By LAURA SAUNDERS
The U.S crackdown on tax evasion is having an “intense impact” on Americans living abroad, according to a new report by Democrats Abroad, the official arm of the Democratic Party for Americans living outside the U.S.
Nearly 6,600 expatriates responded to a survey conducted in June and July about the effects of the Foreign Account Tax Compliance Act, known as Fatca.
The expats said “their financial accounts are being closed, their relationships with their non-American spouses are under strain, some Americans are being denied promotions or partnership in business . . . and some are planning or contemplating renouncing their U.S. citizenship,” according to the Democrats Abroad report.
In a recent Wall Street Journal story about expatriates affected by the U.S. crackdown, experts said that even the wealthy and employees of multinational firms aren’t immune to ripple effects of the U.S. action.
Congress enacted Fatca in 2010 after learning that foreign financial firms, especially in Switzerland, were profiting by encouraging U.S. taxpayers to hide money abroad. The law’s main provisions took effect in July.
As a result of Fatca, foreign financial firms must report to the Internal Revenue Service the investment income and balances above certain thresholds for accounts held by U.S. customers. If a firm doesn’t, all its customers will have 30% withheld from income received from U.S. sources, such as interest and dividends.
Nearly 100,000 banks and other financial firms have registered with the IRS in order to prevent the withholding, but some are also closing the accounts of U.S. taxpayers to avoid the compliance burdens.
The survey by Democrats Abroad found that nearly one in six respondents had had a financial account closed by a bank or brokerage house. More than two-thirds of the checking accounts that were closed had a balance of less than $10,000. Nearly 60% of the closed investment accounts had a value of less than $50,000. Other people were unable to open accounts.
Respondents also reported Fatca-related difficulties with non-U.S. spouses and partners. More than one-fifth said they have separated or are considering separating financial accounts held jointly with their partner.
Added one person, “Fatca has caused enormous friction in my marriage. My non-U.S.spouse is refusing to let the U.S. government know about his salary/earnings/savings. . . and moving to separate bank accounts would leave me very vulnerable as I’m an unemployed, stay-at-home mother.”
Nearly 6% of respondents said that they had been denied promotions or other opportunities because of Fatca. Said one, “I was told that they didn’t want an ‘American person’ and they refused to recognize my EU citizenship. Too costly, complicated and dangerous, they said.”
At the same time, many responses from participants expressed genuine support for policies that fight tax evasion, according to the report. Said one participant, “I support Fatca to monitor/take action against rich individuals or corporations that are not paying their taxes. However, many of us ‘average citizens’ are currently caught in the dragnet of Fatca implementation.”