The Israeli High Court’s temporary injunction against the enforcement of America’s FATCA global tax law “should serve as a wake-up call for other countries to rethink enforcing this toxic, flawed, imperialistic legislation,” commented Nigel Green, chief executive and founder of deVere Group,. The injunction stops Israeli government’s plans to start actively implementing the U.S.’s Foreign Account Tax Compliance Act (FATCA) in the country.

Under FATCA, which came into effect in July 2014, all non-U.S. financial institutions worldwide are required to report the financial information of American clients and U.S. green card holders who have accounts holding more than $50,000 directly and routinely to the United States.

Israeli action and reaction

Days before this process was due to go into operation in Israel, Justice Hanan Meltzer has ordered officials to stop the preparatory work.  An emergency hearing is to be held on the matter before September 15. 

Although Hana Meltzer is a rather controversial judge - he was part of the decision by the Supreme Court back in 2009, to order the government to demolish illegally built Palestinian homes in the West Bank - this decision does raise important issues about how far the US authorities can ‘interfere’ in other countries tax affairs.

The strident deVere CEO believes that: “Justice Meltzer’s action should be championed.  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.”

Nigel Green, a long-time, vocal critic of FATCA, continued his blistering attack: 

• “There are important questions to be asked about the imperialistic nature of FATCA. 
• “Countries and FFIs have been coerced into complying with FATCA’s sovereignty-violating, expensive, burdensome, privacy-infringing regulations by the U.S. – or face heavy penalties.  In effect, these countries and FFIs are now working as de facto agents of America’s tax authority.”
• “It is claimed by its proponents that this law is designed to catch tax evaders who illegally shelter money offshore.  This is a noble aim. But FATCA cannot possibly tackle this extremely important global issue effectively due to its dragnet, untargeted approach.
• “Instead what it does – because of its plethora of serious unintended adverse consequences – is to brand the 7 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 foreign financial institutions (FFIs), such as banks in their country of residence, because FATCA’s costly and onerous regulations mean Americans are now typically deemed more trouble than they are worth.
• “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 – which would then, of course, have far-reaching consequences beyond the U.S.”

THE flaw in the US’s stance: their own financial secrecy

FATCA has been described as a “masterclass” in fiscal imperialism and unintended consequences by the USA as they chase unpaid tax. But the USA itself is not transparent, the Financial Secrecy Index 2015, which details global financial secrecy, revealed that the U.S. is in third place in the secrecy ranking.

No wonder Nigel Green concludes: “I hope that Justice Hanan Meltzer’s bold action will encourage other people of influence worldwide to reconsider FATCA.  This could be a landmark moment in the fight to have this controversial and damaging law resigned to the history books.”

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CTMfile take: The current balance of USA insisting on FATCA whilst at the same time being one of the most secretive financial regimes world-wide is not working. Corporate treasurers could usefully mount a global campaign to 1) get rid of FATCA, and 2) have BEPS implemented fairly and consistently world-wide, and 3) rid of Financial Secrecy.