Israeli Supreme Court blocks FATCA enforcement
Israeli banks have long since barred accounts held by US citizens who don't live here. Those accounts were all closed several years ago. And for those of us who do live here, every account we open - including loan accounts whose proceeds are to be used in Israel - requires filling out a W-9 to report our social security numbers.
One Israeli Supreme Court Justice has stepped into that breach. Hanan Meltzer, who never hesitated to challenge the Israeli government when he was in private practice, has issued an injunction stopping the Israeli government and banks from turning over information about US citizens to the IRS, and is holding an emergency hearing about it on September 15. Will his actions become a model for other countries?
“Justice Meltzer’s action should be championed,” deVere’s Green asserts, who is an outspoken critic of FATCA. “His wise caution should serve as a wake-up call for other countries to rethink enforcing this toxic, flawed, damaging legislation that is being imposed on sovereign states around the world by the U.S.”
FATCA could indeed be described as a “masterclass” in fiscal imperialism and unintended consequences. But also of concern is that the US is increasingly secret in matters of financial data. It’s no wonder some have labelled it “horrific” and a nightmare for financial institutions.
Perhaps unsurprisingly there a growing trend and an overwhelming number of U.S. citizens are giving up their American citizenship (citizenship abdications), which has been revealed by the U.S. Treasury Department.
And, according to a survey conducted in early 2015 by deVere itself almost three quarters (73%) of Americans living overseas expressed the view that they were tempted to relinquish their U.S. passports.
They also found when canvassing over 370 its American expatriate clients that just under half (48%) would vote for a Presidential candidate who seeking FATCA’s repeal. This was against 29% saying ‘No’ and 23% ‘Don’t know’. So, that would seem to sufficiently take the pulse on US expat thinking.
Perhaps it had something to do with the fact that many U.S. citizens cannot even now hold a bank account in their country of residence since foreign banks routinely feel Americans are too much trouble due to FATCA’s onerous and costly rules in order to comply with and take them on as clients.
As regards the cost to banks around the globe to implement FATCA it has been suggested that it will run to billions of dollars a year.
Instead, he says what it does – due to its plethora of serious unintended adverse consequences – is to brand the some seven million Americans who choose to live and/or work overseas, including many of the 300,000 in Israel for example, as “financial pariahs”.
U.S. expats are now routinely rejected from FFIs, such as banks in their country of residence, as result of FATCA’s costly and onerous regulations. The upshot is that in Green’s view Americans are now typically deemed “more trouble than they are worth.”
Rubbing the point in further he adds: “Similarly, American businesses working in international markets are now often branded with a leprosy-like status. Clearly, this can only be detrimental to their global competiveness and could, in turn, hit American jobs and the long-term growth of the U.S. economy.” Now that of course could well have far-reaching consequences beyond the US itself.
The Israeli High Court decision could represent a landmark moment in the fight to have what Green and others regard as a “controversial and damaging law that should be resigned to the history books.” It’s any guess whether Justice Meltzer’s latest action will encourage and influence more nations worldwide to reconsider FATCA.I doubt it will influence the US - they're making way too much money off this. But it might convince an awful lot of US citizens to give up their citizenship (curiously, I know very few people in Israel who have, but have heard lots of stories of US expats in Europe giving up US citizenship), and it might convince some countries to try resisting FATCA. But no country will do it alone.