EU pushback on FATCA continues, as expats look for signs of commitment to their tax frustrations as election approaches

As reported, U.S. Treasury officials discussed FATCA  – and specifically, the problems that "accidental American" EU citizens have been having in trying to obtain and keep bank accounts in their home countries  – on May 31 with representatives of the French Presidency of the EU Council (PFUE), and were reported to have seemed receptive to an EU proposal designed to address at least some of the issues. 

News of the Tweede Kamer hearing was highlighted earlier this week by the Nederlandse Association of Accidental Americans (NLAA), which posted a link on Facebook to a Tweede Kamer website page, for those interested in watching the proceedings online.

(Since that original posting, the hearing date and time has been changed, and it's now set to run from 5pm to 6:30pm local time next Wednesday, June 22). The proceedings are expected to be carried out mainly in Dutch. 

Members of the NLAA and other accidental Americans in the Netherlands say they have become increasingly frustrated that the problems they're having when they try to apply for, or even simply keep, local bank accounts has continued to drag on, without any apparent progress being made. 

One reason for their increasing agitation is the fact that they've been told that an agreement by the country's banks to not close accidentals' accounts, on the grounds that they don't have a U.S. Tax Identification Number/Social Security Number or a "Certificate of Loss of Nationality" (CLN), is set to end on  Sept. 1. 

And because that date currently remains the deadline, Marnix van Rij, who succeeded Johannes "Hans" Vijlbrief as State Secretary for Finance and Taxation in January, said in a pre-hearing letter made public on Monday  that he still thinks Dutch accidentals needed to "either renounce their [U.S.] nationality or apply for a U.S. Social Security Number (U.S. TIN/SSN)," due to the existing U.S. regulations. Because they don't consider themselves to be anything but Dutch, and believe the Dutch government should also take this view, van Rij's advice is not at all what the accidentals want to hear.  

As spokespeople for these accidentals explain when asked, Dutch and French lawmakers have been holding hearings on the subject of FATCA for years, but thus far have succeeded in doing little more than push back the deadline for accidental Americans and others who lack U.S. tax identification numbers, or proof, such as a CLN, that they're not U.S. citizens in spite of having been born in the U.S., or born abroad to a U.S. parent.

Following the last round of hearings back in October, the Dutch accidentals expressed their disappointment at the lack of progress they felt had been made.

Today, meanwhile, Sophie in 't Veld, a Dutch member of the European Parliament who has been championing the cause of Europe's accidental Americans for the last several years, went public with a letter she's sending as of today to European Data Protection Board chairperson Andrea Jelinek, seeking an update on the EDPB's stated intention, back in April 2021, to invite the EU member states to "assess and, where necessary, review their international agreements that involve international transfers of personal data," with an eye specifically on FATCA. 

Referring to recent testimony by IRS Commissioner Charles Rettig, in which, she said, Rettig revealed that "the U.S. authorities have acknowledged that they do not even process personal data of Accidental Americans in the context of FATCA, and therefore do not effectively implement the intergovernmental agreements implementing FATCA, does the EDPB agree that the principles and proportionality of such [IGAs] are no (longer) established...[and] if so, which steps should be taken to suspend or annul [them]?"

In 't Veld posted her letter to Jelinek on Twitter around noon today, remarking above it: "What have data protection supervisors done to protect Accidental Americans from ridiculous US tax law #FATCA?

"Years have passed by, but little action...My letter to @EU_EDPB ." 

FATCA still a major issue
for 'ordinary expats' too, as
midterms loom

Signed into law in 2010 by then-president Barack Obama, FATCA, formally known as the Foreign Account Tax Compliance Act, is also – still – a major issue for ordinary American expats (as opposed to "accidental Americans"), although most experts agree that what makes it so toxic for them is the fact that the U.S. taxes on the basis of citizenship rather than residency, unlike any other countries (apart from Eritrea).

