Republicans Overseas in Israel files High Court petition against FATCA agreementresults of the last elections) has filed a petition with Israel's High Court of Justice seeking to stop Israel's banks from transferring required information to the Internal Revenue Service under FATCA. FATCA requires foreign financial institutions to disclose to Lois Lerner's IRS the value of all foreign accounts held by US citizens. US citizens who actually live abroad are up in arms about this because it means that we have to go through two regulatory systems in all of our dealings with local banks (example: I had to fill out a W-9 to show that I have a US social security number in order to get a car loan from an Israeli bank for my car in Israel last year).
If you're a US citizen who lives in the US you no longer have any foreign bank accounts - at least in Israel where long before the Bank of Israel signed an agreement with the IRS, the local banks forced all non-Israeli residents to close their accounts. That means that this is almost entirely about people who live in Israel by any definition.
ROI’s petition claimed that the new information sharing process is not only beyond government officials’ discretionary authority absent Knesset legislation, but also in violation of the Basic Laws which create certain property and privacy rights defending against an automatic transfer of personal data absent a reasonable chance to object (currently there is no chance to object.)I can only wish them luck.
In courts in many countries, including now Israel, the argument is, that the FATCA law and how foreign countries are implementing, means it functions as a dragnet of massive amounts of private information which could be misused and where there is no evidence of wrongdoing.
Zell explained that “we are not saying the Israeli tax authorities are prohibited from transferring information to the IRS or other foreign tax authority…where there is a reasonable basis to suspect tax evasion.”
He said that Israel can already do this under existing conventions and that the problem is to “collect and transfer such data to foreign governments without a showing of cause and without allowing the affected taxpayers an opportunity to be heard before the information is transferred.”
The equal treatment issue is that only dual US citizens are being treated this way by the Israeli government, and not persons who are dual-citizens of any other countries, let alone most Israelis who are solely Israeli citizens.
The application is most “absurd” said Zell with cases of persons who merely have an American greed card.
But so far other litigation against FATCA and its consequences have had mixed results, with lawsuits in the US and Canada being initially dismissed and currently pending appeal.
“If the Court addresses the merits of the case, I believe our chances are quite good… The action of the Bank of Israel is highly problematic, given that there was absolutely no statutory basis for its action…. The Government Decision…directly infringe[s] upon fundamental rights and no attempt was made to mitigate the damage,” stated Zell.
He also said treating American-Israelis differently is “clearly discriminatory…There is no easy answer to that... the Government simply disregarded the privacy interests of the affected class, signed what is effectively an adhesion [coercive] contract and paid no attention whatsoever to the fact that the US Government…does not provide adequate protection for private information,” confirmed he said by the European Court of Justice and Israel’s Justice Ministry.
As Zell said, “taxpayers have a fundamental right of privacy protected by Basic Law and statutory law. The Government sought to nullify these rights with the wave of a hand and the Knesset thus far has said no. We hope the High Court of Justice will agree.”