Center for Freedom and Prosperity
For Immediate Release
Monday, July 18, 2011
CF&P Letters to Treasury and Congress Call
for Cost-Benefit Analysis, Repeal of FATCA
(Washington, D.C., Monday, July 18, 2011) In a pair of letters sent to Treasury and Congressional leadership, the Center for Freedom and Prosperity (CF&P) has once again asked Congress to repeal the Foreign Account Tax Compliance Act (FATCA), and for Treasury to conduct a cost-benefit analysis. While CF&P welcomes the recent IRS announcement that FATCA will not be put into force at the beginning of 2013 as originally scheduled, the announcement shows recognition on the part of the IRS of the heavy regulatory burden that would be placed on foreign financial institutions. The new phased-in timeline beginning in the middle of 2014 only delays the damage. It is in light of this announcement that CF&P President Andrew Quinlan has sent the two letters on behalf of CF&P and the Coalition for Tax Competition calling on Treasury to finally conduct a cost-benefit analysis, and on Congressional leadership to repeal FATCA entirely.
Link to Letter to Secretary Geithner:
Link to Letter to Speaker Boehner and Majority Leader Reid:
“The fact that the initial legislation passed in early 2010,” comments Andrew Quinlain on the IRS announcement, “and that the IRS now believes it will be over four years from that date before regulations can be implemented, tells us everything we need to know about the burdens and complexity of the law. Congress should scrap FATCA and reconsider its entire approach to tax policy.” He concluded, “Rather than drive out investment capital with overbearing regulations, Congress should look at pro-growth reforms that simplify the tax code and take advantage of tax competition instead of undermining it.”
The letter to Secretary Geithner states:
It has already become clear that the costs of implementing FATCA will be high. U.S. persons living overseas are experiencing difficulty finding banking options as foreign financial institutions (FFIs) facing heavy compliance costs are determining that it will be easier to drop U.S. clients than comply with the law. Much needed investment in the U.S. economy is also threatened as some FFIs divest in U.S. assets to avoid the burdensome law. This means a loss in competitiveness for the U.S. economy and even slower job growth.
As a matter of policy, FATCA fails to measure up on several levels. It is not clear what benefits, if any, will come with its heavy costs. The projected revenue gains are questionable, and may even be offset entirely by the reduced economic activity. Treasury should take the additional time before FATCA is to be implemented to illuminate this issue with a cost-benefit analysis, so that lawmakers can determine if such legislation should ever be considered again, or if FATCA itself should be outright repealed.
The letter to Speaker Boehner and Majority Leader Reid states:
In light of the recent decision by the Internal Revenue Service, following significant industry backlash over the costs and burdens of the regulation, to delay the implementation of the Foreign Account Tax Compliance Act (FATCA), the Center for Freedom and Prosperity and the Coalition for Tax Competition are renewing the call for Congress to reconsider and repeal the ill-advised legislation.
Not only is it bad tax policy, but FATCA also has other serious problems. In many countries, FATCA requirements may violate privacy and confidentiality laws which serve to protect human rights. This is a critical issue for the people around the world who need a refuge for from high levels of crime, mismanagement, extortion, and corruption. They are counting on Congress to step up and undo its costly mistake before it is truly too late by immediately repealing the devastating Foreign Account Tax Compliance Act.
Passed in 2010 as part of the Hiring Incentives to Restore Employment Act, FATCA threatens foreign financial centers with a 30% withholding requirement on US accounts if they don’t comply with an onerous new reporting regime. The Center for Freedom and Prosperity and the Coalition for Tax Competition have been leaders in opposing FATCA since before the HIRE Act was passed, writing letters to Congressional leaders outlining the problems which would be created by passage of FATCA, and then several to Treasury and the IRS in an effort to mitigate the damage during the regulatory implementation process. CF&P and CTC continue to push for repeal.