In a letter to US treasury secretary Steven Mnuchin and Mick Mulvaney, director of the White House office of management and budget, senator Paul Rand and congressman Mark Meadows announced plans on Monday to reintroduce bills to repeal Fatca.
They describe the legislation as a “massive, wasteful regulatory mandate that has failed in its ostensible purpose of recovering tax revenues hidden offshore”.
Rand, who was among the Republicans vying for the presidency in the last election, and Meadows introduced bills to repeal Fatca during the last congress. The bills were co-sponsored by Mulvaney.
“We plan to reintroduce the same legislation in the 115th congress, and efforts are underway to include it in any tax reform legislation,” they wrote.
In addition to their congressional efforts, Rand and Meadows highlighted steps they believe could be taken by the Trump administration with regard to Fatca.
“These steps mainly concern so-called intergovernmental agreements (IGAs) used by the Obama administration to implement Fatca.
“This was done largely because Fatca, on top of its other defects, failed to take into account other countries’ privacy laws that would preclude their financial institutions’ reporting private personal data to the Internal Revenue Service.”
Rand and Meadows explained that “while the IGAs read like and have the effect of treaties, they are not treaties”.
The politicians said that the “IGAs are a characteristic example of the previous administration’s inclination for abusing its executive power”.
“For that reason, these same abuses are amenable to executive action to mitigate the ongoing damage caused by Fatca, pending its repeal.”
Steps to take
Rand and Meadows outlined four steps that the Trump Administration could take in the interim, while they resubmit their bills to congress:
1) Issue a statement of administration policy to the effect that the Trump administration is committed to the repeal of Fatca, welcomes the inclusion of the repeal provisions in any tax reform bill, and is reviewing administrative steps to limit Fatca’s damaging effects, pending its repeal.
2) Instruct the Treasury Department’s office of international affairs and other elements of the department that may be involved to cease all efforts to negotiate, sign and implement IGAs. Continued signings of new IGAs – most recently with Ukraine in February 2017 – send a false signal that the new administration is committed to this destructive law as a matter of policy.
3) Announce that the IGAs are under legal review of their authority and that if they are found to be legally infirm – as we believe they will be – they may be declared invalid ab initio with immediate effect or terminated upon expiry of the one-year’s notice specified.
4) Under the broad authority Fatca grants the treasury secretary, deem all impacted foreign institutions compliant on a temporary basis pending outcome of the legal review of the IGAs.
The IRS should also be instructed to suspend enforcement of provisions impacting individual taxpayers; and, on an urgent basis to help decrease the spiking rate in US citizenship renunciations, suspend imposition of penalties for Fatca filing errors by individuals.