[House Hearing, 115 Congress]
[From the U.S. Government Publishing Office]
REVIEWING THE UNINTENDED CONSEQUENCES OF THE FOREIGN ACCOUNT TAX
COMPLIANCE ACT
=======================================================================
HEARING
BEFORE THE
SUBCOMMITTEE ON
GOVERNMENT OPERATIONS
OF THE
COMMITTEE ON OVERSIGHT
AND GOVERNMENT REFORM
HOUSE OF REPRESENTATIVES
ONE HUNDRED FIFTEENTH CONGRESS
FIRST SESSION
__________
APRIL 26, 2017
__________
Serial No. 115-45
__________
Printed for the use of the Committee on Oversight and Government Reform
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Available via the World Wide Web: http://www.fdsys.gov
http://oversight.house.gov
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COMMITTEE ON OVERSIGHT AND GOVERNMENT REFORM
Jason Chaffetz (UT), Chairman
John J. Duncan, Jr. (TN) Elijah E. Cummings (MD), Ranking
Darrell E. Issa (CA) Minority Member
Jim Jordan (OH) Carolyn B. Maloney (NY)
Mark Sanford (SC) Eleanor Holmes Norton (DC)
Justin Amash (MI) Wm. Lacy Clay (MO)
Paul A. Gosar (AZ) Stephen F. Lynch (MA)
Scott DesJarlais (TN) Jim Cooper (TN)
Trey Gowdy (SC) Gerald E. Connolly (VA)
Blake Farenthold (TX) Robin L. Kelly (IL)
Virginia Foxx (NC) Brenda L. Lawrence (Ml)
Thomas Massie (KY) Bonnie Watson Coleman (NJ)
Mark Meadows (NC) Stacey E. Plaskett (VI)
Ron DeSantis (FL) Val Butler Demings (FL)
Dennis A. Ross (FL) Raja Krishnamoorthi (IL)
Mark Walker (NC) Jamie Raskin (MD)
Rod Blum (IA) Peter Welch (VT)
Jody B. Hice (GA) Matt Cartwright (PA)
Steve Russell (OK) Mark DeSaulnier (CA)
Glenn Grothman (WI) John P. Sarbanes (MD)
Will Hurd (TX)
Gary J. Palmer (AL)
James Comer (KY)
Paul Mitchell (MI)
Jonathan Skladany, Staff Director
William McKenna General Counsel
Jack Thorlin, Senior Counsel
Sharon Casey, Deputy Chief Clerk
David Rapallo, Minority Staff Director
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Subcommittee on Government Operations
Mark Meadows, North Carolina, Chairman
Jody B. Hice, Georgia, Vice Chair Gerald E. Connolly, Virginia,
Jim Jordan, Ohio Ranking Minority Member
Mark Sanford, South Carolina Carolyn B. Maloney, New York
Thomas Massie, Kentucky Eleanor Holmes Norton, District of
Ron DeSantis, Florida Columbia
Dennis A. Ross, Florida Wm. Lacy Clay, Missouri
Rod Blum, Iowa Brenda L. Lawrence, Michigan
Bonnie Watson Coleman, New Jersey
C O N T E N T S
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Page
Hearing held on April 26, 2017................................... 1
WITNESSES
The Hon. Rand Paul, Senator from Kentucky
Oral Statement............................................... 1
Mr. James Bopp, Jr., Attorney, The Bopp Law Firm, PC
Oral Statement............................................... 7
Written Statement............................................ 10
Mr. Mark Crawford, Director, AKSIONER International Security
Brokerage
Oral Statement............................................... 38
Written Statement............................................ 40
Mr. Daniel Kuettel, (Former U.S. Citizen Living in Switzerland
who Renounced his U.S. Citizenship due to FATCA)
Oral Statement............................................... 51
Written Statement............................................ 53
Ms. Elise Bean (Former Staff Director for Sen. Carl Levin (D-MI),
Senate Permanent Subcommittee on Investigations)
Oral Statement............................................... 57
Written Statement............................................ 61
APPENDIX
Letter of April 25, 2017, from FACT Coalition submitted by Mr .
Connolly....................................................... 86
Letter of September 15, 2015, to the Treasury Department and IRS
submitted by Ms. Maloney....................................... 91
Taxpayer Advocate Service 2015 Report submitted by Ms. Maloney... 94
Response from Mr. Bopp to Questions for the Record............... 104
Response from Mr. Crawford to Questions for the Record........... 125
Response from Ms. Bean to Questions for the Record............... 129
REVIEWING THE UNINTENDED CONSEQUENCES OF THE
FOREIGN ACCOUNT TAX COMPLIANCE ACT
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Wednesday, April 26, 2017
House of Representatives,
Subcommittee on Government Operations,
Committee on Oversight and Government Reform,
Washington, D.C.
The subcommittee met, pursuant to call, at 2:05 p.m., in
Room 2154, Rayburn House Office Building, Hon. Mark Meadows
[chairman of the subcommittee] presiding.
Present: Representatives Meadows, Hice, Jordan, Ross, Blum,
Connolly, Maloney, Norton, and Watson-Coleman.
Mr. Meadows. The Subcommittee on Government Operations will
come to order, and without objection, the chair is authorized
to declare a recess at any time.
Today's hearing is on the Foreign Account Tax Compliance
Act, or FATCA. We will hear from our witnesses about FATCA's
effect overseas and on our Treasury. However, our first
witness, Senator Rand Paul, a friend, a patriot, truly someone
who is willing to not only put his money where his mouth is but
someone who has defended liberty and freedom each and every
day, and you're certainly welcome.
He has a briefing, as I understand it, at the White House
coming up, so we're happy to have you testify first, Senator,
and then the Ranking Member Connolly and I will give our
statement.
So in recognition of that, I'd like to recognize the
Honorable Senator Rand Paul.
WITNESS STATEMENTS
STATEMENT OF THE HON. RAND PAUL
Senator Paul. Thank you, Chairman Meadows, and thank you
for inviting me to this hearing on the Unintended Consequences
of the Foreign Account Tax Compliance Act. And also for
allowing the American people an opportunity to hear how FATCA
undermines their privacy through the bulk collection of their
foreign financial records.
I oppose FATCA for two reasons. First, it violates our
privacy rights, and second, I think the compliance cost
actually exceed the revenue that it brings in.
Regarding privacy, the Fourth Amendment prevents the
government from seizing or searching a person's house or
papers, including their financial records, unless the warrant
shows individualized suspicion and probable cause. This
protection was included in the Bill of Rights in response to
general warrants that have been issued by the British.
FATCA, I think, undermines the very heart of this privacy
right. It forces foreign financial institutions to hand over
U.S. citizens' personal financial records without a warrant,
without a probable cause, and without naming them individually.
FATCA also violates the Fourth Amendment by demanding all
data on all Americans with overseas accounts. The demand is not
individualized but collected rather in bulk without specifying
a specific suspicion or cause.
The government is using the heavy hand of the IRS to tell
foreign financial institutions that they must hand over the
records of all U.S. citizens, and if they dare to defy the
government, they will be hit with a crippling tax penalty that
no business could survive.
This turns the Fourth Amendment on its head. It presumes
that every American with money overseas is a criminal with no
proof or even suspicion of criminal activity. You are guilty
until proven innocent. These are not the principles on which
our country was founded, and we should not stand for it.
This is not just my concern. In January, the IRS' own
taxpayer advocate raised the same concern in her annual report
saying that FATCA's operative assumption appears to be that all
such taxpayers should be suspected of fraudulent activity
unless proven otherwise. Think about that. Guilty until proven
innocent.
No one should be deceived that the data being collected by
the IRS is somehow harmless or benign. In addition to having to
report the name, address, taxpayer identification number of
each account holder, the government requires financial firms to
report the account number, the account balance, the value at
the end of the reporting period, and all the inflows and
outflows of the account, basically everyone for whom you have
had a financial transaction or written a check to.
Comparable information is not required to be disclosed for
those who have domestic accounts, so it's a double standard.
You have one standard for Americans living overseas and another
standard for Americans here.
The government has no business asking for or knowing this
information about its citizens and certainly not without a
reason to believe that the person is doing something wrong.
FATCA essentially gives the IRS all your overseas financial
data without going through any court to decide if the
government has a right to see your documents. FATCA seems to be
also a solution in search of a problem.
The taxpayer advocate finds also that a lack of
comprehensive statistical data establishing the existence of
widespread noncompliance or fraud by taxpayers with foreign
accounts. They don't find evidence that there is excessive
problems with people not paying their taxes. It's about the
same rate as people domestically, so why would we be giving the
government special powers, lower standards to look at our
information?
My biggest concern about FATCA is that it treats all 9
million Americans living abroad as guilty until proven
innocent. FATCA acts as if the Bill of Rights does not apply to
citizens dealing with their U.S. Government, depending on where
they live. After FATCA was passed, some foreign banks even
began to refuse to do business with Americans, even canceling
their accounts to avoid the red tape and possible draconian
penalties.
Individual Americans are not the only ones bearing the
burden either, estimates of initial cost of compliance reach
into the tens of billions of dollars globally. Ongoing
compliance just for U.S. companies cost more than $160 million
a year.
In addition, FATCA has led to foreign countries seeking
information on citizens residing in the United States. Indeed,
over 60 countries now have signed reciprocal intergovernmental
agreements called IGAs. The IGAs allow bilateral exchange of
financial data, meaning that the U.S. will now spy on
foreigners who have accounts in our country as well, and we
will aid and abet foreign countries in invading their citizens'
privacy as well
Think about this. This may mean sending financial
information to countries who are known as human rights abusers,
such as Saudi Arabia, China, Tunisia. One can imagine the risk
to a political dissident who comes to our country to escape
tyranny, and then we find that we are going to be sending their
information back to a tyrannical government, the tyrannical
government they fled?
These bilateral agreements, these IGAs, have not received
any Senate certification, no vote, no vote in the House, no
congressional authority at all. They are just done by the
administration with no authority. Their constitutionality is
currently being challenged in court, and I think you will hear
from some of those involved in that challenge.
My hope is that this hearing will shed some light on this
abusive law and lead to a demand for action.
Chairman Meadows, and I have sponsored a bill to correct
this injustice and repeal FATCA. Congress should pass our bill
this year and put an end to this madness.
Thank you very much for letting me testify.