FATCA, in other words, is the tool that (theoretically) enables the U.S. authorities to monitor those who are failing to report their overseas (non-U.S.) holdings, which would cease to be as much of an issue for expats if the U.S. tax system were to be based on the taxpayer's country of residence. (We say "theoretically" because, as a U.S. Treasury Inspector General for Tax Administration report in April said, little if any of the data being collected under FATCA is actually being used, among other problems.)

Ironically, for most expat Americans, the tax reporting burden they're under as a result of the combination of FATCA and the U.S. citizenship-based tax (CBT) regime has mainly to do with the cost and hassle of filing tax returns and various information documents, such as FBARs, from abroad, rather than the fact that they owe U.S. taxes, because most the time, they don't.

The regulations also significantly impact their ability to invest while abroad and save for their retirements,  the expat Americans say.

And now, with the 2022 midterm elections less than five months away, many expat Americans are expressing growing frustration, especially on such social media sites as Twitter and Facebook, with what they see as a continued lack of interest in fixing FATCA and/or moving to a residence based tax regime (RBT, as opposed to CBT) on the part of either major U.S. political party. 

The Democrats Abroad, at least, appears to be aware of expats' concerns, as evidenced by the fact that members of its " Taxation Task Force" (TTF) spent last week meeting with key members of Congress in Washington, to "discuss tax advocacy priorities including but not limited to residency based taxation, simplified filing, FATCA reform, and GILTI", according to a notice on the Democrats Abroad's website.

This week, the notice says, they'll be holding "virtual meetings" with others there in Washington, whom they couldn't meet with in person.

The TTF has been regularly updating its followers on its progress via Twitter (see left), and is planning an online "panel discussion" on July 7 that will feature the Democratic Party's candidates who are running for office in New York's 12th District in this year's primary election, set to take place in August. (The 12th District has one of the largest concentrations of Democrats living abroad, an online notice about the meeting explains.) 

The party is also promoting three bills – all sponsored by Democrats – that are aimed at addressing some of the tax compliance problems expats face. They are: HR 5800 (the Commission on Americans Living Abroad Act) and HR 5799 (The Overseas Americans Financial Access Act) both of which were introduced by Rep. Carolyn Maloney (D - NY); and HR 6057 (Tax Simplification for Americans Abroad Act), introduced by Rep. Donald Beyer (D - VA).

It should be noted that former Republican Rep. George Holding of North Carolina introduced a bill aimed at helping American expats in December, 2018, called the Tax Fairness for Americans Abroad Act (HR 7358), but it failed to win support from fellow lawmakers, and disappeared altogether after Holding announced in December, 2019 that he wouldn't be running again, after the district he represented had been redrawn.

Also significant, some note, is that the Democrats Abroad Taxation Task Force, now being led by London-based Rebecca Lammers, has been seeking since April to "update" the Democrats Abroad's FATCA policy "from 'reform' to 'repeal'." The decision to query members on this move followed a vote by the steering committee of the TTF, according to a website statement, which invites DA members to vote, and to "share the link with friends and family", (ahead of a date that has now passed). 

Republicans 'less visible'

So far this election season, the Republican Party has been less visibly active abroad than the Democrats. A few individuals connected with Republicans Overseas have been sighted occasionally posting reminders, again on social media, that the GOP's 2016 Platform – which was reconfirmed at the party's Winter Meeting in February – still contains a (thus-far dormant) call to repeal FATCA, and to transition the U.S. to a residence-based tax regime, but otherwise the party has seemed to focus its efforts on Stateside issues and elections.

Unintentional consequences 

While all this has been taking place, still other problematic "unintentional consequences" of the Foreign Account Tax Compliance Act have also occasionally been emerging. One is the fact that FATCA is "non-reciprocal," meaning that although it obliges banks and financial institutions in more than 100 countries to provide the U.S. with the details of the bank and financial accounts of all of their American citizen clients and Green Card holders, it doesn't provide the governments of these countries with the same data about the U.S. accounts held by their citizens. 

