updated 1:02 PM CEST, Jun 4, 2020

EU economic chief Gentiloni to Europe's 'accidentals': 'no evidence' FATCA infringes 'basic bank account rights'

EU economic chief Gentiloni to Europe's 'accidentals': 'no evidence' FATCA infringes 'basic bank account rights' Florian Pircher Pixabay

Europe's estimated 300,000 so-called 'accidental Americans' were dealt a fresh blow yesterday, in the form of a statement by a top EU official who said the European Commission had found "no evidence of the existence of an infringement" on the rights of such 'accidentals', as EU citizens, to have "a basic bank account".

The statement, by Paolo Gentiloni, who succeeded Pierre Moscovici as Europe's Economy Commissioner in December, references a legal right to a bank account that is currently granted to all EU citizens by the bloc’s 2014 Payment Accounts Directive. Gentiloni maintains that this right is not being compromised – as some accidental Americans groups have been claiming – by the way some European banks have been complying with the American tax evasion law known as FATCA (Foreign Account Tax Compliance Act, a 2010 U.S. tax-evasion-prevention law).

(The accidental Americans say that these banks have begun suspending and/or threatening to suspend, close and not open new accounts for those “accidentals” whom the U.S. considers to be Americans and thus U.S. taxpayers, who fail to provide for them a U.S. “Tax Information Number” such as a Social Security number, because these individuals have spent their lives in Europe as European citizens, and therefore don’t have such TINs.)

Accidental Americans were typically born in the U.S. to non-American parents and left the country as babies, never to return. They have been brought up in other countries and are citizens of, and pay taxes in, these countries, and don’t consider themselves to be American – even though the U.S., which is one of just two countries in the world known to tax on the basis of citizenship rather than residency, does, for tax purposes.

Gentiloni's comments (which may be seen by clicking here) came in the form of a written response to a formal question posed to the Commission in February by MEP François-Xavier Bellamy, and were seen by observers as the second major setback to hit accidental Americans in Europe in little more than a week.

As reported, in a letter to the EU Council's head of tax last month, top U.S. Treasury official Lafayette G. "Chip" Harter asserted the importance and need for the U.S. to be able to enforce FATCA in order to ensure that "all U.S. citizens are compliant with their U.S. tax filing obligations", including "EU residents who are U.S. citizens".

Harter had been responding to a December letter to U.S. Treasury Secretary Steve Mnuchin from a European Union official, Terhi Järvikare, who had expressed concerns over elements of the way FATCA is being enforced, and its effects on EU citizens who also happened to have U.S. tax obligations.

Among Harter's points that were singled out for criticism was his claim that the U.S. had received “only anecdotal information” about the extent of the problem accidental Americans have been having as a result of FATCA.

‘Disbelief’

On Wednesday, Gentiloni's written response to Bellamy’s question was met with shock and disbelief on the part of many in Europe's accidental American community. Less than five months ago, the European Parliament held a two-and-a-half hour hearing on the subject of FATCA, and its effects on accidental Americans in particular, in Brussels, during which a series of European citizens spoke of their personal struggles with the extra-territorial American tax regime.

Less than two years ago, the European Parliament unanimously approved a resolution supporting Europe’s “accidentals”, by a resounding 470 votes to 43, with 26 abstentions. 

As reported, that resolution called on EU member states as well as the European Commission to re-open negotiations with the U.S. over the way it enforces FATCA. 

'Nationality...has reciprocal
rights and obligations'

In his response to Bellamy's question, Gentiloni, who is a former prime minister of Italy, began by noting that the intergovernmental agreements between the U.S. and the various EU member states that currently govern the implementation of FATCA would only "fall under the competence" of the European Commission if they were found to violate EU law in some way, which, to date, he said "no evidence" exists to suggest that they do.

"Nationality, even when acquired by 'accident', has reciprocal rights and obligations, including the payment of taxes in the United States for American citizens," he went on.

"The impact of the FATCA law on individuals and financial institutions, as well as [FATCA's] lack of full reciprocity, have been discussed on several occasions with the American authorities by members of the Commission and their competent departments.

"We have seen improvements in the first two areas, the impact on citizens and financial institutions, through the publication of guidance and additional information on U.S. government websites, and the implementation of new 'waiver procedures' for individuals who wish to renounce their status as [U.S.] citizens.

