As CNN Money reported over the weeked, a new law known as the US Foreign Account Tax Compliance Act (“FATCA”) is having some seriously detrimental consequences for thousands of Ameircan expatriots. This set of regulations, enacted in an effort to recapture what the Treasury Department believes to be hundreds of billions in lost taxes, has generated compliance procedures so onerous and costly that many foreign banks have decided they’d rather see American depositors take their money elsewhere. The results for effected persons include paying enormous “American citizenship penalty fees,” losing the ability to purchase a home, and in some cases, even having to forgo everyday conveniences like ATM withdrawals and cashing a check.
Although I obviously believe tax evasion is a serious crime that demands significant enforcement measures, laws like FATCA are exactly the wrong way to solve the problem. Much like Foreign Corrupt Practices Act which has forced many US businesses and individuals to engage in competition with a proverbial arm tied behind their back, FATCA will do little to stop actual tax cheats while creating an increasingly hostile climate for honest expatriot citizens. I’m glad CNN has shown a spotlight on the damage this type of ill-conceived regulation can cause and I certainly hope the folks over at Treasury are getting the message. Especially with the economy just barely emerging from the Great Recession, the last thing we need are new burdens on global American enterprise.