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 |  Subject: Taxation is Theft: Why 'Accidental Americans' Are Desperate to Give Up Their U.S. Citizenship  Mon Dec 28, 2020 7:07 pm | |
| Ever since the Top Salon opened its doors in 1988, it has done solid business styling hair for the residents of Harkema, in the north-west Netherlands. Yet it might soon be giving its last haircuts. “The bank wants to close my account by January 1,” says the salon owner Annie Brouwer-Hoogsteen, 53, who launched her business when she was just 21. “If they do, we cannot buy supplies, we cannot pay three hairdressers, we cannot do anything.”
Brouwer-Hoogsteen’s business is not failing, and she is not a criminal. Instead, she is being targeted because of her ties to the United States. She received automatic citizenship by being born on U.S. soil, but has no other connection to the country, having left as a baby. Like countless others around the world she is an “Accidental American,” and is now being forced to pay a price for it.
Other than Eritrea, the U.S. is the only country in the world with citizenship tax rules, demanding that all Americans—including anyone born in the U.S.—submit yearly tax filings to the Internal Revenue Service, no matter where they live. And since 2010, when the U.S. introduced the Foreign Account Tax Compliance Act, or FATCA, all the world’s banks have been obligated to begin reporting on the activities of their American customers.
This year, the U.S. began enforcing those rules in earnest. Although the U.S. Treasury temporarily relaxed the rules last year, as the tales of woe mounted, the easing of the regulation ended in January, when the Treasury refused to extend a moratorium against banks who do not send their clients’ data to the U.S. Despite pleas from European Union officials, the U.S. refused to reconsider, and beginning on Jan. 1, 2020, threatened to impose fines potentially up to billions of dollars, on foreign banks that do not share their U.S. clients’ information.
Since then the rules have ensnared thousands like Brouwer-Hoogsteen in a sticky web of tax implications, as their banks threaten to shut down their accounts, or turn away prospective American customers, rather than deal with U.S. compliance, or risk financial sanctions. “The impact on people’s lives has been enormous,” says Marc Zell, a U.S. lawyer in Israel. “People cannot get mortgages. They cannot get bank loans for businesses,” he says. “Many do not even know they are American.”
Now, lawsuits filed on both sides of the Atlantic are seeking to redress the situation. On Tuesday organizations representing Americans in Europe filed complaints against Luxembourg and Belgium’s governments, demanding they immediately stop transferring European citizens’ personal banking information to the U.S.—something they say violates strict European and national privacy laws. The complaints are a prelude to formal lawsuits in the courts.
Zell sued the State Department in early December, on behalf of 20 accidental Americans whose lives have been upturned by FATCA. Other legal challenges say it might be in violation of the European Union’s data-protection laws, and perhaps also a violation of the U.S. constitution.
With a new U.S. administration about to take office, lawyers and pressure groups who have spent years battling FATCA’s fallout say they might finally have a chance to force some changes to the law, which they say are increasingly urgent. “Under cover of fighting tax fraud, the U.S. has created a monster,” says Fabien Lehagre, founder and president of the Paris-based Association of Accidental Americans who was born in California in 1984, and lived there until he was 18 months old. FATCA, he says, is “a monster that has made accidental Americans pariahs of the international banking system, in which fundamental rights are flouted every day.”
‘They all think that we are rich Americans’
When President Obama introduced FATCA in 2010, its intention seemed reasonable: To catch rich Americans shielding their wealth from the IRS. It came after a whistleblower in the 2000s revealed how Americans were hiding billions of dollars in tax-free Swiss banks.
However, the law has acted as a dragnet with miserable unintended consequences. In several interviews with lawyers and victims, they describe time and again how ordinary people have been embroiled in years of problems, after suddenly being made aware—often from their banks—that an accident of birth has put them under suspicion.
There is no accurate figure for the numbers of “accidental” Americans. Banking organizations estimated more than 110,000 in Europe back in 2016, but that included a tally from only a fraction of banks; the Paris-based association has 1,200 French members. Some estimate that at least 9 million Americans live abroad, including many who still have deep ties to the U.S. Yet the law does not distinguish between those people, and those simply born in the country.