Mr. Meadows. Thank you, Senator. And you're very
complimentary in terms of my involvement, but it's basically
been your leadership, Senator, that not only has highlighted
this, but that continues to stand as a vigilant sentinel to
protect our Fourth Amendment privacy, and I just want to say
thank you.
And it's an honor to have you articulate this. You brought
this issue to light when no one was paying attention, and yet I
found that universally you're being applauded for your
protection of this constitutional right that our Founding
Fathers so wisely enshrined.
Senator Paul. This is a big, big deal to the 9 million
Americans who live overseas, and you know, we are getting ready
to come up on tax reform. While this may be a small issue to
many other Americans, it's a big deal to them.
My hope is that the bill we have worked on, maybe we could
try to get it into the tax reform package because it's an
issue, I think, that should bring right and left together
because, you know, sometimes the right is more concerned with
financial affairs and the left more concerned with privacy and
with civil liberties, but really, I think right and left can
come together to say, you know what, we should protect
everybody's Fourth Amendment rights.
Thank you for letting me testify.
Mr. Meadows. Well thank you. I know you've got to go to the
White House, so you're hereby dismissed.
Thank you for your testimony. Your entire written testimony
will be made part of the record. I thank the ranking member for
allowing you to come in and testify early.
The chair now recognizes himself for his opening statement.
We are certainly pleased to hold this hearing to examine the
Foreign Account Tax Compliance Act, also known as FATCA.
FATCA requires foreign financial institutions to
investigate their own accounts for suspected ties to the United
States. Hear that again. Investigate their own accounts for
suspected ties to the United States, and then report those
accounts to the IRS for further investigation.
Now, that doesn't sound crazy in its face, but as it turns
out, FATCA is a failure at a number of different levels. By its
drafter's own estimate, of whom we are going to hear expert
testimony today and certainly the work that has been done in
some of those investigative modes, is to be applauded. I've
looked at the record, and so I look forward to seeing that.
But even by those own estimates of the drafters, it was
seeking to reduce tax evasion overseas and it only does that by
less than 1 percent. The Senator mentioned this. You know, so
less than 1 billion out of an estimated 100 billion in lost
revenue overseas.
Commissioner Koskinen who has testified before this
committee a number of times has given sworn testimony regarding
the high rate of return on investment for spending on the IRS
with normal enforcement actives. In fact, his public statements
indicate a return of up to $20 for every $1 that is invested on
enforcement. So a $20 return in revenue for $1 invested in
enforcement.
By contrast, FATCA brings in well under, by any
estimations, half of that amount on a per-dollar basis that is
invested. So the IRS gets asked for about 200 million to
implement FATCA in fiscal year 2017 budget. So by the
commissioner's own estimates, not by mine, not by any think
tank, but by the commissioner's own estimates in enforcement
returns, just shifting the money from FATCA to the general
enforcement areas would increase our tax revenues by over a
billion dollars.
And so if we're looking at proper allocation, and this is
without spending one more penny on the overall budget for the
IRS, it's just shifting it, and so when we look at that, that's
a significant return.
FATCA also unfairly and unilaterally burdens our biggest
trading partners and strongest allies. I found out about this
really by some of the people that we'll hear from today when I
was in Israel and with some of the issue that they started
referring to this thing called FATCA that I had no idea what it
was. And so, you know, as a good politician I was saying, well,
I'll get back to you on that. And so I went very quickly and
googled it to figure out exactly what we were talking about,
and so as I look at this, we are looking at unbelievable
implications here.
When we look at the compliance cost on foreign banks and on
the international economy, we are looking at up to $200 million
per bank to comply and potentially hundreds of billions of
dollars overall.
Other countries are understandably upset that we are
hurting their economies and are doubly upset that we have not
yet offered them access to our own taxpayer data. So we
basically said you have to comply, and there was this
reciprocal agreement, and we said: Well, you have to comply,
but we're not going to comply. It was a double standard that we
see, and so many of the foreign financial institutions have
tried to avoid these FATCA compliance costs by refusing to take
U.S. citizens.
That's what highlighted it for me, and I said: You've got
to be kidding me. They're saying, well, if you're a U.S.
citizen, they don't want to touch you in some of these foreign
financial institutions just because of the compliance cost. So
expatriates have had to make the tragic choice between keeping
their citizenship and preserving their financial stability.
And to illustrate that point, I want to share a video that
has been shared with the subcommittee to this committee, and so
if we'd pause and maybe take a look at this video. It's
approximately 3 minutes in length.
[Video shown.]
Mr. Meadows. Donna is not alone. FATCA has led to a number
of U.S. expatriates renouncing their citizenship, and so
hopefully today we'll hear from some of our witnesses on how we
can address this particular issue in a meaningful way and
hopefully return the accountability that we're all for to the
proper balance of protecting our personal Fourth Amendment
rights and yet still making sure that we hold our government
accountable.
And with that, I'd like to recognize the ranking member for
his opening statement.
Mr. Connolly. Thank you, Mr. Chairman, and thank you for
having a hearing. And maybe there's a slightly different point
of view about the issue while acknowledging there are problems
with the act and with its implementation.
The United States taxes the foreign income of its citizens,
and we're not alone. Most countries with income taxes do the
same. Citizens pay taxes on all the income they earn regardless
of where they earned it.
There are benefits to this system. Americans are the most
productive in the world, and this system ensures that the
wealthiest among us cannot avoid paying taxes simply by moving
money abroad. It's quite simple. If you receive benefits by
being an American, you should pay your fair share. And I say
that, but no American ought to have to foreswear his or her
citizenship in trying to comply with the law.
We obviously are very sympathetic to the woman we just saw
on that video. This tax system assumes everyone plays by the
rules and pays their taxes according to the law. We know,
unfortunately, in the past, not everyone did play the game
fairly. While the law has, for decades, required us who are
account holders to file reports with the Treasury Department,
not everyone did.
Extremely wealthy tax cheats, not the woman we just saw on
that video, hired expensive lawyers who knew how to evade the
system. Whistleblower leaks changed things. Congress learned of
thousands of Americans who were willfully avoiding paying their
taxes and overseas income without disclosing that information
to the IRS. These weren't simply inadvertent mistakes. They
were willful efforts to avoid taxes.
Congress chose to take some action. That action came in the
form of this act, FATCA, the Foreign Account Tax Compliance
Act. Under that act, foreign financial institutions are
required to disclose to the IRS the accounts of U.S. taxpayers.
The Wall Street Journal reported that an IRS limited amnesty
program, pursuant to this act, brought in $9.9 billion in
taxes, interest, and penalties from 55,000 taxpayers who hadn't
paid their taxes and income earned abroad.
FATCA is an incremental step in terms of tax collection.
U.S. companies and financial institutions already provide
taxpayer information to the U.S. Government through 1099 forms,
and taxpayers with assets abroad file with the IRS the same
information FATCA collects. Now, that information is also
coming from foreign financial institutions since many taxpayers
previously had not been filing.
Despite the new law, banks are still lending, and it is
possible for Americans to get accounts. Citigroup, for example,
operates in more than 160 countries and will give Americans
abroad bank accounts and mortgages. Because of this act,
international tax collection has changed. Countries around the
world are adopting the Common Reporting Standard, which is
based on FATCA.
Under the Common Reporting Standard, countries collect
identifying information from account holders. They then share
that information with a foreign account holder's country of
citizenship and receive information on the accounts of their
own citizens. The information collected under the Common
Reporting Standard is broader than that required by FATCA.
Common Reporting Standard countries collect information on all
account holders, not just U.S. citizens. With 100 such nations
committing to implementing the standard by 2018, efforts to
evade taxes are expected to diminish.
I certainly don't mean to suggest there haven't been
problems with FATCA. We just saw one. Although it's important,
the law does not require anyone to give up their citizenship.
The advice came, as I understand it, from a Swiss bank, but
nonetheless, we have a victim here. Nobody ever should feel
they have to give their U.S. citizenship.
So there are kinks, clearly, to work out, and I think
that's why this hearing can be very helpful, and we want to
make sure that people like Ms. Nelson and Mr. Kuettel are
protected.
Repealing FATCA, however, entirely, would not restore their
citizenship and could harm our government's ability to collect
the taxes owed. We've had hearings in this committee about the
fact that hundreds of billions of dollars, not overseas, but
hundreds of billions of dollars go--are left on the table
uncollected because the IRS doesn't have the staffing or
resources or mechanisms, frankly, to collect taxes owed but not
collected.
And so, you know, as we wrestle with the fairness of this
act and its implementation problems and certainly the
injustice, individuals such as the one we just saw in that
video have experienced, so we want to--we certainly want to
address that, but we also want to make sure that the United
States Government is being fair to all of its citizens by
making sure everybody pays their fair share.
So I look forward to the hearing. I look forward to hearing
testimony from our witnesses, and with that, I yield back, Mr.
Chairman.
Mr. Meadows. I thank the gentleman for his thoughtful
opening statement. We'll now go ahead and allow the witnesses,
if you will make your way forward. I appreciate your
flexibility with regards to allowing Senator Rand Paul to go
first.
And so we would love to welcome--and we're going to keep
these introductions brief. I understand we may have votes
coming up here 2:45 to 2:50 range, and so we're going to try to
push a little bit quicker here, but I'll hold the record open
for five legislative days for any member who would like to
submit a written statement.
So in recognizing our panel of witnesses, I'm pleased to
welcome Mr. James Bopp, Jr., welcome; Mr. Mark Crawford,
welcome; Mr. Daniel Kuettel, welcome; and Ms. Elise Bean,
welcome to you all.
Pursuant to committee rules, witnesses will be sworn in
before they testify, so if you will please rise and raise your
right hand.
Do you solemnly swear or affirm that the testimony you're
about to give will be the truth, the whole truth, and nothing
but the truth?
Thank you. You may be seated.
Please let the record reflect that the witnesses all
answered in the affirmative.
In order to allow time for discussion, I'd ask that you
limit your oral testimony to 5 minutes, but your entire written
statement will be made part of the record.
And so we'll now recognize you, Mr. Bopp, for 5 minutes.
You need to hit your little button right there.
STATEMENT OF JAMES BOPP JR.
Mr. Bopp. Thank you. Thank you, Chairman Meadows, and thank
you for the opportunity to testify. In my oral presentation, I
will summarize the key points of my written testimony.
Republicans overseas, who which I serve as treasurer and
general counsel, advocates for their rights and interests of
overseas Americans. As this hearing will demonstrate, our
overseas Americans are the victims of a draconian system of tax
laws that disrupts their lives, deprives them of a living, and
strips them of their basic Constitutional rights as U.S.
citizens.
