money and Taxes.
Disclaimer: This article is for educational purposes and is not a substitute for investment advice that takes into account each individual’s special position and needs. Past performance is no guarantee of future returns.