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Topics: House of Representatives

FATCA and the American expat: Taxation without representation

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"If my co-workers knew that I was American, I would most likely lose my job," my friend, whose mother and father hail from Wyoming and British Colombia respectively, said to me one day.

I expect I rolled my eyes in response, assuming such a statement to be nothing but further proof of my friend's penchant for exaggeration. After all, he was a bank employee not in Iran or Cuba but in expat-friendly Geneva, Switzerland.

One week later, however, I received a letter informing me that my own Swiss bank account, which I had used throughout my eight years of working in Geneva, was being closed for the simple fact that I was an American citizen.

The Swiss are renowned for not being picky about their banking clients. From Nazis to Gaddafis, I was sure that my Swiss bank had maintained the accounts of much more nefarious characters than myself.

As it turns out, the roots of this new discrimination against Americans lie back in Washington, where the Foreign Account Tax Compliance Act (FATCA) was passed.

Snuck into the 2010 HIRE Act, FATCA rightly aims to clamp down on tax evasion. The problem is the means. FATCA allows the IRS to force foreign financial institutions (FFIs) to disclose all their American clients' financial holdings.

If foreign banks refuse to hand over such information, they find themselves faced with a 30 percent withholding tax on all securities transactions coming from the U.S., regardless of whether complying violates that country's national laws.

FATCA essentially turns foreign bank employees into an army of unpaid IRS agents. Faced with the bureaucratic nightmare of complying with IRS requests, many FFIs are finding that the safest course of action is to simply stop doing business with Americans.

Ultimately, it is all Americans living and working abroad that suffer from FATCA's burdensome stipulations. As many expats know, opening up a checking account in a foreign country can be difficult enough without the bank actively discriminating against you.

Moreover, FATCA means that foreign companies are more reluctant to hire American workers, feeling there would be too much red tape. Through the various trials of living in another country, expats would prefer to feel that the US government has their backs rather than simply watches over their shoulders.

If all members of Congress were aware of the full consequences of FATCA, it is unlikely that the bill would have passed the House. The reason few representatives leapt to defend the interests of American expats is that there is no congressman elected to represent the interests of American expats. Americans living abroad are only permitted to vote in Presidential elections.

While it may not be within Congress' mandate to protect expats' interests from FATCA, though, it is something that they should be doing; for the legislation is equally damaging to the relations and interests of the United States as a country. By enforcing FATCA, the US fulfills its worst stereotypes, giving credence to those that would portray us as a hypocritical bully on the world stage.

When I speak with my friend who is fearful to mention his American nationality at work, I feel angry at such blatant discrimination. My first recourse in such a situation would be to turn to the U.S. government for support, to my guarantor of rights.

Americans the world over are looking to Congress to put in place a fairer and more effective means of curbing tax evasion. Let's hope Washington listens.

Robert Held is a financial consultant currently based in Geneva, Switzerland.

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