At the heart of this is the fact that the United States is
only one of two countries in the entire world that tax its
citizens based upon their citizenship, not their residence. So
the long arm of the IRS reaches out to the 9 million U.S.
citizens overseas and taxes them.
For the same reason that President Donald Trump has
advocated for territorial taxation on corporations, U.S.
citizens should also be taxed where they reside. The 2016
Republican national platform calls for this.
But it is worse than this. The Bank Secrecy Act resulted in
the U.S. citizens being required to file a FBAR report which
applies to U.S. citizens and requires them to report to the IRS
for any account which they have in a foreign bank or foreign
asset, and if it's--the value is greater than $10,000. Willful
violation of this law results in a 50 percent penalty on the
highest value of that account.
On top of this, in 2010, the Democratic Congress passed
FATCA, which requires more reporting of personal and
confidential financial information by individuals and by
foreign financial institutions.
Individuals are required to file a FATCA report annually if
they have $50,000 in foreign accounts or foreign assets,
whether they are in the United States, living in the United
States, or living abroad. That report includes the name,
account balance, maximum value of the account, and there's a
$10,000 penalty.
In addition, foreign financial institutions have one of
three choices. One is to report to the IRS on every single U.S.
citizen account holder the account information, the value, and
then the gross receipts and gross withdrawals of that account,
or two, purge themselves of all U.S. account holders and
certify that to the IRS, or three, suffer a penalty of 30
percent of all transfers of all funds for all purposes from the
United States to that bank.
In addition, the Obama administration has negotiated
illegal intergovernmental agreements which provide, in most
cases, that the banks, instead of reporting to the IRS, report
to the foreign government--require the foreign banks to report
to the foreign government of information about U.S. citizens
which is then reported by the government to the IRS.
These agreements have not been approved and are
unconstitutional. Thus, FATCA is a sweeping financial
surveillance program of unprecedented scope that allows the IRS
to peer into the financial affairs of any U.S. citizen with a
foreign bank account.
In so doing, FATCA has imposed enormous costs on individual
Americans abroad. As this hearing will demonstrate and as the
Democrats abroad found out in a survey of Americans overseas,
these surveys' results show the intense impact FATCA is having
on overseas Americans. Their financial accounts are being
closed, their relationships with nonAmerican spouses are under
strain, some Americans are being denied promotion or
partnership in business because of FATCA reporting, and some
are planning to--contemplating renunciation of their own U.S.
citizenship.
A decade ago, about 200 a year renounced. Now the number is
up to 6,000 last year. These Americans are, in many ways,
ordinary middle class Americans being affected in extraordinary
ways.
FATCA has also imposed an enormous financial cost on
foreign financial institutions, and through the IGAs has
converted foreign governments and foreign banks into IRS agents
who are surveilling U.S. citizens and reporting to the IRS.
FATCA has furthermore denied U.S. citizens basic
constitutional rights, equal protection, due process, 14th
Amendment protection against unlawful search and seizure, 8th
Amendment protection against excessive fines. I am lead
attorney in Crawford v. United States Department of Treasury
that is making these claims.
The bottom line about all of this is that the Americans
abroad are U.S. citizens who should enjoy the individual right
and freedom to reside overseas, if they choose, without
penalty, and America benefits when they do. They are
ambassadors for America who promote this country and its values
and often are directly involved in promoting American business
and products overseas.
However, the U.S. Government has placed a scarlet letter on
the forehead of every American, and it is stamped U.S.A., and
as a result, they are treated as pariahs by foreign banks and
employers. This is wrong, and it needs to stop.
[Prepared statement of Mr. Bopp follows:]
[GRAPHICS NOT AVAILABLE IN TIFF FORMAT]
Mr. Meadows. Thank you, Mr. Bopp.
Mr. Crawford, you are recognized for 5 minutes.
STATEMENT OF MARK CRAWFORD
Mr. Crawford. Thank you very much for allowing me to be
here today to share my firsthand experience regarding the
consequences of FATCA from the perspective of an international
businessman.
My name is Mark Crawford. I'm an American citizen, and I do
not hold any other citizenship, though at various times I've
been a resident of the United Kingdom, Albania, Montenegro, and
Greece. The politics that divide Americans at home don't often
divide those of us broad. Most of the 9 million Americans
living overseas are ordinary citizens who are living their
lives, raising families, studying, and working. We're just
Americans, and though we're often far from home, America is
still our home, and the U.S. Constitution is still our
Constitution.
In my written submission, I outline more detail about my
personal background, having lived and worked across three
continents over a 25-year period as a teacher in China, a
missionary in Albania, a graduate student in England, a venture
capitalist in the Balkans, a banker in Montenegro and Serbia,
and now an entrepreneur involved in finance, natural resources,
and film production.
I've employed hundreds of people and increased economic
activity between the United States and its friends around the
world. Throughout my work abroad, I've remained active
assisting U.S. interests whenever called upon, regardless of
which party controlled the Congress or the White House,
including having worked for appointees of the Clinton
administration, supported USAID financial inclusion projects,
voluntarily chairing American Chamber of Commerce affiliates,
advising leaders of several American allied governments, and
more recently, volunteering to assist the Treasury Department
in Kosovo.
Having worked in finance throughout the world, I returned
to Albania in 2010 to pursue a business opportunity, and I ran
into the consequences of FATCA. In smaller developing markets,
there often isn't enough volume to support standalone financial
products, so it's important for such markets to leverage off
larger ones. Albania's domestic capital market is still
developing, and in order to connect Albania to international
capital markets, I founded an Albanian introductory brokerage
firm that would work with Saxo Bank in Denmark offering basic
brokerage services to Albanian residents.
When I sent the first 10 applications to Saxo Bank, they
responded approving only nine. I reached out to Saxo Bank to
see who was rejected, and they responded to say that I was
rejected. I owned the company. I was told that though I was an
Albanian resident at that time, I was rejected solely because I
was an American citizen, because of fears because of the FATCA
law.
I realize that due to FATCA, I could not serve U.S. persons
in my Albanian brokerage firm because of the carry-on impact of
the Saxo decision. The introductory brokerage vision that I had
was alive, but the idea of working with Americans and American
persons was dead.
I'm the pro bono chairman of the American Chamber of
Commerce in Albania, and I work closely with our U.S. Embassy
there in a private sector capacity trying to promote American
business. A brokerage firm owned by myself that markets itself
as an American led by the American Chamber chairman that does
not accept American citizens is a logical anomaly to most in
Albania, and understandably so.
The introductory brokerage products became sidelined, and
Saxo Bank eventually grew so unhappy with me that they dropped
my firm altogether. The obstacle to my brokerage business
created by FATCA was a deal breaker.
Proposals to address the unintended consequences of FATCA
had been considered by both parties and candidates on both
sides of the aisle in the most recent presidential election.
And recognizing the problems of FATCA, some have suggested
implementing a safe harbor exception that would help Americans
solely within the country of their residency.
Such a safe harbor exception would not have solved the
negative impact that FATCA had on my situation. I have never
been a resident of Denmark, thus an exception would not have
alleviated Saxo Bank's relationship with me or other potential
clients that I was bringing through my introductory brokerage
firm from Albania.
In conclusion, my experience is that the American
entrepreneurial mentality sets our culture apart. Americans do
not restrict their investments based on their personal
residency; rather, they pursue opportunity according to the
markets. Access to international financial services is critical
for all such projects, and FATCA's impact has already harmed
some of my businesses, and if left unrepealed, will risk
others.
It is ironic that after spending much of my career helping
advance U.S. interests by expanding financial inclusion through
FATCA, the United States has inadvertently restricted inclusion
for its own citizens. The fact that an increasing number of
banks and financial institutions reject working with United
States citizens, outright harms our interests.
It is my belief that the best way to improve the current
situation is not to make the situation more complex by creating
carveouts or safe harbor exceptions or other partial fixes;
therefore, I do support a full repeal of FATCA, and I look
forward to your comments and questions in the future.
[Prepared statement of Mr. Crawford follows:]
[GRAPHICS NOT AVAILABLE IN TIFF FORMAT]
Mr. Meadows. Thank you, Mr. Crawford.
Mr. Kuettel, you are recognized for 5 minutes.
STATEMENT OF DANIEL KUETTEL
Mr. Kuettel. Thank you, Mr. Chairman, for allowing me to
speak on the negative consequences of FATCA. I'm here-- my name
is Daniel Kuettel. I live in Switzerland, and I'm here to tell
you why FATCA forced me to renounce U.S. citizenship.
As you see here, I brought my Army--U.S. Army jacket. I
served in the Army. I served in the Army Reserves, and then I
got married in the Philippines, asked my wife to come join me
in America, but that was during the Dot-Com crisis. I lost my
job, couldn't find work, I sent my resume around the Nation but
had no luck, so I took my chances in Europe.
I did not leave the U.S. to evade taxes. I paid my taxes. I
enjoyed paying taxes. I'm an economic refugee. I don't have a
lot of money. I'm not wealthy. In Switzerland, we saved up to
be able to finance a small condo, and then in 2012, I needed to
investigate refinancing that condo. In Switzerland, every few
years, you have to refinance. But when I went to a bank to ask
them if they would allow me to refinance my mortgage, when they
heard that I was a U.S. citizen, they denied it.
I went to another bank, I was denied again, and another. I
called them. I was denied, rejected, rejected. It was horrible,
terrible. I mean, if you've ever lived anything like this, this
type of discrimination is unacceptable.
I was worried that I would not be able to refinance my
home, and so I called HUD, I called the VA, but they told me
that they only support--they only help Americans reside in
America. They don't help expats.
I called the Department of Justice to inquire why this law
prohibiting national origin discrimination is not being
applied, and they referred me to some statute that I could
never find which was supposed to state that also the law only
applies to U.S. residents.
So I had to renounce, and it was a difficult decision to
make. I went to a small village in Switzerland that I went to
the first time that I came to Switzerland at the age of 10
where I was able to gather the strength to renounce. And
afterwards, I was able to refinance my mortgage.
But today I'm here because I'm having a problem again
because of FATCA and that is with my children. My daughter is
still a U.S. citizen. My son, on the other hand, he's not a
U.S. citizen. So my son, he can have a bank account with any
bank in Switzerland. My daughter, about 310 out of 320 banks
rejected her, and this is going to become a problem later on
when she's 16.
