The US tax authorities clearly have no intention of further easing the tax and banking obligations of ‘accidental Americans’ under the US Foreign Account Tax Compliance Act (FATCA).
In a letter dated 12 March, copied to EUROPE, Chip Harter, the Deputy Assistant Secretary for International Tax Affairs at the US Treasury, dismissed the concerns raised by the EU Council in its letter from 3 December (see EUROPE 12389/21) about those European citizens who, by accident of birth, inherited US citizenship but have no connection with the United States.
Overall, the letter merely recalls the measures already taken by the United States in this area. Contacted on Tuesday 31 March, the President of the Association of Accidental Americans, Fabien Lehagre, expressed his disappointment to EUROPE.
“What struck me when I read the letter was that at no time does it mention accidental Americans. When you read this letter, it’s obvious that in the eyes of the US tax administration, we are not accidental Americans, we are Americans who reside abroad”, he said.
Indeed, the US Treasury says that it has received only “anecdotal information about the extent of that situation” with regard to “EU residents who were not aware until recently that they were US citizens and who face a number of obstacles in obtaining social security numbers”.
Another troubling – and even ironic, in his view – answer concerns the reciprocity of the exchange of information. The letter celebrates the fact that the United States has been a “leader” in the field of ending banking secrecy and in the automatic exchange of financial information, in particular through the conclusion of some one hundred intergovernmental agreements implementing FATCA.
But what the letter fails to mention, according to Mr Lehagre, is that the United States is one of the few countries that does not apply the OECD’s common reporting standard. Furthermore, as the intergovernmental agreements were never approved by the US Congress, the US does not apply reciprocity in the exchange of information – something that the EU Council deeply regretted in its letter.
For Mr Lehagre, this is simply a “non-response”, since the letter does not indicate the steps the US government intends to take “to achieve levels of reciprocal automatic information exchange”, as requested by the EU Council.
“Exorbitant renunciation fees”
While new measures have recently been taken to ease tax reporting requirements for citizens who intend to renounce their US citizenship, for the Association of Accidental Americans, this remains largely insufficient.
These measures ignore the costs involved in using tax experts to find out whether or not one is eligible for the new procedure or to help fill in tax returns and start the waiver procedure, Mr Lehagre explained.
The cost of renouncing US citizenship remains “exorbitant and does not reflect the actual cost of the process”, he said. Before FATCA, the procedure to renounce American citizenship was free of charge. In 2010, 3 months after the adoption of FATCA, the procedure became chargeable to the tune of $450 and in 2015, the fee increased to $2,350, while the actual cost of the procedure did not exceed $20.25, according to a recent report by the President’s Executive Office. “We feel like we’re trapped”, he denounces.
On this issue, the Treasury passes the ball back to the State Department, which is solely responsible for this procedure. On 10 March, Mr Lehagre sent a letter to the US Secretary of State, Mike Pompeo, to which no reply has been received to date.
The EU must respond
The possibilities for action are slim, but the EU must respond, says Mr Lehagre. Asked about the chances of one day having an agreement between the EU and the US to remedy the adverse effects of FATCA, as called for by the European Parliament in a resolution of July 2018 (see EUROPE 12056/7), he was very sceptical.
“I don’ t believe in it at all”, he said, recalling that before agreements were concluded between the US and EU Member States, the Commission had started informal contacts with a view to a possible EU-US agreement, but Member States preferred to conclude bilateral agreements.
Nevertheless, he hopes that the EU Council will respond or at least react to this letter. “It will be interesting to see, in concrete terms, what the commitment of Member States will be to defend their affected citizens”, he told us. Since the US tax authority refuses all responsibility, Member States could, for example, write to the State Department, he suggested. The Croatian Presidency of the Council was contacted by e-mail on Tuesday and did not reply.
The solution could then come from the European Commission. On 3 October, the Association of Accidental Americans lodged a complaint with the Commission against France (see EUROPE 12341/14), alleging that the Franco-American intergovernmental agreement, which applies FATCA, violates EU law and, more specifically, the General Data Protection Regulation (GDPR).
To obtain a US tax identification number, ‘accidental Americans’ must provide confidential documents such as immunisation records, diplomas and employment contracts, all of which are completely outside the scope of the GDPR, he explained.
“The EU has put in place the GDPR to protect these European citizens, but because of the agreements that the Member States have signed, we have to provide this information without being able to rely on EU law”, he lamented.
Mr Lehagre hopes that the Commission will decide to open formal infringement proceedings against France and bring the matter before the European Court of Justice.
See the letter: https://bit.ly/2yfuGrN (Original version in French by Marion Fontana)