Acronyms abound in the federal government, used as convenient short cuts to describe what are often long-winded agencies, laws and agendas. When fully spelled out, some apply to rather pedestrian groups and subjects. Others, though, emerge fully cloaked to denote highly controversial -- even explosive -- subject matter.
Take FACTA, for instance. Those letters are veritably super-charged for their global implications, most notably for Americans holding bank accounts in foreign countries.
FACTA stands for a recently passed federal law entitled the Foreign Account Tax Compliance Act. Its rationale has been simply stated on many occasions by government officials: to uncover tax fraud carried out by Americans who use foreign banks to hide income that should be declared to the IRS.
The government strongly defends the law, which takes effect on June 30, 2014, but legions of critics have emerged to slam it.
As noted by the New York Times, FACTA “effectively makes all foreign banks and foreign financial institution arms of the I.R.S.” It does so by requiring them to report detailed information on the accounts of American clients. Failure to do so results in penalties for those banks.
The legislation is understandably spooking many Americans living abroad, as well as foreign banks. Recent reports indicate that a number of foreign financial institutions are simply terminating the accounts of Americans rather than face the administrative costs required to comply with the law.
Criticism of FACTA is wide-based and coming from a number of disparate sources. Senator Rand Paul (R-Kentucky) recently cited privacy concerns with the law. A law school lecturer and global consulting head calls FACTA “bullying and selfish.” Mark E. Matthews, an ex-deputy commissioner of the IRS says feedback on the law is “all criticism, and that speaks volumes about the challenges.”
For many Americans, what is perhaps most troubling is the seeming premise that they are tax evaders and must therefore open up their private financial lives to an unprecedented degree.
That upcoming level of scrutiny promises to be thorough, given a U.S. Treasury Department assertion that future probes will cover not just individuals’ bank accounts, but their pensions, investments and other matters as well.
Source: New York Times, "Complying with U.S. tax evasion law is vexing for foreign banks," Lynnley Browning, Sept. 16, 2013