In Switzerland, it's a common practice to get an
apprenticeship where she would go to work, earn money, she'll
need a bank account. But having a bank account means she'll
have to file FBAR, she'll have to be subject to FATCA, and I
mean, assuming that she even can get a bank account.
And this is just a problem which rolls over. She's going
have to relive what I relived, go through what I went through.
She's going have to decide if she wants to have U.S.
citizenship or she wants to have a normal life in Switzerland
with a normal bank account.
Thank you, Mr. Chairman.
[Prepared statement of Mr. Kuettel follows:]
[GRAPHICS NOT AVAILABLE IN TIFF FORMAT]
Mr. Meadows. Thank you for your testimony.
Thank you for your service to our country.
And you are in a minority. You're the only witness, I
think, that I've ever heard who says they enjoy paying taxes.
So--but Ms. Bean, you're recognized.
And before I recognize you, I want to just say that this
hearing, where it's highlighting some of the difficulties with
FATCA, I want to recognize, as I did in my opening statement,
the great work that you did with UBS in the investigation, and
so nothing in this is meant to be disparaging of the
consequences of what I believe are unintended consequences of
really your fine work, and so I recognize you for 5 minutes.
Mr. Connolly. Mr. Chairman.
Mr. Meadows. Yes.
Mr. Connolly. Could I just ask a unanimous consent request
before we hear from Ms. Bean. I meant to do this in my opening
statement. I have a statement from the FACT Coalition opposing
H.R. 2054, I'd ask be entered in the record.
Mr. Meadows. Without objection.
Mr. Connolly. And I would also comment on the Chairman's
comment to Mr. Kuettel. Actually there are only two kinds of
people who oppose taxes, men and women.
Mr. Meadows. We'll now recognize Ms. Bean for 5 minutes.
STATEMENT OF ELISE BEAN
Ms. Bean. Well, thank you, Chairman Meadows, Ranking Member
Connolly, and the members of the subcommittee for inviting me
here today to present another view of FATCA.
I was asked to testify because for many years I worked for
Senator Carl Levin on the Senate Permanent Subcommittee on
Investigations, and we held a number of hearings looking at how
foreign banks were helping U.S. clients hide assets and evade
U.S. taxes.
To give you a couple of examples. We had a gentleman named
John Mathewson who testified in front of us. He set up a bank
in the Cayman Islands called, ``Guardian Bank & Trust,'' had
about 2,000 clients, $150 million in assets, and he said, in
his opinion, virtually all of his clients were engaged in tax
evasion. He said a standard practice to handle them was he
would set up a shell company in the Cayman Islands, open up an
account in the name of the shell company, the client would
supply the money, and then he would give the client a credit
card in the name of the shell company, and he would advise him
to sign it illegibly on the back. That way they could use the
credit card in the United States to withdraw funds from their
Cayman account without anybody linking their name to their
shell company.
We looked at two banks in Switzerland, UBS, the largest
bank in Switzerland and the second largest, Credit Suisse. UBS
was shown that they had 52,000 undeclared accounts, meaning
accounts opened by U.S. clients that had never been disclosed
to the IRS with about $18 billion in assets.
They were sending Swiss bankers to U.S. soil. It wasn't a
case of us going there, but sending their Swiss bankers here to
yachting races, art shows, tennis tournaments, quietly handing
around their business card and trying to convince people to put
their money abroad. They were very successful. They had tens of
thousands of clients through those methods. They eventually
pleaded guilty. They paid a fine of $780 million, and they
eventually disclosed about 4,500 names to the U.S. but 4,500 is
nowhere close to the 52,000 undeclared clients.
Credit Suisse had, at their peak, about 22,000 undeclared
accounts with about $10 billion in assets. They too pleaded
guilty. They paid a fine of about $2.6 billion. But guess what,
they never disclosed any of those 22,000 accounts to the U.S.
The U.S. had to find those people on their own, and they
haven't found very many of them.
We did identify two clients. One told us about an occasion
where his Credit Suisse banker met him at a luxury hotel here
in the U.S. over breakfast, slipped him a Sports Illustrated
magazine, and in between the pages was his bank statement so he
could know what was going on in his Swiss account. That's how
they did business.
Another gentleman told us about how he went to the bank's
headquarters in Zurich. He was ushered into an elevator with no
buttons. It was remotely controlled. He was taken up to a floor
and shown to a room with all white walls. The whole point being
how the bank was so secret, and they actually told him they did
not file the forms that required disclosure of his account to
the IRS.
In short, our investigations--and by the way, we also
looked at a bank in Liechtenstein, and there we were able to
get very detailed records on about 150 U.S. clients who had
accounts there, and we gave examples at our hearing just to
give you one, a Florida contractor in a construction business
set up four Liechtenstein foundations, opened up accounts in
the name of those foundations, and stashed about $49 million in
those accounts that had not been disclosed to the U.S. until a
whistleblower turned over the documents to the agency.
In short, our investigation showed that opening up offshore
bank accounts for U.S. clients was big business, billions of
dollars, tens of thousands of clients. Additional evidence of
the scope of the problem is the IRS Offshore Voluntary
Disclosure Program. The latest statement from the IRS says that
they have now had word from 100,000 Americans, 100,000
Americans who admitted to having an undeclared offshore
account. In order to get right with the government, they have
now, as Mr. Connolly said earlier, paid a total of about $9.9
billion to satisfy the back taxes that they owed.
That's the backdrop for FATCA. That's why FATCA was enacted
on a bipartisan basis. The first thing to understand about
FATCA is it does not impose a tax on anyone here or abroad. It
does not impose a tax. It is simply a transparency measure, and
it matches what every American citizen has been doing for
decades. All of us get 1099s that are turned into the IRS about
all domestic bank accounts. All of us do. It simply institutes
the same program so that an American living here who opens up a
U.S. bank account is treated the same way as an American living
here or abroad opens up a foreign bank account.
Recent research has shown that FATCA and other offshore
account disclosure programs are working. Preliminary results
from the 2017 study says that since 2009, the number of
individuals reporting offshore accounts to the IRS has
increased by 19 percent, and they have disclosed additional
account assets of over $75 billion. It's starting to work. We
are starting to change and end these offshore abuses.
Now, how has FATCA helped? Well, first of all, it leveled
the playing field between Americans who open accounts here and
Americans who open accounts abroad. It treats them the same
way. It also leveled the playing field between U.S. banks and
foreign banks. U.S. banks no longer see their wealthiest best
clients leaving the U.S. bank and going to a foreign bank
because they can open up a secret account. U.S. banks first.
This restored a level playing field between U.S. banks and
foreign banks.
At the same time, everybody is correct that FATCA did not
have a smooth implementation. It had a very rough beginning.
There were a lot of banks that were furious at this U.S. attack
on your secrecy and on their business model to open up these
accounts, particularly in Switzerland.
We went after UBS, Credit Suisse. We had a program to go
after another 100 banks. Switzerland is very unhappy with the
U.S., but you know what, those banks have adapted. Those banks
have said that they will comply with FATCA. And in fact, today,
7 years later, there are over 274,000 foreign financial
institutions have signed up to FATCA and agreed to comply with
it.
In addition, 100 countries have adopted a similar FATCA
program under the leadership of the OECD to do the exact same
thing that we're doing. So disclosing foreign account
information is becoming the global norm. So while it was a very
rough beginning, people were very angry, particularly in
Switzerland, that's not the case 7 years later today. Now many
banks are agreed to comply with FATCA.
Now, we've heard today about how some American citizens are
saying that FATCA is forcing them or leading them to give up
their citizenship, but I have to also point out that that's
affecting a very small number of people.
In 2015, about 4,300 people gave up their citizenship. That
same year, we got new citizens of 730,000, people willing to
pay U.S. taxes. And when you compare that 4,300 figure to the 9
million Americans living abroad, you're talking about a rate of
less than one-tenth of 1 percent.
To conclude, I wanted to say that repealing FATCA today
would be a mistake. It would hurt honest taxpayers who have to
disclose their account information on a bulk basis every year
to the IRS. That's what honest taxpayers do. Whether you're
honest or not, that's how banks treat your bank accounts here
in the U.S. But it would hurt honest taxpayers here living in
the United States to allow people who have the wherewithal to
go abroad to not play by the same rules.
It would encourage Americans to move more of their money
offshore to get some of that secrecy. It would disadvantage
U.S. banks who would again have to compete against foreign bank
secrecy. It would also waste all of the investments made by
those foreign banks to comply with FATCA. They have all done
it. They are complying.
We began disclosures in 2015. All of that money would be
wasted. And finally, it would return us to an era where it was
much easier to have an offshore account hide your assets and
evade your taxes. So that's why I think repealing FATCA would
be a tragic mistake.
Thank you.
[Prepared statement of Ms. Bean follows:]
[GRAPHICS NOT AVAILABLE IN TIFF FORMAT]
Mr. Meadows. Thank you, Ms. Bean.
The chair recognizes himself for a series of questions.
So Ms. Bean, let me go--because you made some very profound
statements there that I'm not sure you want to carry them out.
Are you suggesting that the whole reason to do this is that
U.S. banks want us to do it?
Ms. Bean. Well, it's my understanding that when FATCA
passed the first time around, the point----
Mr. Meadows. I'm just asking for your sworn testimony. Are
you suggesting that U.S. banks are really supportive of this
law?
Ms. Bean. Yes, I think banks do not want to compete against
foreign banks that----
Mr. Meadows. So if I get the banking institutions to say
that they don't have a problem with us repealing that, you
would change your opinion?
Ms. Bean. Well, many of those banking institutions have
foreign banks as members.
Mr. Meadows. No, I know that.
Ms. Bean. So that's the opinion----
Mr. Meadows. That's what I'm saying. So at this point, if
they changed their position, would you change yours?
Ms. Bean. I think U.S. banks do not want to compete against
foreign banks that can take their wealthiest clients----
Mr. Meadows. That's not the question I asked.
Ms. Bean. --and separate accounts.
Mr. Meadows. That not what I--I said if they changed it,
would you change your opinion?
Ms. Bean. If they, you mean if U.S. banks?
Mr. Meadows. Yes.
Ms. Bean. Not their trade associations, which have foreign
banks in them. But if you could get U.S. banks alone to say we
don't want FATCA anymore, they'd still have to comply, by the
way, with all of the other----
Mr. Meadows. Well, they're about to have to comply. You
see, we haven't forced them to comply on this side, you know,
and----
Ms. Bean. They do comply----
Mr. Meadows. In a different way. We do not require them to
comply with foreign entities at this particular point. So if
France----
Ms. Bean. Yes, we do.
