Automatic Exchange
of Information

FATCA close to failure?

Switzerland positions itself sceptical in regard to FATCA (Foreign Account Tax Compliance Act). Actually, the exchange of data with Switzerland should start in September 2018. The confidentiality of the transferred data in regard to the automatic exchange of information (AEOI) is not guaranteed on the principles of OECD standards. This is the clear message of Yves Mirabaud, the president of the “Association of Swiss Private Banks” in this context. He believes that the start of FATCA has to be deferred at best. Singapore has the same opinion in this case. Furthermore, reciprocity is not implemented in FATCA. The missing reciprocity does not comply with OECD standards.

The Americans themselves try to stop FATCA with legislative initiatives from the Republicans. During the election, President Trump argued massively against FATCA. Especially US citizens who are living outside the United States of America are suffering from FATCA. They hardly can open any private accounts in their country of residence, because banks want to avoid overwhelming bureaucracy which comes along with it.

Multiple accounts of US students and US citizens who work abroad were frozen so far. Overall more than 9 million US citizens live abroad. In case their accounts are frozen, they have no access to their money anymore from one day to the other. Many of these US citizens living abroad gave back their US citizenship, which is a big administrative hurdle for them and harms the US likewise.

The confidentiality of data delivered to Latin America, Russia and Asia is also questionable in the opinion of Yves Mirabaud. He argues, that personal security for clients related to these countries has to come first, before any tax issues are discussed, especially in regard of the corruption risk and the ongoing political power games in these countries.

From today’s point of view only Europe and Switzerland are eliminating privacy protection for their citizens. In other jurisdictions, it does not look the same and one has to evaluate this issue differently.

It will be interesting to see, how Switzerland will handle this issue and how AEOI will be implemented finally. It seems that there are still a lot of open questions especially in regard to the contracts with the United States.