"With regard to compliance with the Payment Accounts Directive, the Commission has examined the alleged infringements of the right to have a basic bank account as intended, but has found no evidence of existence of an infringement of the EU legal framework in the national measures transposing the directive."

Gentiloni concludes his written response by noting that any negotiation of an EU-US agreement on the automatic exchange of information would be "subject to a mandate from the [European] Council", but that "to date, the Commission has received no information that such a warrant is being considered".

'IGAs do violate EU law'

Spokespersons for American expat campaign groups insisted that Gentiloni had not fully understood the issues with respect to FATCA and the way it is enforced. 

One accidental American in the Netherlands noted that Gentiloni's written respose was an example of the EU "bowing again" to the wishes of the U.S.

Fabien Lehagre, president and founder of the Paris-based Association of Accidental Americans, said that it was obvious that the bilateral intergovernmental agreements between the U.S. and EU member states, which set out how FATCA is implemented, by their nature "authorize the massive storage and transmission to the U.S. of the personal data of many [EU] persons [whom the U.S. identifies as] 'American persons'.

"The mechanism does not take into account the fact that most of these people have no connection with the United States, [nor does it] provide for any measures to protect personal data, nor does it allow individuals to access the data that has been transmitted, or to correct errors that might have slipped into it," he added.

"This lack of safeguards, coupled with the disproportionate nature of the information being transmitted to the IRS, clearly violates EU legislation, on the protection of personal data."

Lehagre went on to stress that although the U.S. may regard “accidental Americans” as Americans, such individuals themselves do not, and many object to the term “accidental Americans” for this reason.

Lehagre called on the European Commission to prove its confidence in the legality of the FATCA IGAs by referring an appeal his organization filed in October, in a case involving a legal challenge it has brought against the way France is enforcing FATCA, to the European Court of Justice.

As reported, France's top administrative court, the Conseil d'Etat, ruled against Lehagre's AAA in July, when it saw no legal basis to support claims the organization’s claims that the way France currently implements FATCA violates the privacy of dual French/American citizens.

At the time, Lehagre vowed to continue to pursue the matter with the EU's top court, saying that his organization had "lost a battle, but not the war". 

The Conseil d'Etat's ruling came just months after a French Assembly report called on the French government to engage in further negotiations over FATCA, and if necessary abandon it altogether, if it were unable to resolve the "extra-territorial tax" problems that it was causing to those French citizens whom the American government considered to be Americans, for tax purposes. This report in turn came a little more than month after a U.S. Government Accountability Office report  in April noted that the implementation of FATCA was causing significant problems around the world, and was seen to have contributed to  a "nearly 178%" increase in the rate of citizenship renunciations between 2011 and 2016.

‘Gentiloni is saying
accidentals are Americans’

John Richardson, a Toronto-based lawyer and campaigner on behalf of American expats’ rights, said that the key point Gentiloni appeared to be making in his written response to Bellamy’s question was that he, at least, considers individuals known as “accidental Americans” to be Americans rather than European citizens – a fact that Richardson said would surprise many of these accidentals, were they to learn of it.

Rather than calling out the extra-territorial raiding of the pockets of bona-fide European citizens – by arguing that it’s okay because it’s mandated by America’s citizenship-based tax regime – for what it actually is, Richardson went on, Gentiloni is participating in game being played out at the top level of the EU, whereby Europe’s 300,000 accidental Americans are being officially dismissed as irrelevant, in order not to have to engage the U.S. in a diplomatic matter that could jeopardize “more important” trade and political matters.

What remains to be seen, Richardson added, is whether such efforts by "apparatchiks" like Gentiloni and Harter will succeed, given the widespread support Europe’s accidentals already enjoy in the corridors of Brussels and Strasbourg.

Richardson recalled that during a two-and-a-half hour European Parliament hearing on FATCA in Brussels last November, one Parliamentarian was heard to observe: “These [accidentals] are European citizens. If we are not going to protect European citizens, we might as well go home.”

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UPDATE: Since this story was written, European MEP Sophie in 't Veld, a champion of Europe's accidental Americans for the last several years, officially challenged EU commissioner Paolo Gentiloni over his comments with respect to accidental Americans described above, in a letter seen by the American Expat Financial News Journal. To read our story on this development, click here.