Last month, the UK-based Tax Justice Network cited FATCA as a contributing reason for the U.S. coming out on top of its "Financial Secrecy Index", which it compiles every other year, mainly because it had "again fail[ed] to meet international standards and practice on information exchange with other countries."

This was a reference to the fact that even though other countries provide it with information about its taxpayers' overseas accounts, the U.S. has thus far declined to participate in the OECD's Common Reporting Standard, a FATCA-like automatic information exchange regime that more than 100 other countries have signed up to. This enables those in these other countries who wish to hide assets from their tax authorities to do so by stashing them in the U.S. 

'Little or no evidence of
concern' in Washington

John Richardson, a Toronto-based lawyer, citizenship expert and recently, campaigner on behalf of American expat issues, said that in his view, even though 12 years (and a few months) have now passed since the Foreign Account Tax Compliance Act was signed into law, "FATCA and U.S. citizenship taxation continue to be a problem for individuals living outside of the U.S., who suffer from the 'taint' of their U.S. citizenship," as they struggle to maintain accounts with non-U.S. banks, and other issues. 

"There is little or no evidence, even after all this time, that this is a concern of either U.S. lawmakers or the U.S. Treasury.

"The efforts of the Democrats Abroad Taxation Tax Force notwithstanding, there is no evidence that the Democratic Party is willing to abandon its core commitment to FATCA, and citizenship-based taxation.

"The problem is not so much that they don't care, it's that they don't care that they don't care.

"That the result of this bleak outlook is the reluctant renunciations of their citizenships by thousands of Americans is, sadly, not all that surprising." 

Jet Barendregt, an accidental American who lives in the Netherlands and who is a founding member of the NLAA, said that "to be honest, we're becoming increasingly frustrated by the lack of real progress, the lack of a solution, after all this time.

"We feel that we're being dragged along by all these governments – the Dutch government, the EU and the U.S. – and, being Dutch citizens, we feel that the Dutch government should protect our rights more than it does, rather than telling us to get a U.S. SSN or a CLN. We are Dutch, for heavens sake!

"It is absolutely unjust for the U.S. to be allowed to enforce its extra-territorial tax laws on innocent Dutch citizens [the way it is doing].

"And unfortunately, the way things are going, we think it will be years before the U.S. finally fixes the problems with FATCA, and moves to a residence-based tax system from its CBT regime." 

For London-based Mishcon de Reya LLP partner Filippo Noseda, one of the most significant indications that as its currently written, FATCA doesn't bear examination, occurred last year, when certain U.S. lawmakers introduced legislation that was seen as a potential Stateside FATCA.

Conceived as a way of closing the so-called "tax gap" between what American taxpayers pay, and what they are believed to actually owe, in taxes every year, it would have required U.S. banks and other financial institutions there to report on every movement into and out of their clients' accounts of amounts of US$600 or more, on an annual basis  – and was resoundingly rejected almost from the start.

Noseda is perhaps best known in U.S. expat circles for his work in representing an American expat (usually referred to simply as "Jenny") in various legal challenges in the EU and the UK over the way her personal data is being shared with the U.S. – in violation, she has argued, of her data protection and privacy rights – in addition to other defendants in similar cases. In his opinion, what EU lawmakers have done to address FATCA thus far represents little more "than small and largely cosmetic steps that may help some Accidental Americans, but which do not deal with the crux of the matter."

He added: "Recent evidence from the U.S. Treasury, and comments made by the IRS commissioner, show clearly that FATCA is a dud.

"However, the European Union continues to deliver personal data belonging to EU citizens to the IRS  – data which the IRS cannot legally obtain from U.S. banks, following Congress's rejection last year of a domestic version of FATCA,, owing to concerns about data privacy, the absence of any link between the measure and tax evasions, and concerns as to how the IRS has been shown to deal with taxpayers' data .

"As the European Parliament said in a formal resolution in 2021, the European Commission has 'put [the EU's] relations with the U.S. before the interests of EU citizens... thereby [leaving] the task of defending EU law to [the bloc's] individual citizens' themselves."