Summary – The Reader’s Digest Version …
In 2011 Canada's Finance Minister Jim Flaherty recognized that FATCA was being applied to target people with @taxresidency OUTSIDE the USA. He stated the obvious: "Canada is not a tax haven!" Raising the question: why were CDN residents targeted by FATCA?https://t.co/KrN3Bs8CmV
— John Richardson – lawyer for "U.S. persons" abroad (@ExpatriationLaw) January 16, 2023
Although FATCA was clearly motivated by the behaviour of US citizens resident in the United States, Treasury did NOT interpret the “purpose” as being limited to prevent abuses by “residents of the United States”. Rather Treasury appears to have interpreted the purpose of FATCA (very broadly) to target residents of other countries.
Had Treasury done what it was required by statute to do (consider the purpose of IRC 1471) it might have approached its responsibilities very differently. What began as an attempt to curb the behaviour of US residents became an attack on residents of other countries who happen to be US citizens. The evidence further suggest that the FFIs most heavily impacted by FATCA are located in the high tax jurisdictions where US citizens abroad are most likely to reside. Can it reasonably be concluded that the purpose of IRC 1471 – AKA FATCA – was to attack the residents of other countries and the banks in those countries? If not, then why did Treasury target the whole world, rather than the parts of the world with conditions that facilitated tax evasion for resident Americans? Can anybody seriously make the claim that banks in Canada, the UK, Australia New Zealand and other first world democracies were attractive locations for tax evaders? Yet, this is precisely what Treasury did.
It didn’t have to be this way!