Mr. Meadows. We're not forcing them to do that unless
there's a reciprocal agreement. I've looked at it, Ms. Bean,
and so we can argue the point, so let me go to one other side
of this.
So you're saying it's the investment that we made, even if
it's bad policy, we shouldn't go the other direction because we
made a substantial investment and everybody is getting used to
it. Is that your testimony?
Ms. Bean. It is. Foreign banks----
Mr. Meadows. All right.
Ms. Bean. By the way, these aren't U.S. banks, but these
are foreign banks----
Mr. Meadows. Okay. I've got 5 minutes, so yes or no answers
are the best for me, but you can explain. That's fine.
So GAO did a study in 2013, and they suggested that really
it's the voluntary disclosure that has most of this. It's not
the IRS coming in. It's the voluntary disclosure that comes up
with this.
In fact, they said, in that study, 80 percent--now these
are of the high income people. So the lower income people like
Mr. Kuettel would not be actually in this study, but they said
80 percent of the high income individuals, the income that we
recovered actually came from fees and--penalties and fees, not
actually income tax. Does that strike you as surprising?
So of the 800 million that we actually got last year, 80
percent of that were fees and penalties. It wasn't really
taxes.
Ms. Bean. When people don't pay their taxes and they're
caught by the IRS, they do impose penalties.
Mr. Meadows. Listen, this isn't my first rodeo. I get that.
What I'm saying is does that surprise you that 80 percent of
the money we have coming in is actually fees and penalties?
It's not tax avoidance. It's a penalty or a fee that goes with
that. So the number we're collecting, the vast majority of it
is just a fee and a penalty for voluntary disclosure. Does that
surprise you?
Ms. Bean. It did not surprise me, but it also includes
interest, I believe, not just penalties but also interest.
Mr. Meadows. Well, when we look at this, when we look at--
--
Ms. Bean. I think it's the biggest part of it.
Mr. Meadows. It was 80 percent. I mean, I've got the study
right here. I'll be glad to share it with you. It's 80 percent
would basically come from penalties and fees, quote.
And so when we look at that, you know, then what you're
doing is you're taking this number down, and so we're investing
200 million to try to go over, and we're assuming that they're
not doing legal activity. I think most people actually agree
with Mr. Kuettel. They may not be happy about their paying
taxes, but they agree that it is their civic duty to do so.
Ms. Bean. I would agree with that.
Mr. Meadows. And so when we see that, we're making an
assumption that activity is illegal, just like Senator Rand
Paul was taking about. So what you're saying is that it's okay
for us to go in and get details on their private accounts and
making sure that we understand that in case there is illegal
activity. Is that your premise today?
Ms. Bean. I don't like getting a 1099 on my bank account.
I'm an honest customer.
Mr. Meadows. That's not what I asked. Is it your sworn
testimony----
Ms. Bean. Like I would here with a 1099----
Mr. Meadows. --that it's okay for us to go look at the
private individual account with the suspicion that there may be
illegal activity, and that's okay?
Ms. Bean. I treat all Americans the same. 1099s or 1042s, I
treat them all the same.
Mr. Meadows. Ms. Bean, you're--this isn't your first rodeo
either. You're not answering my question.
Is it your sworn testimony that it's okay to go into the
private individual accounts under the suspicion that there may
be illegal activity and look at that as FATCA does?
Ms. Bean. As FATCA and American law does, yes, I think that
is appropriate.
Mr. Meadows. All right. So let's look at it a little bit
differently.
So I am assuming you are a law abiding citizen. Would it be
okay, under that same premise then, for me to go look at all
your emails and all your private correspondence which some
would argue is not as intimate as your financial details, would
it be okay for me to go in there looking for suspicious
activity? Would you think that that would be appropriate?
Ms. Bean. No.
Mr. Meadows. Okay. I agree with you, and so what we've
done----
Ms. Bean. And the difference is that one is about paying
taxes----
Mr. Meadows. What we've done----
Ms. Bean. The other one is about private communications.
There's a difference there. All of us----
Mr. Meadows. Listen, my son is graduating from law school.
His specialty is Fourth Amendment. So I mean, we've had these
arguments at the dinner table, and so when we look at that, I
understand the difference. But as we start to see this, Ms.
Bean, here's what I'm saying.
We're investing money, which forces a compliance nature
that is making people where they can't bank or where actually
being a U.S. citizen is a detriment internationally for any
financial, whether you're in a single household or whether
you're a financial corporation. Do you think that that was the
intended purpose of this bill?
Ms. Bean. The Supreme Court.
Mr. Meadows. Was that the intended purpose of the bill, yes
or no?
Ms. Bean. Was the intended purpose to denigrate Americans?
Absolutely not.
Mr. Meadows. All right. Thank you.
I'll recognize the ranking member.
Mr. Connolly. Thank you. I do want to, you know, want to
caution about only looking at extremes. So we can ask about
intrusion into Americans' financial information as if all of it
is extreme.
So I'll pose the opposite question to you, Ms. Bean, would
it be okay if we completely repealed FATCA, and while we're at
it, say that anybody is free, as an American citizen, to have a
secret bank account in Switzerland and should never have to
report on it and should never have to pay taxes on it unless
they feel like it? What's wrong with that?
Ms. Bean. Well, what's wrong with that is we have tens of
thousands of people who are cheating on their taxes and----
Mr. Connolly. Correct. Right.
FATCA didn't just come out of, you know, busybodies who
love putting their nose in people's private business and there
was no problem to solve and it was just another perverse
liberal thing to do in Congress, right?
Ms. Bean. Correct.
Mr. Connolly. I mean, there was actually a problem
identified, which was rather substantial tax evasion in the
billions of dollars. Hard-working Americans pay their fair
taxes, and none of us like to see anyone cheating, right?
Ms. Bean. Correct.
Mr. Connolly. Okay. Now, here's my question. Having said
all of that, the testimony we've heard from your three
colleagues at the table would suggest that sometimes, though,
we've gone too far, that maybe the intention was good, but it's
disrupting people's lives. We've had testimony from two
Americans that they had to renounce their citizenship because a
bank in Switzerland told them they had to, if I got the
testimony right. And surely you would agree that's not an
intended consequence of FATCA?
Ms. Bean. No, it's not.
Mr. Connolly. You said something about the rollout, you
admitted, was rocky. So is the implementation still rocky? Are
there still unintended consequences that maybe Congress needs
to address or someone implementing needs to address?
Ms. Bean. FATCA still is not--it's far from a perfect law.
There are things that could be improved.
Mr. Connolly. Nothing is a perfect law. I hate that
expression. I mean, that implies something could be perfect.
Nothing is perfect. I wish there were, but there is not. So we
will put that aside.
So it has problems in its implementation still?
Ms. Bean. Yes.
Mr. Connolly. Okay.
And listening to the testimony of the three gentlemen to
your left--left? Right?
Ms. Bean. My right.
Mr. Connolly. Right. Sorry.
Do they have a point? I mean, do you recognize what you're
hearing here as a fair critique, maybe not a comprehensive
critique? You and I would stipulate that the purpose of FATCA
is a good one, and it has done some good, clearly, in promoting
an international standard and in collecting taxes that
otherwise would have been foregone. But, in doing that, either
in the zeal or in the reach, it's hurt people unintentionally.
That's really what we're hearing here. And I'm concerned about
that as a Member of Congress.
I don't want to see fellow citizens hurt. I want to see tax
cheats brought in. I want to see everyone pay their fair taxes.
And maybe not everybody up here shares that philosophy. I do.
But I don't want to be hurting people in the process who are
innocent victims of a well-intentioned piece of legislation
that's overly broad or is badly implemented. And that's what
I'm asking you to comment on.
Ms. Bean. I really think their concern is misplaced.
Mr. Connolly. Whose?
Ms. Bean. The people to my right.
Mr. Connolly. Okay.
Ms. Bean. I think what they're concerned about is, in some
cases, it's unfair to tax them because they don't live in the
United States.
Mr. Connolly. Can I just say--I've seen this--Mr. Chairman,
if I can interrupt one second?
I would ask everybody to forbear civility and acceptance.
This is not a hearing where you're shaking your head because
you don't like what somebody says. We're going to hear
everybody, and we're going to try to be fair. But you're not
free to be commenting through body language on whether you
approve or disprove of somebody's right to express themselves.
You know, if you're at the table, you get to express yourself.
If you're not, please be forbearing and polite.
Ms. Bean?
Ms. Bean. I was just going to point out that, even if FATCA
were completely repealed, you'd still have all of the same
problems about people saying ``we're getting taxed when we
shouldn't be'' or ``getting taxed too much'' or ``the process
for renouncing citizenship is too complicated or too
expensive.'' All of those things would still be true because
FATCA itself does not impose any tax, and it does not, of
course, require anybody to renounce their citizenship.
I think Switzerland was a particularly tough place to be,
that the banks there were particularly upset because FATCA was
aimed, in part, at Swiss bank secrecy. I think that a lot of
those Swiss banks now have changed their practice. UBS and
Credit Suisse now agree to open up accounts for American
citizens and report them to the IRS, and a lot of other Swiss
banks----
Mr. Connolly. Thank you. Unfortunately, votes have been
called.
Mr. Chairman, I would like, if it's all right, to have Mr.
Bopp just comment on that, if he would like to. I'd like to
hear the other point of view.
Mr. Meadows. Yeah. Very quickly.
Mr. Connolly. Very quickly.
Mr. Meadows. We've got a couple minutes left, and we're
going to need to recess and reconvene. So very quickly.
Mr. Bopp. Thank you. I would just make a couple of points.
First, this is not an unusual or rare problem that is affecting
Americans overseas. The Democrats Abroad survey of Americans
overseas found that 65 percent of married Americans overseas
have lost bank accounts because of FATCA.
Secondly, this does not level the playing field. U.S. banks
have to file, you know, 1099s regarding interest income. Under
FATCA, foreign banks have to not only identify income but also
gains and losses, et cetera, also gross receipts, gross
withdrawals, account information, value--no taxpayer in the
United States reports that information to the IRS.
