BEHIND THE HEADLINES: Paul’s mission – to correct FATCA error
Barbadians will hear quite a lot about United States (US) Senator Rand Paul in the next few days and weeks, and some of what he says would be like music to their ears.
That’s because the Republican lawmaker from Kentucky, a right wing Tea Party advocate, is a firm believer in the rights of Americans and their corporations to use offshore financial centres like Barbados, The Bahamas, Switzerland, Luxembourg, the Cayman Islands, the British Virgin Islands and Bermuda to move money around and save on their taxes to Uncle Sam.
That position makes him something of a darling to many on Wall Street and corporate America. And if he should get his way, American citizens and holders of US immigration green cards wouldn’t have to account to the US Internal Revenue Service for money they have in bank accounts in foreign countries.
So when Paul takes the plunge on April 7 in Louisville, the premiere horse racing centre in America, by announcing his bid for the Republican presidential nomination for the 2016 election, his announcement will be watched very closely by business leaders in the United States and in Europe.
And Minister of International Business Donville Inniss can be expected to pay close attention to the positions Paul takes on the issue of privacy and the rights of Americans to hold money in foreign accounts in foreign jurisdictions, Barbados included.
“I find his attitude on the offshore sector and the Foreign Account Tax Compliance Act, FATCA, very interesting. I intend to follow his positions very carefully,” John Beale, Barbados Ambassador in Washington told BARBADOS BUSINESS AUTHORITY recently.
“Few people in Washington are as adamantly opposed to FATCA as he is.”
As a matter of fact, Paul feels so strongly about FATCA and what it is doing to Americans, immigrants and others, that he has introduced a measure in the senate calling for its repeal.
“FATCA is a law requiring every foreign bank to excessively monitor, and report to the Internal Revenue Service, the bank accounts of every American residing overseas or risk severe punishment,” Paul said after introducing his bill.
“Not only is that requirement a privacy concern of American citizens, it’s a costly burden on the banks. As a result, the private data of American accounts is forfeited and foreign banks have approached the onus of this law by shutting the door to United States citizens, leading to a hardship for millions of citizens working abroad.”
But American citizens aren’t the only ones affected by FATCA. For example, Bajan immigrants who hold US green cards are now being warned by Canadian and Caribbean banks in Barbados that depending on the amount of money they have in accounts in their homeland, they run the risk of being penalised if they don’t account to the IRS for their holdings.
“FATCA has been just one disaster after another,” complained Andrew Quinlan, president of the Centre for Freedom and Prosperity in Washington.
“Congress passed a rash law without first properly weighing the costs and benefits, and now millions of innocent Americans are suffering the consequences. Thankfully, Senator Paul recognises that it’s not too late to correct this egregious error.”
Actually, FATCA was approved by Congress in 2010 without much discussion in the House of Representatives and the Senate after it was adding to the Hiring Incentives to Restore Employment Act.
“It was a throw-in to the legislation on employment and few lawmakers realised at the time what they were approving,” Quinlan recalled. “Now it is a nightmare for foreign banks around the world, including those in the Caribbean.”
Paul, a close ally of Senate Majority Leader , Mitch McConnell, is adamant that attempts by Washington to use treaties and other bilateral agreements with foreign countries, including those in Europe and the Caribbean, to get information about foreign bank accounts and other assets of Americans violate the Fourth Amendment to the United States constitution and therefore should end.
“If people are breaking the law, they should be punished,” asserts Paul. “But we can’t capitulate on American privacy rights in order to handle this one issue at this one moment in time.”
What are the chances of the FATCA being repealed? It is unlikely Paul’s Congressional colleagues would go along with him to jettison it. Most say, its goal to go after tax cheats, but the hard reality is that almost five years after FATCA was enacted into law, United States authorities and the Justice Department haven’t determined how the measure will be implemented and how they will use the data.
In the meantime, Paul can be expected to use his presidential campaign to draw attention to his opposition to FATCA and various tax treaties that force foreign countries to provide Washington with information about Americans, which he thinks is misguided and unconstitutional.