12 May More FATCA Follies: Do We Need an Anti-Passport?
As my correspondent Victoria Ferauge points out in response to last week’s post on inter-governmental agreements implementing the Foreign Account Tax Compliance Act, the problem with FATCA for expatriate Americans is not so much the prospect of added accountant fees in tax preparation. It’s the prospect of being discriminated against as an American for all things financial. Faced with their own accounting hassles, some foreign financial institutions are refusing to deal with Americans at all. If they don’t have U.S. citizen account holders, they won’t have to comply with FATCA’s reporting requirements.
Problem is, how do you show you’re not an American?
If you are clearly an American (if, for instance, you were born in US territory), there is a definitive route to losing your citizenship and having it documented. You formally renounce your citizenship before a consular officer (or otherwise demonstrate that your citizenship has been relinquished). A Certificate of Loss of Nationality is your reward. That should do the trick with local bank officers on the lookout for US depositors.
But what if you’re not sure whether you are American in the first place?
Foreign banks are erring on the side of caution. Suspected Americans are to be avoided. Local bankers are assuming citizenship by association. Where they know one family member is a US citizen, they will assume the worst of others, especially parent/child. Banking in Europe remains a more personal, service-oriented business than in the States, so it will not be uncommon that the connections are made.
Individuals in these situations, unsure of their US citizenship status, are in a tricky position. One would expect some to seek out opinion letters from private counsel to the effect that, this person is not a US citizen. You would think that would do the trick with FATCA-shy banks. But perhaps the US government should make it official with the equivalent of an anti-passport, certifying non-citizenship in particular cases.
That an anti-passport is even plausible as a thought experiment shows how bad FATCA really is. Americans abroad are renouncing their citizenship in record numbers, and others will feel lucky not to have it in the first place. What a turn from an earlier era, in which US citizenship was a badge of honor and a shield against a brutish world.