In an 18-page document mostly containing formal texts having to do with the implementation of EU requirements for the exchange of tax information, the European Parliament has devoted several paragraphs to criticizing the 2010 U.S. tax evasion-prevention law known as FATCA, saying that it "deplores" FATCA's "lack of reciprocity," and adds that it is resulting in "the United States becoming a significant enabler of financial secrecy for non-U.S. citizens" as a result.
The comments on FATCA begin on page 16 of the document, which may be viewed and downloaded here.
The reason the European Parliament, along with other critics in recent years, say that FATCA (Foreign Account Tax Compliance Act) is making it possible for the U.S. to become an enabler of financial secrecy for non-Americans is because after the U.S. implemented FATCA, it has consistently declined to participate in the Common Reporting Standard (CRS), a FATCA-like data sharing regime that came along a few years later, and which more than 100 other countries around the world have signed up to.
The U.S. has said that it doesn't need to sign up to the CRS because it has FATCA, which enables it to keep track of the overseas financial accounts of its own citizens, but it has thus far resisted calls by other countries to provide them with the same data on their citizens that it extracts from them on its U.S. citizen account-holders, under FATCA.
Meantime, as such media organizations as Bloomberg and the Financial Times have reported in recent years, the United States' failure to sign up to FATCA has enabled U.S.-based providers of banking, wealth management and investment products and services to look after non-U.S. clients who wish to keep their holdings out of their home countries' tax nets.
Adds the European Parliament, in its Sept. 16 "Texts Adopted" document: "There are two main loopholes [with FATCA]: only information on U.S. assets is shared, and no beneficial ownership information is shared."
It continues by noting that it "calls on the [European] Commission and the EU Member States to enter into new negotiations with the United States in the OECD framework, in order to
achieve full reciprocity within a commonly-agreed and strengthened CRS framework," and adds that it believes this "would lead to significant progress and...lower compliance costs for [financial institutions]" while also "significantly reduc[ing] bureaucratic burdens."
It also calls on the European Commission and EU Member States to enter into negotiations for a "UN Tax Convention."
FATCA side effects also "deplored'
While on the subject of FATCA, the European Parliament document says the body also "deplores the side effects that FATCA still has on so-called accidental Americans" and that it "regrets that, to date, no lasting solution has been found at the European level."
Historically, the European Parliament and European Union generally have stopped short of doing more than voicing their unhappiness with FATCA and its lack of reciprocity, as well as the difficulties it is causing for those EU citizens who are also, usually as a result of having been born in the U.S., considered Americans. Such dual citizens are finding it difficult to keep or obtain bank accounts in their home countries, for example, unless they formally come into tax compliance with the U.S., which can be expensive, and which many are reluctant to do.
For its part, the U.S. has tended to play down the matter as well. In March 2020 for example, as reported, Lafayette G. "Chip" Harter, Deputy Assistant Secretary (International Tax Affairs) for the U.S. Treasury Department, in response to a December 2019 letter from the then-president of the EU, Terhi Järvikare about her "concerns" over various FATCA issues, that "the United States has long been a leader in taking actions to lower tax secrecy and bank secrecy barriers to providing information to tax authorities, and in the area of automatic exchange of information.
"That leadership has been carried out through enforcement actions against banks that took affirmative measures to hide customer information from the United States and other countries, through the enactment of FATCA and through the negotiation of over 100 IGAs. We are pleased that FATCA has inspired the subsequent adoption of the Common Reporting Standards by EU member states. We share a common goal in promoting the automatic exchange of financial account information between tax authorities.
"The U.S. government recognizes its commitments under our reciprocal IGAs and will continue to work towards achieving equivalent levels of reciprocal information exchange."
Earlier this year, U.S. Treasury officials were reported to have agreed to meet with their EU counterparts to discuss the various FATCA-related issues, according to EU sources, who said the U.S. acceptance of an invitation to discuss FATCA and "the exchange of information under [its] intergovernmental agreements" that had been sent the previous December had come during a meeting of the European Council's High Level Working Party (HLWP) on Taxation.
It is not thought such a meeting has yet taken place.
Meantime, in April, the European Data Protection board issued a statement in which it instructed EU member states to undertake a "review" of their international agreements "that involve international transfers of personal data, such as those relating to taxation (e.g. to the automatic exchange of personal data for tax purposes)," and to revise these agreements if necessary, in order that they complied with the EU's General Data Protection Rregulation (GDPR).
The EDPB statement didn't mention the word FATCA, but legal experts said that the statement definitely referenced FATCA, and pointed to the EDPB statement's mention of "case law of the European Court of Justice, including the Schrems II judgment of 16 July 2020."
As reported, that case struck down the main mechanism used for years by the EU to protect the personal data of EU citizens when it's transferred to the U.S. – the so-called EU-U.S. Data Protection Shield – and was declared at the time to be a potential "game changer" with respect to FATCA.
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