And, finally, regarding the penalty point that you made,
the $9.7 billion that she's talking about of taxes, interest,
and penalties, most of those penalties we know anecdotally were
not because these people needed to pay any taxes and failed to
do it, but because they failed to file this form, this one
lousy form that generates a 50-percent penalty of the highest
value in the account. If you do it in the second year, fail to
file your form, you're now at a hundred percent. That's the
penalty. And, you know, that is something this committee should
force the IRS to explain to the American people about how FATCA
is working.
Mr. Meadows. All right. We're going to reconvene probably,
for planning purposes, no sooner than 3:35. So you can go get
coffee, do whatever you want. And so this committee stands in
recess.
[Recess.]
Mr. Meadows. The chair recognizes the gentleman from
Georgia, Mr. Hice, for 5 minutes.
Mr. Hice. Thank you, Mr. Chairman.
Ms. Bean, I want to pick up with you, if we can continue
here.
Any idea how much revenue is lost to offshore tax evasion
each year?
Ms. Bean. Estimates have been between $100- and $150
billion per year is lost to offshore tax evasion.
Mr. Hice. All right. Between $100- and $150 billion. And
you're satisfied with that estimate?
Ms. Bean. Yes.
Mr. Hice. Okay.
And how much revenue is brought in because of FATCA?
Ms. Bean. I don't know. It's such a new law. They just
started the reporting in 2015. I don't know if they have any
statistics yet.
Mr. Hice. Okay. The Joint Committee on Taxation estimated
$870 million. Are you familiar with that estimate?
Ms. Bean. That is being brought in per year?
Mr. Hice. [Nonverbal response.]
Ms. Bean. I wasn't familiar, but okay.
Mr. Hice. Okay. Based on that, assuming that the Joint
Committee on Taxation is accurate, at least in the ballpark, it
is very poor math. We've got a loss of $100- to $150 billion.
We're only bringing in 870 million. And that's just part of the
problem. I mean, we're spending--figures have been going out
today--$200 billion spent on this. The estimates on that range
from a little less than that. The $200 billion is kind of a
middle-of-the-road estimate. I've seen as high as a trillion,
as low as $8 billion. But the middle-of-the-road guess, $200
billion. And besides all that--I mean, I listen to these
witnesses and read their testimonies and the harm that has been
caused individuals around the world and the harm that has come
about to some of our allies. You even mentioned yourself how--
you know, you said that, in your opinion, things are changing.
But many of our allies have been hurt because of this.
Obviously, it's not a very efficient use of IRS resources.
And, quite frankly, I have questions as to just whether or
not this thing is even constitutional or not. There are
tremendous constitutional questions that come up with this. The
fact that Americans living overseas are forced to provide
financial information that would normally require a warrant is
just amazing to me. There's obviously an issue at least with
the Fourth Amendment there.
We have heightened reporting requirements to treat
Americans living overseas more harshly than those living here.
And that, obviously, is a Fifth Amendment concern. You just
wonder even how constitutional this thing is at its very
foundation. And then the fact that this was instituted without
congressional authority--President Obama--the agreements were
made. I mean, you've got a separation-of-powers issue.
I guess my point is, over and over and over, there's just
questions on this thing as to even how effectively it's
working. If we're bringing in $870 million but the cost is some
$200 billion, it doesn't take a whole lot of math to figure out
this is not a very efficient thing. And you add to it the harm
that's being caused and the constitutional issues that are
being raised, it appears to me that, although this may have
been implemented with good intentions, as has been mentioned
here today, there's enough information that's come forth here
about FATCA that, frankly, I find this thing not only to be
disastrous as a law but dangerous, potentially,
constitutionally. And it just seems to me in every way this
ought to be repealed; if not, majorly modified. Just a quick
yes/no, would y'all agree or disagree that this needs to be
either repealed or modified?
Mr. Bopp?
Mr. Bopp. I definitely agree it needs to be repealed. We
have thought about fixes, alleged fixes, being proposed by
various people. The problem is it leaves all the essential
elements of the FATCA regime in place. The burdens on most
individuals, the burdens on financial institutions, don't
change in any of the proposals that we are aware of. And the
constitutional issues remain.
And we just should not be treating people that are U.S.
citizens, because they're residing abroad, stripping them of
their rights as if they are second class citizens.
Mr. Hice. Okay.
My time has expired.
Mr. Crawford, Mr. Kuettel, yes or no, repeal or modify?
Mr. Crawford. Yes. I support a repeal.
Mr. Kuettel. Yes. I support repeal.
Ms. Bean. No, I don't. And just so you know, the courts
that have looked at these types of issues have upheld----
Mr. Hice. Nor do you believe it should be modified? You
like it just as it is?
Ms. Bean. I think there's some modifications that would be
appropriate.
Mr. Hice. Okay.
Thank you, Mr. Chairman.
Mr. Meadows. I thank the gentleman.
The chair recognizes the gentlewoman from New York, Mrs.
Maloney, for 5 minutes.
Mrs. Maloney. Thank you, Mr. Chairman.
I want to thank you very, very much for your focus on this
issue. It's an extremely important one as we move into more of
a global world with many Americans living abroad.
And, of course, I thank Ranking Member Connolly.
And thank you to all of the witnesses who have come from
all of the corners of the globe to testify about the future of
this important law.
I represent a district that has many Americans that live
abroad that have expressed the concerns of Mrs. Nelson,
although I have never had a first family who came over on the
first ships testify to me. But many people have told me the
excruciating experience of renouncing their American
citizenship and their inability to open up bank accounts or
being forced off the bank account of their spouse.
But, likewise, I'm very sympathetic to the points that Ms.
Bean has raised about the need to crack down on terrorism
financing, drug financing, human trafficking financing, and
just plain crooks. But I do think that we could reach some type
of agreement in going forward.
I personally do not think FATCA should be abolished. But
certainly the reporting procedures should not subject ordinary
Americans, in my opinion, to the same scrutiny as criminal tax
evaders, money launderers. And coming from New York, which is
constantly a terrorist target, the extreme concern that law
enforcement has in New York, and I'd say around the country, of
terrorism financing.
I've been particularly interested in this issue for some
time now as co-chair and founder of the Americans Abroad
Caucus. I have heard reports from constituents overseas
detailing how FATCA's expensive and risky reporting
requirements have had a negative impact on access to banking
services for Americans living abroad.
FATCA was passed to fight overseas tax havens and make sure
that American money could not be hidden from tax obligations,
which is something I strongly support, and I'm sure most
Members do as well. It does this by requiring foreign financial
institutions to disclose certain information to IRS about
American-held accounts or the institution will be subject to a
30-percent withholding tax on all of its income from U.S.
sources.
Unfortunately, in order to minimize their exposure to FATCA
reporting requirements and avoid any withholding fees and
potential penalties, some foreign financial institutions have
decided to simply close accounts for U.S. citizens or refuse to
open new ones for them or have asked them to get off the
account of their spouse. As a result, many law-abiding American
citizens living overseas have lost access to everyday financial
tools, such as mortgages, bank accounts, insurance policies,
and pension funds, all of which are critical services in a
modern economy, regardless of your place of residence.
Now, I believe it is essential that the Treasury Department
has the tools it needs to fight overseas tax havens and make
sure that any American money around the world remains compliant
with the U.S. Tax Code, but the current FATCA reporting
procedures subject ordinary Americans to the same scrutiny as
criminal tax evaders. It's gotten so bad that some Americans
have resorted to renouncing their American citizenship in
response, and that's unacceptable. Whether it's 1 or 2 or
2,000, we should not live in a world where people feel they
have to renounce their citizenship in order to comply with,
basically, transparency laws.
Recognizing the consequences that the reporting
requirements have had on Americans living abroad, the IRS
Taxpayer Advocate Service 2015 annual midyear report to
Congress recommended that the IRS exclude from FATCA reporting
financial accounts maintained by a financial institution in the
country in which the U.S. citizen is a bona fide resident.
And I have here a letter that about 20 Members of Congress
joined me in signing and sent to Treasury and IRS supporting
this idea, this narrow, narrow exemption for American
taxpayers.
The report details how this proposal would mitigate
concerns about unintended consequences raised by overseas
Americans, reduce the reporting burden on FFIs, and allow the
IRS to focus its enforcement efforts on identifying and
addressing willful attempts at tax evasion or money laundering
or money hiding through foreign accounts. The IRS would retain
access to foreign financial account information as citizens
would still be required to submit the report of foreign bank
and financial accounts. Additionally, the Financial Crimes
Enforcement Network, or FinCEN, the query system ensures IRS
employees direct access to FBAR data.
The Treasury Department has not yet implemented this
recommendation, and I wrote this letter on September 15th of
2015, which I'd like to submit to the record.
Mr. Chairman?
Mr. Meadows. Without objection.
Mrs. Maloney. --to the IRS and Treasury Departments, urging
adoption of this reform, but still nothing has happened.
So today I--as we hold this hearing, they haven't taken
any--been taken to institute a policy to alleviate the burden
on overseas Americans as a result of FATCA. That is why, last
night, I introduced the Overseas Americans Financial Access
Act, which would implement the recommendation and exempt
Americans from FATCA reporting if their accounts are held in
the same country where they are bona fide residents. It is a
narrowly tailored change that could drastically improve the
financial conditions for Americans living abroad.
I hope my colleagues will join me in this good-faith effort
to make FATCA more effective in its intention and yet less
burdensome on law-abiding Americans living and working abroad.
And I request permission to place in this record, I think,
an excellent document that was prepared by the Foreign Account
Reporting on the issue and ways it could be improved, which
included the recommendation that I legislated last night. And I
have the bill here. And I'd also like to put that in the
record.
I feel that this narrowly tailored approach would relieve
the burden on American residents, members of--Americans, yet
keep the benefit of cracking down on terrorism financing, drug
financing, human trafficking financing and just plain criminal
behavior.
My time is long over--expired. I thank the gracious
chairman for allowing me this time to speak, and I look forward
to a second round where I can participate in asking questions.
Thank you.
Mr. Meadows. I thank the gentlewoman.
Her two unanimous consents, without objection, so ordered.
Mr. Meadows. And the chair recognizes the gentlewoman from
the District of Columbia, my good friend Eleanor Holmes Norton.
Ms. Norton. Let me thank you, Mr. Chairman, for this really
interesting and important and revealing hearing.
I was pleased to hear my good friend Mrs. Maloney take a
stab at how we could, in fact, go at the probable unintended
consequences of going after bad guys and getting good guys
while at the same time not opening the gates altogether to the
bad guy.
