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FATCA: Banks under pressure

The FATCA (Foreign Account Tax Compliance Act, American extraterritorial law against tax evasion) raises many concerns in the French banking community but also in Europe. According to the European Banking Federation, which went to Washington in March to address the issue, more than 300,000 people are affected in the European Union.

The subject also worries French banks who sound the alarm bells with Bercy. They could be forced to close 40,000 accounts by the end of 2019 for lack of agreement on the application of a US tax regulation.

Applied in France since a bilateral agreement in 2013, the Fatca is a headache for the “accidental Americans”, these French born in the United States and who have American nationality under the law of the soil, even if they do not have almost never lived in this country.

“The French banks are facing difficulties because of the lack of progress on this tax agreement that places them under the threat of heavy penalties,” warned the French Banking Federation (FBF) in a letter to the Minister Bruno Le Maire and relayed by the foreign press.

Adopted within the framework of the “Hiring Incentives to Restore Employment Act” law signed by President Obama on March 18, 2010, the Fatca is intended to fight against tax evasion. It allows the US administration to ask foreign banks for information about their customers as “US people”.

In case of refusal, the banks expose themselves to sanctions up to 30% of their financial flows with the United States. “Sums very important,” insists the boss of the FBF Laurent Mignon who calls Bruno Le Maire to “find a solution to this situation.”

In particular, banks are required to collect and report the US tax identification number (TIN) of these citizens. However, they may have difficulties in providing it and obtaining it may be almost impossible.

In 2017, the US authorities had accepted a moratorium valid until the end of December 2019. They had stipulated that there would be no infringement if, in the absence of a tax identifier, the banks provided the date of birth of the customers concerned and asked them for tax IDs each year. But this derogation will end on January 1, 2020, “including for accounts opened before that date,” says the French Banking Federation, which considers “urgent to act to prevent massive account closures.”

Decision of the Council of State

These fears are expressed as the Council of State rejected the appeal filed by the Association of “accidental Americans”. It brings together French born in the United States, opposed to the application in France of American tax regulations which they consider themselves victims.

In its decision, the highest French administrative court ruled “unfounded the application of accidental Americans, considering that the regulatory acts taken for the implementation of this agreement were not devoid of legal basis.”

The Council of State thus followed the conclusions of the public rapporteur. The latter had estimated during a hearing in early July that the Fatca did not show a lack of performance “proven but at most technical difficulties implementation”.

“Such an assessment is, however, directly contradicted by various parliamentary reports, as well as by the Court of Auditors. He lamented in 2017 that the United States has not transmitted any information to the French tax,” responded the Association of accidental Americans. While regretting that her legal criticisms were not heard by the Council of State, she deplores “an opportunity for resistance failed to extraterritoriality of US law.”

In addition to the lack of reciprocity in the implementation of the agreement, the lawyer of accidental Americans, Patrice Spinosi, had invoked to contest the application of Fatca, “the lack of guarantees on the Protection of personal data”. A point also challenged by the Council of State, for whom “the information collected and transferred in the context of the treatment in dispute can be used only for tax purposes and are otherwise strictly limited and proportionate”.

In a statement, the Association said it would file a complaint with the European Commission alleging breach of EU law. While deploring the fact that the Council of State refused to question the Court of Justice of the European Union to decide this issue.

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