Republican Senator Rand Paul introduced “a Bill to repeal the violation of sovereign nations’ laws and privacy matters” on May 7. However, the Democrats have a six-seat majority in the chamber.
The FATCA legislation, which is due to be enforced on a phased basis from January 1 2014, requires foreign financial institutions to report to the US information about payments to their US individual and corporate accountholders that hold accounts with them or pay a withholding tax of 30%.
Legal restrictions in some countries on sharing information directly with foreign authorities has caused the US to pursue a bilateral approach to FATCA enforcement. That method has attracted Paul’s wrath.
“In order to implement this law, Treasury has initiated intergovernmental agreements (IGAs), citing the intent to engage in reciprocal information sharing with other nations,” Senator Paul said. “In other words, the Treasury Department, without the consent and authority of Congress, will force US financial institutions to provide the bank account information of private customers to foreign nations.”
Paul has proved quite a thorn in the side of the US government’s attempts to enact IGAs to enforce FATCA and other tax treaties. He has placed a hold on every tax treaty the US has negotiated since his election in 2010. This means the legislation has to be removed from the Senate’s workload.
Activists have said the senator should not be allowed to delay attempts to find out about undeclared income.
“There is an international movement for automatic exchange and FATCA is the driving force,” Heather Lowe, legal counsel and director of government affairs of Global Financial Integrity, a US organisation that campaigns against the cross-border flow of illegal money. “For the US, failing to fulfil our end of these agreements would undo all of the progress we have already made on this issue. Global progress should not be thwarted by the whims of one US senator.”
However, Paul has plenty of supporters, too, including the Centre for Financial Prosperity, which campaigns for competitive markets and limited government.
“Senator Paul is offering real leadership, working to defend individual rights and promoting common sense tax policy,” said Andrew Quinlan, the centre’s president, “FATCA has caused significant harm for many Americans. This legislation is a critical and necessary first step toward cleaning up a colossal mess.”