Indeed, I was a little surprised to hear some of your
responses to the question that was asked by my colleague on the
other side whether repeal or modification was appropriate. Let
me remind you what it takes in this Congress and what it took
in the Congress that passed this to get legislation through to
recoup taxes or to tax anyone.
The evidence was overwhelming of human trafficking, of drug
smuggling, of tax cheats, so overwhelming, that, in a Congress
which is not known as passing a lot of bills and in a Congress
which has cut the IRS more than it has cut any other part of
the government, this legislation, FATCA, was passed. So I have
to ask you, when you say you would like repeal, do you really
mean you want no law on the books that went after the bad guys
so that we could make sure that the good guys weren't, in fact,
caught? I'm going to ask you to think about that, because this
is the kind of modification that is going to take bipartisan
support. And you just heard a Member offer at least one version
of modification.
But if you come to the Congress of the United States, who
passed a law like this after being overwhelmed by evidence, and
say, ``The only thing we want is a wide open gate and ask you
to throw all of that away,'' then you're not really helping us.
So I'm asking you whether you would consider the notion of
modifications that would in fact help us deal with what moved
all of us during your testimony.
Mr. Bopp? Let me hear all down the line on that.
Mr. Bopp. Thank you.
And, of course, we have considered the possibility of
changes such as proposed and other proposals. And the problem
is, is we do not find that they will be effective in relieving
the burdens----
Ms. Norton. All right. Mr. Bopp, my time is----
Mr. Bopp. And I can tell you why.
Ms. Norton. You know, you may not have seen any yet, but
you see what you give us, an all-or-nothing kind of resolution.
And that, of course, it tells us, who don't do much in the
first place, nothing.
I just want to ask in the--I would--maybe the chairman
would grant me some time as well, because I want to see whether
any of you would be open to modification going back to where we
were. The fact that you haven't seen one----
Mr. Meadows. The chair will give----
Ms. Norton. --doesn't mean that there isn't one in
existence. And there haven't been hearings like this; doesn't
mean that working with people couldn't help us.
But I do have to ask Ms. Bean about this--what looks like
the rest of the country moving toward us with this common
reporting standard. Does that, in fact, share much of what
we've been talking about in FATCA, Ms. Bean, this common
reporting standard, this OECD effort to collect and share
information about foreign-held accounts?
Ms. Bean. It's modeled on FATCA. It's very similar to it.
It's not identical. But, yes, and over a hundred countries have
now signed up to that system.
Ms. Norton. So, if anything, it looks like the rest of the
world is moving toward FATCA because of hearings which opened
this matter up, in fact, found. So could they work together to
stop the kind of tax evasion we've been talking about, the
common reporting standard and FATCA, Ms. Bean?
Ms. Bean. That's the hope, that with most banks around the
world starting to report account information to governments,
that this whole problem of secret bank accounts that, as you
said, are used not only by tax evaders but terrorists,
criminals, sex traffickers, drug lords, that whole problem
would be much more manageable because of the transparency.
Ms. Norton. Would the information of U.S. account holders
still be collected if Congress repeals FATCA but the common
reporting standard continued in existence?
Ms. Bean. I don't know the answer to that. I believe it
would be. But I'd have to look at it in more detail.
Ms. Norton. I wish you would get that answer back to our
chairman.
I have to tell all of you sitting at the table: I was a
tenured professor of law before I came to Congress. And,
essentially, I taught one of the--in addition to the hard level
of court courses I taught, one was negotiations. So I came kind
of with the frame of mind is every--lawyers can be most helpful
if they understand that we live in a world where each side
can't get what he wants but can, in fact, be satisfied. And
it's that kind of problem-solving approach I've tried to bring
to the Congress as well. So I must tell you: When somebody
tells me to take back a piece of legislation that could have
passed only if we were deluged with information that made it
irresistible, if you tell me that that is the only answer, I
have to tell my friends at the table that you're asking for the
status quo. And I would ask you to work with Mrs. Maloney, with
me, with the chairman, to find a way out of this dilemma so
that, in trying to help the good guys--and you represent them--
we do not go back to opening the gate to all the bad guys we
were after in the first place.
I thank the chairman for his indulgence.
Mr. Meadows. I thank the gentlewoman.
I would like to make note that the chair did give the
additional 2 minutes to the gentlewoman from D.C.
Ms. Norton. That's why I love him so much.
Mr. Meadows. We're going to go ahead--since the gentlewoman
from New York wanted a second round, we're going to go ahead
and do a brief second round. So I'm going to recognize myself
for a series of questions.
But let me clear up, I guess, some testimony. I've got
sworn testimony that Ms. Bean says that we're not asking
financial institutions abroad to do anything that the United
States banks do.
And, Mr. Bopp, your sworn testimony seemed to be at odds
with Ms. Bean.
So help me clear up--Mr. Bopp, I think you said that more
than just a 1099, they are required to have all kinds of other
information.
I want to give you a chance to correct the record if you're
not correct in your sworn testimony.
Mr. Bopp. The 1099 that American banks are required to send
in to the IRS and to the taxpayer, of course, reports the
interest income on the account. It does not report gross
receipts. It does not record gross withdrawals. It does not
report the value of the account. These are things that FATCA
requires foreign banks to provide to the IRS. So----
Mr. Meadows. All right. So you're saying that foreign banks
have to do that and U.S. banks don't?
Mr. Bopp. [Nonverbal response.]
Mr. Meadows. Okay. I think we'll get a different opinion
here, but, Ms. Bean, go ahead. Are you saying that his
testimony is not correct?
Ms. Bean. Mr. Bopp is correct. There's additional
information under FATCA from foreign banks than there is in the
U.S. banks.
Mr. Meadows. Why is that?
Ms. Bean. I think that's just the way the law was written.
Mr. Meadows. Do you not see that as problematic?
Ms. Bean. Well, I think one reason is that U.S. banks are
subject to subpoena from U.S. law enforcement in a way that
foreign banks aren't. So U.S. law enforcement, if they wanted
to, could get the information----
Mr. Meadows. Oh. Whoa. Whoa. Whoa. So you're saying FATCA--
FATCA's intent, from someone who should know--FATCA's intent
was to allow a way to access information without a subpoena? Is
that what you just said?
Ms. Bean. Yes. Just like 1099s. There's no subpoena for a
1099.
Mr. Meadows. Right. But you're saying that, because we did
FATCA, we're going to have our constitutional protections
violated because of a law? Is that your sworn testimony here
today?
Ms. Bean. The courts have said it is not unconstitutional.
The Supreme Court----
Mr. Meadows. But you're saying they're getting around a
subpoena, is you're saying they're subject to a subpoena, and
somebody else is not subject to a subpoena.
Ms. Bean. I think you were asking me, why would FATCA
require more information----
Mr. Meadows. No. I was asking you if it was different.
Because your sworn testimony from my first round of questions
is you said that we weren't asking them to do anything that a
U.S. bank was asked to do. That was your sworn testimony. And I
can get them to read back the transcript. But I assume that
you're saying now you want to change that to say that, yes, we
are asking foreign banks to do something that a U.S. bank
doesn't have to do. Is that correct?
Ms. Bean. What I meant in my testimony is that we're
requiring foreign banks to file a form on all accounts opened
by U.S. clients. And we have U.S. banks that have to file a
form on all accounts opened at U.S. banks.
But Mr. Bopp is correct. There are a couple additional
items of information primarily----
Mr. Meadows. So you would be okay with waiving those couple
additional items and amending the law, because obviously
that's--we're not treating people the same in the United States
as we do abroad?
Ms. Bean. I would not because from a foreign bank, U.S. law
enforcement cannot----
Mr. Meadows. Well, I'm going to go back to what the
gentlewoman from the District of Columbia says. You can't have
it the other way either. I mean, they may not be able to get
full repeal, but you can't keep the full law and sit here and
negotiate in good faith and assume that everything with FATCA
is correct.
Ms. Bean. In fact, the rest of the world has noticed the
same difference----
Mr. Meadows. They're being forced to notice the world
because of what we're doing----
Ms. Bean. --press the U.S. to provide that additional
information----
Mr. Meadows. Would you not agree with that? They're being
forced to do it because of what we're doing from our law and
forcing them to do it?
Ms. Bean. We are forcing them through the 30 percent----
Mr. Meadows. And do you not see that some of these sides
effects that we've had expert testimony from Mr. Kuettel and
Mr. Crawford, that those side effects of our forcing financial
institutions to do it are having repercussions that were not
intended in the original law?
Ms. Bean. My entire adult life I've had to file a 1099 on
every bank account I've ever opened.
Mr. Meadows. So you would be okay----
Ms. Bean. I'm okay with that.
Mr. Meadows. All right. So let's go there. And maybe that's
a reasonable compromise. We repeal FATCA and that we require
foreign institutions to have to file a 1099 to the IRS on
interest income. Would you be okay with that?
Ms. Bean. I'd prefer the 1099 to be expanded to what FATCA
requires.
Mr. Meadows. Therein is a deeper problem. But we won't go
there.
Ms. Bean, we're not going to ever agree on that.
Ms. Bean. Okay.
Mr. Meadows. So let's go ahead with this.
Are you okay, yes or no, with us just repealing back and
saying that a foreign account has to do a 1099 on interest
income as a U.S. Bank would do, as Mr. Bopp, and that's all
they have to do? Are you okay with that?
Ms. Bean. No. No, I'm not.
Mr. Meadows. You know, I find it challenging that--because
apparently--so what are the problems that you see with FATCA,
Ms. Bean?
Ms. Bean. Well, one of the--there are a number of problems.
One of the problems is----
Mr. Meadows. How many problems would you say there are with
FATCA?
Ms. Bean. Well, I haven't counted them up. But let me give
you two of them.
Mr. Meadows. Okay.
Ms. Bean. One is that, when the IRS started to penalize
people for violating the law, their penalties--they had a range
of penalties they could do--they were very unreasonable in the
penalties they applied.
Mr. Meadows. So what would a reasonable penalty be?
Ms. Bean. Well, one of the things that the IRS did at the
insistence of the Taxpayer Advocate is they came up with a
system that, if you had an inadvertent violation of the law----
Mr. Meadows. Inadvertent by who? Now, I will sometimes tell
my wife that I forgot to take the trash out inadvertently. Is
that--I mean, inadvertent by whose standard?
Ms. Bean. I think they require a certificate from the
taxpayer. And if the taxpayer will certify that they--it was
inadvertent; they didn't realize that they were violating the
law----
Mr. Meadows. I would think that that would happen 100
percent of the time, wouldn't you?
