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FATCA: a Tool of the Electronic Surveillance State

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opednews.com Headlined to H3 9/28/13

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James George Jatras for  RepealFATCA.com

  

Washington, DC --    Those familiar with the U.S. "Foreign Account Tax Compliance Act" (FATCA) -- and in the United States, that's not many people -- think of it as either a as   sledgehammer  attempt to curb "offshore tax evasion" or (more accurately) as a costly, counterproductive, and indiscriminate burden on the global economic system; a compliance nightmare that only benefits tax lawyers, accountants, and software firms; a job-killing disincentive for foreign investment in the United States; a crude extraterritorial overreach in violation of every principle of sovereign legality; an abuse of the U.S. Senate's constitutional treaty authority; a blatant violation of WTO and other trade commitments; and a financial "drone strike" against   Americans living abroad

FATCA is all that and much, much more.  But in light of sweeping revelations about the email, telephone, and internet surveillance activities of the U.S. National Security Agency (NSA), it's time to take a look at FATCA's implications for personal electronic privacy and the growing power of U.S. intelligence agencies' global " surveillance state ."

Just Hand Over the Information -- or Else

FATCA is a U.S. law enacted in 2010 that, beginning in July 2014, would require all "foreign" (i.e., non-American) financial firms (not just banks but also credit unions, insurance companies, pension funds, stock and investment funds, etc.) to report the accounts of "U.S. Persons" defined so broadly as to include many citizens of other countries, for example perhaps a   million Canadian citizens .

How does the U.S. government get jurisdiction to do this?  Well, it has no jurisdiction and doesn't claim any.  If any of the hundreds of thousands of foreign financial institutions (FFIs) anywhere in the world, whether it does business in the U.S. or not, fails to demonstrate to the U.S. Treasury Department that it has "due diligence" in place to gather the demanded account information, and agrees to hand it over to the IRS   in a manner dictated by that agency in 544 pages of mind-numbing regulations , it will be hit with a 30% deduction on any U.S.-sourced revenues, including "pass-thru" payments on a percentage basis. 

In view of the U.S. role in the global financial system, many if not most FFIs are recipients, at least indirectly, of revenues that can be intercepted by U.S. financial institutions forced to act as "withholding agents" on Treasury's behalf.  This would amount to confiscation of the FFIs' legitimate assets for being "recalcitrant" under a foreign law which they are under no legal (much less moral) obligation to obey, and which in most countries they   can't  obey without violating local   human rights ,   data security , and other protection laws.

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Thus, FATCA has no legal claim to its breathtaking demand for worldwide submission.  Its only claim of authority is the Treasury Department's threat to inflict pain on foreign entities not otherwise subject to U.S. law.  In other words: might makes right.

There is much more to it of course, including the fact that even FATCA advocates admit the law is " wholly unachievable " as written and can only be implemented by foreign governments' knuckling under to the threat of economic sanctions and agreeing to sign so-called "intergovernmental agreements" (IGAs) to act as the IRS's enforcers against their own institutions and citizens   under false promises of "reciprocity ."   And it is well established that FATCA would yield at best a meager "recovery" of revenues hidden offshore --   less   than $1 billion  per year (enough to fund the U.S. federal government for about two hours) while inflicting compliance costs worldwide of   $ 1 to 2   trillion .  It is increasingly clear that FATCA is cruising towards a " catastrophic collision " with reality.  (See Victoria Ferauge and Lynne Swanson, " FATCA Losing Its Way ,"   Accounting Today , September 11, 2013.)

Since FATCA doesn't pass the laugh test as an effective tax enforcement tool, one then has to wonder if it serves some other purpose.  Why would the U.S. government (or at least some elements of the U.S. government) be so insistent on gathering immense amounts of personal financial data from foreign institutions, without any suspicion of wrongdoing by either the vast majority of account-holders or by the institutions themselves? 

FATCA-Compliant Banks Would Have No Privacy Expectation from U.S. Security Agencies

If FATCA's sole purpose were to "recover" tax revenues from assets squirreled away offshore by American "fat cats," it seems odd that it targets only individuals and specifically   exempts  reporting on accounts held by U.S. corporations.   On the other hand, targeting individuals makes a lot of sense if FATCA's purpose is directed towards something else: adding to U.S. government agencies' global electronic "map" of personal information.   Americans and the rest of the world are increasingly aware of the vanishing concept of personal privacy, whether supposedly "justified" by the needs of law enforcement, anti-terrorism, or (as here) recovering tax revenues.  

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It should be further understood that any data transmitted by foreign financial institutions will   not  be confined to the IRS but will be handed over ("upon request," of course) to other "three-letter" agencies of the U.S. government.   The following is from a 2012 letter from Sen.   Carl Levin (D-Michigan), a prominent FATCA supporter, to then-IRS Commissioner Douglas H. Shulman:

"Although FATCA is structured to address offshore tax abuse [ Note : this is itself inaccurate, as FATCA includes   not a single provision  targeting actual tax evasion activity], offshore account information has significance far beyond the tax context, affecting cases involving money laundering, drug trafficking, terrorist financing, acts of corruption, financial fraud, and many other legal violations and crimes. Given the importance of offshore account disclosures, FATCA guidance and implementing rule should create account FATCA forms that are not designated as tax return information but, like FBARs, may be provided to law enforcement, regulatory, and   national security  communities upon request.   FFIs are not, after all, U.S. taxpayers , and will not be supplying tax information on behalf of their U.S. clients; they will instead be providing information about accounts opened by U.S. persons. The U.S. Supreme Court has long held that   bank account information is not inherently confidential  but is subject to inspection by law enforcement and others in appropriate circumstances. Foreign account information is too important to a wide range of civil and criminal law enforcement and   national security  efforts to be designated as tax return information bound by   Section 6103 's severe restrictions on access."  [emphasis added, source:   http://bsmlegal.com/PDFs/CarlLevin.pdf  ]

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www.globalstrategicpr.com

Managing Director, Global Strategic Communications Group; government and media relations specialist. Former US diplomat, US Senate staffer. JD Georgetown 1978, BA Penn State 1974.

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Barter and local currencies are a great alternativ... by Paul Repstock on Saturday, Sep 28, 2013 at 6:43:34 PM
As someone who is subject to FATCA requirements, I... by Doc McCoy on Monday, Sep 30, 2013 at 3:52:31 AM