Finance: US opposition Republican Party is expected to make repealing America’s international tax evasion rules part of its official platform this week.
America’s Republican Party, also known as the “Grand Old Party”, is likely to oppose tax evasion rules that are unpopular in Luxembourg. The Republican National Committee is set to place the repeal of FATCA on its election platform by Friday. The proposal was put forward by the party’s expatriate branch, Republicans Overseas, as part of the committee’s conference in Washington that started on Monday.
More than 30 senate seats and all 435 seats in the lower House of Representatives will be contested this November. President Barack Obama’s Democratic Party currently control the senate, while Republicans have a 33 seat majority in the lower chamber.
“I am told it is a done deal, and that the RNC will adopt the resolution this week,” James George Jatras, a lobbyist who runs the RepealFATCA.com pressure group and attended an RO meeting in Washington on Tuesday, told Delano.
“At the very least, I think that the GOP will approve language very critical of FATCA,” Dan Mitchell of the libertarian thinktank Cato Institute, told Delano on Thursday. “That’s what’s important.”
FATCA has been a source of concern for the Grand Duchy’s financial sector since the law was passed in 2010, with many in the industry arguing it imposes unreasonable costs on firms and breaches EU and Luxembourg privacy laws.
Even if the GOP adopts the resolution, there are no guarantees that FATCA will be scrapped. “It is very unlikely that the law would be reversed while Obama is in the White House, even if Republicans win the senate in the 2014 elections,” Mitchell said. “Simply stated, the president would veto such a law. But it is quite possible that the law could be made less onerous.”
Nevertheless Jatras was supportive of the measure, saying it could help inform Americans, most of whom are unaware of the law. “There’s a lot of education to be done about how FATCA hurts not only expatriates, but Americans generally.” He added: “An important question is whether the rival group, Democrats Abroad, stands up for their constituency and follows suit”.
Further changes possible
Mitchell said that it is more likely FATCA will be toned down in some form and financial institutions will be given more time to comply. “Parts of the law already have been modified or delayed, as even the [American tax agency] IRS understands it is a nightmare. So it is very likely that [the US] congress will seek further changes [or] delays.”
American officials have defended the law and said the July 1 implementation date will not be pushed back. “FATCA continues to gain momentum and international support as we work with partners around the world to fight offshore tax evasion,” a US treasury department official told Delano on Thursday.
“We are pleased by this significant international support and are working diligently to finalize all related guidance to ensure that financial institutions have time to effectively prepare and comply. There is no consideration for a delay of FATCA implementation,” the American official stated.
Still no agreement with Luxembourg
FATCA requires nearly every financial institution in the world to provide information to the IRS on anyone with links with the US. The American government has signed “FATCA partnership” agreements with several countries--including France, Germany, Japan, Switzerland and the UK--that allows data to be handled via national agencies, instead of financial institutions submitting files directly to the US tax office.
The Grand Duchy has been negotiating such a deal since last spring, but has not announced when an agreement might be inked.
The US treasury official said: “Pending the signing of an [intergovernmental agreement], it would not be appropriate for us to comment on content or timing.”
On Wednesday, Jatras was hopeful that law could still be reversed, if FATCA were better debated. “If those who stand to gain a lot if FATCA is repealed, and lose a lot if it isn’t, get behind the repeal effort, and help educate and inform the public and congress, there’s a good chance it can indeed be repealed. In all my 18 years working at the senate and 13 years as a lobbyist, I have never seen an initiative so vulnerable to scrutiny, which it has not yet received.”
According to the US treasury department official: “FATCA has been widely recognised as a global model for combating offshore tax evasion and promoting transparency, as evidenced by the G20 and OECD’s work on developing the common reporting standard, which draws extensively on our intergovernmental approach.”
In Mitchell’s view: “FATCA is a nightmare for taxpayers and financial institutions. It is a very bad law that is best described as American fiscal imperialism.”
As of this writing, a spokeswoman for Luxembourg’s finance ministry had not returned Delano’s message seeking comment.