Ms. Bean. How about that. And then they're qualified for
much lower penalties. So that's the system that's been set up.
Mr. Meadows. So what should the penalty be, Ms. Bean?
Ms. Bean. That's a very complicated question.
Mr. Meadows. But you're an expert witness. You are here at
the request of the minority as an expert witness. I would
assume you have an opinion on that since you were involved in
part of this. What would be an appropriate penalty?
Ms. Bean. Well, I'll give you an example. There was a
gentleman that they found a bank in Israel. He had hidden $21
million in those accounts, never been reported to the IRS. The
IRS then ended up hitting him with a fine of $8.3 million for
the many years that he hid those accounts, and he went through
a lot of machinations to hide them from IRS agents.
Mr. Meadows. But that's criminal. That's criminal.
I mean--so here's what we're talking about, is when we are
looking at that, if, indeed, he went through all kinds of
issues--I mean, we've got laws that say we have to disclose
those accounts. I know, every year, my accountant would ask
that. But what you're saying is, is that--so a big penalty, if
he's got a lot of money, is okay; but a big penalty, if they
don't have a lot of money, is not okay? Is that what you're
saying? I'm trying to figure out what--I'm trying to answer the
question for you since you don't seem like you want to answer
the question. What's an appropriate penalty?
Ms. Bean. Well, the penalties currently are gauged to how
much money is in the account. So that's one thing they do take
into account. And another thing they take into account is
whether it was inadvertent or not.
Mr. Meadows. So are you going to answer the question or
not? What's the appropriate penalty?
Ms. Bean. Sometimes the appropriate penalty is zero.
Mr. Meadows. All right.
Ms. Bean. If you didn't know you were violating the law,
the penalty could be zero.
Mr. Meadows. All right. So you're okay if we say you didn't
know that you were violating the law, that the penalty would be
zero?
Ms. Bean. In some cases, yes.
Mr. Meadows. Okay. We're not getting much of anywhere.
What would be the other example? So penalties being
outrageous is one. What's the other problem? You said there was
two.
Ms. Bean. The other one I would mention is that we've had
the FBAR for many years where people have to identify their
foreign accounts.
Mr. Meadows. Right.
Ms. Bean. But now, under FATCA, we created another form
that seems to be very duplicative of the first form.
Mr. Meadows. Right.
Ms. Bean. And I'm not sure that we need that second form.
And as people have said, there are a lot of trips and traps to
complying with FATCA, and that seems to me to be one of them,
to have that extra form.
Mr. Meadows. All right. So let me understand. Your best
recommendation on improving FATCA is we get rid of one form,
and we may adjust the penalty. Those are your two best attempts
at trying to fix FATCA?
Ms. Bean. Yes. Because, as I say, I've lived my life under
that regime.
Mr. Meadows. All right. So, if you've lived your life under
that regime, knowing that there is a return, knowing that the
IRS, that the gentlewoman from the District of Columbia talked
about, knowing that there are financial resources, knowing that
Commissioner Koskinen says that he can get a 20-percent return
sometimes--or even let's take conservative, under sworn
testimony, he said an 8-to-1 return, wouldn't we be better off
taking the $71 million that we spent last year and using it for
some other type of enforcement that provided a better return?
Because aren't we only getting 1 percent of what--your sworn
testimony said there's $100 billion out there. We're only
collecting 1 percent of those taxes. And, actually, it's not
even that. It's taxes and fees and penalties and interest. So
we're spending all this money to address 1 percent of the
problem.
Ms. Bean. Well, $150 billion includes all of the corporate
tax avoidance. So that's a whole different issue. But when
you're looking at individuals, the numbers that are usually
used are $35- to $70 billion a year just for individuals. I'd
been asked earlier about offshore tax avoidance and evasion
altogether. But for individuals, it's $35- to $70 billion.
Mr. Meadows. All right. I'm way beyond my time. So here's
what I would ask you to do, each one of you to do, is come up
with three recommendations. Your two that you gave me under
sworn testimony don't count. I need three recommendations on
what you would do with FATCA.
I need you to look at--in the spirit of trying to find--if
we do not fully repeal, what are the three most onerous
situations that affect gentlemen like Mr. Crawford and
gentlemen like Mr. Kuettel? What are those areas? Are all of
you willing to either give me your recommendations back to the
committee to do that?
Okay. Thank you.
I recognize the gentlewoman from New York, Mrs. Maloney.
Mrs. Maloney. I thank the gentleman for his concern and
trying to get an answer. But, to me, it's not a monetary thing.
It really is human life because terrorism financing has become
a way of life in this world.
Mr. Meadows. Well, will the gentlewoman yield for one point
of----
Mrs. Maloney. No. I have a phone call with Justice Ginsburg
in about 5 minutes. So I can't yield right now. Excuse me,
Mr.--I just have to ask one question, and that's it.
Listen, so--I disrupted my train of thought.
So, just recently, this month, Chairman Hensarling of the
Financial Services Committee created a whole new committee on
terrorism financing because it's such a huge issue.
Bombs went off in my district several months ago. The
police caught the guy. But the question is, where did he get
his money from? So cracking down on terrorism financing is a
real concern.
And I would say, why are people hiding money? A lot of
times it's not just to save on taxes. It's because they're
selling guns. They're selling human bodies, or they're involved
in drugs or all kinds of things that basically hurt people.
So I'm trying to--and I join you with your question--find a
solution--and I look forward to working with you on it--that
allows us in law enforcement to go after the bad guys but
protects people like Mr. Kuettel. So my question is to Mr.
Kuettel, would the exemption that was really put forward by the
Taxpayer Advocate Service that basically recommended that the
IRS exclude from FATCA reporting financial accounts maintained
by a financial institution in the country in which the U.S.
Citizen is a bona fide resident--that would have taken care of
Mrs. Nelson's situation, which she explained so clearly. But as
a bona fide citizen of Switzerland, this particular change
would have excluded you from this burden. Is that correct?
Pardon me?
Mr. Kuettel. I fear not.
Mrs. Maloney. Why not? Because you're a bona fide citizen
in a country, you would no longer have to do the FATCA. That's
what this recommendation says.
Mr. Kuettel. From my experience, the damage of FATCA has
already been done. The banks are already terrified of America.
If you just exclude local residents from FATCA, they still have
the reporting requirements for the taxation. When I take my
daughter here to a bank, practically any bank, the first
question is, ``Are you taxed by America?'' They don't ask,
``Are you reportable by America?'' They ask, ``Are you taxed,''
meaning she's a tax threat.
Mrs. Maloney. That's the current law now. But if the law
changed so that, if you're a bona fide citizen, you could just
say back to them, ``I am a bona fide resident of this country,
therefore''--or you could get a form from our government that
says, therefore, if you're going to a financial institution in
your country--I would like to get legal counsel to look at it,
because I believe you would be exempt under these types of
recommendations.
In any event, something needs to be done on it. And I thank
the chairman for his attention to it and his personal
involvement in it and absolutely all of the panelists.
But I do believe cracking down on terrorism financing,
which is one of the major reasons of this, is a critically
important concern, unfortunately, in the world now.
So thank you, and I yield back. And I thank you. And I'm
sorry I couldn't yield, but--I'm in trouble right now.
Mr. Meadows. That's all right. I've got a very long memory.
So that's--we'll go from there. I thank the gentlewoman for--I
understand. A Supreme Court Justice or a Member of Congress
from North Carolina: I would have made the same choice you did.
So it's--I thank the gentlewoman for her interest.
So let me--in the interest of clarity, let's talk about
what this is and what it is not. This is really not about the
terrorist organizations that go and deal with that. I have a
little bit of expertise there. The Hezbollah sanctioning bill
was a bill that I actually started in the first Congress. I
understand the aspects. It is now law. It is affecting behavior
because we're going after money for terrorists. But we use
totally different vehicles than this particular vehicle. And so
to suggest that they're one and the same would not be accurate.
I mean, and when you look at central bank activity and the
moving of funds and all of that, it is a very different issue.
It's very complex, but it's very different. I have real
problems with us treating citizens of the United States who
happen to live abroad differently than citizens of the United
States that happen to live in the contiguous 48 or whether it's
Puerto Rico or anywhere else. When we start to look at this, it
is critically important that we understand the constitutional
foundations of who we are as a Nation. And in the interest of
everything that we know, we can go after all kinds of things
where we start violating the civil liberties of individuals in
the interest of compliance.
And that's why we have--our Founding Fathers set it up.
That's why we have a Fourth Amendment. And we've got other
areas where the Fourth Amendment is being challenged.
And so, Ms. Bean, I would ask you to have an open mind and
try to figure out those areas where the side effects and the
testimonies that we've heard from these individuals and others,
thousands of others, are being affected. So I'd ask you to keep
an open mind and look at that.
Mr. Bopp, I'd ask you to look at it from a different
perspective. Assuming that we can't get enough bipartisan
support--which I believe we can--but if we can't get enough
bipartisan support to repeal this and actually replace it with
something else--and I hate to use the words ``repeal and
replace'' in the context of anything these days--but as I look
at this, if we can look at repealing and replacing it with
something, I would ask you to take the thoughtful suggestions
here.
Here is my closing remark. Senator Rand Paul recognized an
issue that was brought to him not only from his concern for
freedom-loving individuals and the Constitution, but it was
something that was highlighted over and over again. And if you
travel abroad, we have U.S. citizens who love the United
States, who truly--some of them are more patriotic than some
who live in my State of North Carolina. And yet they're being
forced with a decision of, do they renounce the country they
love so that they can continue to transact even a normal bank
account? And that's a choice that we shouldn't be forcing
people to make.
I think there are ways that we can figure this out and
tailor this so that we truly go after those who have a problem
with tax not only avoidance but criminal activity. We know
that, indeed, it is our obligation to pay taxes, and to avoid
that in an improper manner is certainly not anything that a
Republican or a Democrat would condone.
And so it is in that spirit that I would ask you to report
back your three recommendations. Get as many--we won't limit it
to three, but if you don't give me three, you'll hear from us.
How about that? Is that a deal?
Mr. Meadows. I want to thank all of you for the discussion
and, truly, for your testimony. It's been very illuminating.
If there's no further business before the committee, the
committee stands adjourned.
[Whereupon, at 4:27 p.m., the subcommittee was adjourned.]
APPENDIX
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