- - Thursday, September 28, 2017

ANALYSIS/OPINION:

Last month the Sixth Circuit Court of Appeals affirmed the lower district court’s ruling that none of the plaintiffs in the Crawford et al. v. United States Department of the Treasury lawsuit were suffering harm as a result of FATCA (Foreign Account Tax Compliance Act of 2010). Perhaps the justices should have been made aware of the recent Small Business Administration’s report, “Small Businesses Key Players in International Trade.” It clearly shows U.S. exports, once the fastest growing portion of the American economy, have flatlined since passage of FATCA. Why is this happening?

Businesses with less than 500 employees represented 97 percent of U.S. exporting firms. Unfortunately, policies aimed at terrorist and tax cheats, have made it almost impossible for these small American companies to compete internationally. They don’t have legions of international tax and legal professionals on their payroll like the Fortune 1000 have. The result has been America’s top creator of new jobs, small businesses, are now drowning in red-tape while their foreign competitors are stealing away market share abroad.

FATCA requires most American exporters and U.S. expatriates working abroad to report all their non-US financial assets to the U.S. government each year. It also requires foreign banks to report American holdings overseas to the U.S. government. This American policy is counter to many countries’ privacy laws and is demanded without the offer of reciprocal treatment of foreign nationals’ assets in the U.S.

Failure to file exposes both Americans and the foreign banks to huge fines. The obvious result has been foreign banks no longer want to service Americans or their companies. They are canceling our personal and corporate accounts at a rapid pace.

What is the U.S. Treasury’s reward for being a global bully? Almost nothing. A recent study by Texas A&M estimated the income generated by FATCA at 250 million U.S. dollars per year, an insignificant amount for a U.S. federal budget of 4 trillion dollars. Cost estimates for foreign banks are absolutely astonishing however. Robert Wood of Forbes magazine estimates annual compliance costs to financial institutions at 8 billion U.S. dollars.

FBAR (Report of Foreign Bank and Financial Accounts) is the older idiot cousin to FATCA. Unheard of by most before 2009, it has become a typhoon of financial devastation, with penalties as high as 100 percent of the highest total balance of any unreported foreign bank account, regardless of whether taxes have been paid.

At a time when interest earned in foreign banks has been minuscule, billions in penalties are being collected from hapless U.S. expats and exporters. Tax specialists are making fortunes guiding shell-shocked clients through a special IRS self-confession program. Penalties are being leveled in lotterylike fashion, from warning letters (you win) to total confiscation of life savings (sorry, you lose).

Another Washington policy harming American exports has been global taxation. Unlike almost all other nationalities, Americans abroad are forced to suffer double legal and tax obligations in each country they have earnings. This policy of double taxation provides minimal additional income for the U.S. Treasury — American expats and their foreign companies get tax credits for the tax they pay in their hosts countries — but the accounting and legal costs are typically tens of thousands of dollars every year.

Many of these policies have burdened American exporters and expats for a long time, but FATCA passage in 2010 seems to have been the straw that broke the back of the small American exporter. Except for petroleum products, exports of manufactured goods and services have been flat for five years now. American exporters are closing their doors. U.S. expats are renouncing their American citizenship in record numbers. Foreign partners, fearing these policies, are canceling longtime business relationships.

Fortunately, it’s not too late to save small- and medium-sized American exporters. They account for 37 percent of all U.S. exports, so it is worth the effort. Quick action is needed from the Trump administration and congress.

Republicans Overseas recommends America tax U.S. corporations and its citizens on a territorial basis rather than globally. We believe this will increase American exports and jobs for Americans abroad. We also advocate the repeal FATCA and FBAR. They are not cost effective in raising revenue for the U.S. Treasury and are harmful to American exporters and expatriates. Full details on these proposals can be found on our website.

• Tony Rodriguez is chairman of Republicans Overseas-Thailand.

LOAD COMMENTS ()

 

Click to Read More

Click to Hide