Thursday, February 6, 2014

FATCA: “There’s No Point In Complaining. It’s Here To Stay.”

Last week on the “FATCA” LinkedIn group, a member wrote the following: “Why are so many people complaining about FATCA and crying FOUL!!!!!  Just get on with it, it’s here to stay.  It’s everyone, everything, everywhere…The sooner it’s embraced, the better the chance of successfully implementing.” 

Here is my response:  It is true that the creation of a virtual international banking and financial data base is inevitable as an integral part of FATCA, but there is also an element of great sadness when you consider that FATCA, FBAR's, and the disclosure of foreign financial assets on Form 8938 represent a failure of our traditional reliance on the concept of self-reporting our taxable events to the government.  In a “government by the people” which draws its legitimacy from the consent of the governed, there is a basic assumption that an enlightened and informed citizenry can be trusted to fully disclose their tax matters to the government.  FATCA is basically an announcement that the self-reporting model is a joke and that people cannot be trusted to honestly pay their fair share.  FATCA, FBAR's, and Form 8938 basically say “you tell us what you have overseas, even if there were no taxable events during the year, and we will let you know if we need to have a chat.” 

The outrage expressed by Canadians, accidental Americans, Americans abroad, and others from countries with a tradition of democratic rights and institutions is very real and cannot be dismissed lightly.  Americans have a natural mistrust of government in general and the recent dysfunction shown by the health care roll out and so-called IRS Tea Pot scandal have done nothing but reinforce that sense of mistrust.  We as tax professionals have a duty to learn the new rules and advise our clients what they are at risk for, but there is no sugar coating the message that personal privacy and the sanctity of the individual in society have been eroded beyond recognition by FATCA and its “one world” agenda.