updated 3:54 PM CET, Nov 28, 2020

23-page EU Council 'working paper' on AEOI regs emerges, prompting concerns

A "Working Paper" issued by the European Council on Sept. 11, four days before the European Data Protection Board was due to meet to discuss how the EU should best prepare to participate in the worldwide move towards ever-greater automatic exchange of information, is being seen by some observers as an indication of the willingness of EU governments to take measures behind the scenes aimed at quietly ensuring a consistent pan-EU data protection message that also fits in with their "Realpolitik" objectives – including avoiding a public, political showdown with the U.S. over FATCA.

Among those who have flagged up this 23-page Working Paper, in the context of what they say is the European Council's apparent willingness to seek to influence EDPB thinking, has been Filippo Noseda, a Mishcon de Reya law firm partner who has been an outspoken critic of the Foreign Account Tax Compliance Act (FATCA) for the last several years.

During this time, as this publication and others have reported, Noseda has overseen several legal challenges to the U.S. tax evasion law, including one involving a U.S. born British resident known as Jenny, against the UK's HM Revenue & Customs.

Noseda, who said he only recently discovered the existence of the almost-two-months-old Working Paper, has written to European Data Protection Board chairperson Andrea Jelinek to remind her that the EDPB should "resist the temptation of being influenced by the political views of the European Council (which represents national governments)" and that it instead should focus "on the legal and data protection concerns raised by campaigners, the European Parliament's Petition Committee (PETI), the European Data Protection Supervisor (EDPS), the predecessor of the EDPB (WP29) the group of experts appointed by the European Commission (AEFI Group), as well as the European Commission". 

In his letter, dated Tuesday and sent via email, Noseda credits the president of a Paris-based organization that represents so-called accidental Americans, the Accidental Americans Association, with "bringing [the existence of the Working Paper] to my attention".

The AAA has posted the 23-page Working Paper on its website, where it may be viewed by clicking here.

Claim document was intended
to 'influence EDPB's analysis'

Noseda's letter to Dr. Jelinek – whom he has written to several times already in the past year – begins by noting that the apparent purpose of the Working Document on the part of the European Council "was to influence the outcome of the EDPB's analysis by 'offering legal arguments in favour of the alignment of the automatic exchange of information in tax matters with third countries with Art. 49 (I) (d) of the GDPR [EU's General Data Proptection Regulation] by emphasizing the recognized important public interest [in] combating tax avoidance and tax evasion, safeguarding tax revenues, and promoting taxation' "

Notwithstanding repeated calls by campaigners and accusations of Kafkaesque behaviour levelled by MEPs" Noseda continues – referencing via an embedded link to a hearing held last November by the European Parliament's Petition Committee in Brussels, at which numerous individuals testified about the way they were being pursued by the U.S. for personal information, even though they were EU citizens – "the EDPB has thus far avoided to take a position on the necessity and proportionality of automatic exchange of information, i.e., a system of information exchange that does not require any indicia of tax evasion and therefore affects tens of millions of compliant citizens.

"Nobody should evade tax," Noseda's letter continues at this point.

"Our problem is not with FATCA's objective but the disproportionate nature of the measure to achieve its objective." 

He then goes on to stress his point, mentioned above, about the need for the EDPB to "resist the temptation of being influenced by the political views of the European Council", before urging the Data Protection Board authorities to "also reflect on" a number of recent European Court of Justice rulings in the area of data protection and exchange of information, which names, and which include cases known as Schrems and Schrems II, which he points out had been "decided against the European Commission", while a third case (Digital Rights Ireland) held that an EU directive was illegal, because it breached individuals' fundamental rights".

Noseda concludes his letter to Dr. Jelinek by mentioning FATCA, pointing out that it not only is "not reciprocal", in that the U.S. "provides little or no information to EU Member States", but that the FATCA bilateral agreements signed by the EU Member States in order to enable it to be enforced "do not appear to satisfy any of the safeguards contained in the EDPB's Guidelines 2/2020", even though, he says, an EDPB statement in 2019 indicated that they should.

In addition to Dr. Jelinek, Noseda also addressed his letter to the European Parliament's Petition Committee, the  European Commission's Taxation and Customs Union Directorate-General and the Council of Europe's Data Protection Consultative Committee (T-PD). 

Dr. Jelinek and the EDPB were asked if they wished to comment Noseda's letter, but thus far have not replied.

Citzens' call for governments
to challenge U.S. on FATCA

As this and other publications have been reporting over the last few years, thousands of European citizens have been calling on their governments to pressure the U.S. into relaxing its tax reporting and payment requirements for individuals who have spent most if not all their lives abroad, but whom the U.S. considers to be U.S. citizens, and thus having tax reporting obligations, owing to America's citizenship-based tax regime.

There are estimated to be around 300,000 "accidental Americans" in Europe, that is, citizens of European countries who have spent their lives living outside of the U.S., but whom the U.S. considers also to be Americans, typically because they were born in the States or had one or more American parents, even though they were born elsewhere.

The pressure for such individuals to file tax returns every year and report to the U.S. on their non-U.S. financial accounts (via so-called Foreign Bank Account Reports, or FBARs), has been mounting ever since FATCA was signed into law in 2010, and came into force in 2014. As reported, the pressure was stepped up another notch on the first of January this year.

Such individuals also struggle as a result of the fact that many non-U.S. financial institutions will have American account-holders, because of the extra compliance costs they involve. 

After the numbers of American citizens resident abroad who were renouncing their citizenships leapt, in the wake of the introduction of FATCA, the U.S. raised the fee it charges individuals to "expatriate" by 422% in 2015, to US2,350 from US$450. (Wealthy individuals are also expected to pay a significant "exit tax".) 

In spite of such facts, few foreign governments have thus far been willing to seriously challenge the U.S. over the way it taxes their citizens, although a few foreign government officials have occasionally raised the issue over the years. 

Earlier this year, a member of the European Parliament named François-Xavier Bellamy put a question on the matter to the European Commission, but received a stern response from Europe's Economy Commissioner Paolo Gentiloni in April, who said the European Commission had found "no evidence of the existence of an infringement" on the rights of EU citizens, who happened to be accidental Americans, to have a basic bank account. This followed a similarly firm response in March from a U.S. Treasury official named Lafayette G. "Chip" Harter to a similar question, in which 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".

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