Brouwer-Hoogsteen, the Dutch hair-salon owner, could hardly have more tenuous links to the U.S. She was born in 1967 in Bellflower, California, where her parents were dairy farmers, and when she was 13 months old, the family returned home to the Netherlands, where she has lived ever since. She does not speak English.
When her Dutch bank Rabobank asked for her U.S. social-security number in 2018, “I thought it was a mistake,” she says in a phone interview, with her husband translating. She finally filled out bank forms for U.S. citizens, leaving black the space for a tax-identity number, an omission that seemed to anger the bank managers. “From then on it was very threatening,” she says.
FATCA likely never intended to target foreigners like Brouwer-Hoogsteen, who have no connection to the U.S., and do not owe a dime in U.S. taxes. “There is a problem with Americans looking to use foreign tax havens to disguise their income,” says Zell, the U.S. lawyer in Israel. “But they are not expats. They are in the U.S.”
Zell’s lawsuit against the State Department, filed on Dec. 9 on behalf of the Paris-based Association of Accidental Americans, argues that the law has “brought within its draconian regime Americans who have nothing to hide.” It claims FATCA violates the U.S. Constitution, by effectively forcing people to remain citizens against their will—in part because the fees to relinquish American citizenship jumped in 2014 from $450 to $2,350, a sum many U.S.-born people could not afford to pay.
(Even so, more and more people are paying it. In the first three months of this year, 2,907 gave up their U.S. citizenship, according to U.S. Treasury statistics, the highest quarterly figure ever recorded. American expat organizations believe the real figure is probably far higher, since many names do not appear in the official registry, and say the increase is partly due to FATCA).
Beyond relinquishing citizenship, there’s very little accidental Americans can do to escape the vise. Groups pushing for changes to FATCA have found little support in the U.S. Both Republicans and Democrats have declined to take up the issue, either in Congress or the U.S. Treasury, which experts say could fix the problem, for example by creating a new category of permanent expats, and permitting people to register as “qualified nonresidents.”
“I think the group is too small in their eyes,” says Rob Gerretsen, a retired retail manager from Amsterdam, who was born in 1957 in New York City, where his father was working in a bank. They returned home before his second birthday, yet at 63, Gerretsen is now fighting to keep his bank account open in the Netherlands.
He says he is deeply angry over the indifference of U.S. politicians towards the plight of accidental Americans, and American expats. “They all think that we are rich Americans who are hiding their money,” he says. “That is not the case.”
Courtroom challenges
Change may be coming to Washington, but lawyers who have worked for years to fix FATCA doubt the Biden administration will want to repair the law. “[President-elect] Biden comes from Delaware, which is always pointed to [by Europe] as an example of the hypocrisy of the U.S.,” says Filippo Noseda, a tax lawyer in London, referring to Delaware’s tax-free regime for corporations. Noseda has fought years of battle in the E.U. and Britain on behalf of expats trapped in FATCA problems.
Noseda believes that Biden may feel especially reluctant to change FATCA, since it was introduced while he was Vice President to Barack Obama. “Why could the U.S. go back on something that works for the U.S.?” he says. “The only solution is in the courts.”
In the end, it might be courts in Europe that finally force the U.S. to change tack. As this year drew to a close, several legal challenges across Europe are on the verge of being filed in courts, arguing that FATCA violates the Continent’s data protection laws, which are far stronger than in the U.S.
Noseda has lodged a complaint against British tax authorities, on behalf of an American expat named only as “Jenny,” who moved to Britain after graduating college in 1997, and now works in an unnamed university.
The complaint claims that the bank is illegally sharing personal data with the U.S., in violation of the E.U.’s privacy rules (under which Britain still falls), including her name, date of birth, and how much money she has in her bank. “That is incredibly sensitive information, and we say that is excessive,” Noseda says. He calls FATCA’s data sharing “preposterous.”
Similar efforts are underway among the European Union’s 27 countries, which fall under the E.U.’s General Data Protection Regulation, or GDPR, with its tight restrictions on sharing of information. Two rulings against American Internet companies, one this year, has restricted transferring Europeans’ online data to the U.S.
The same principle could hold true for FATCA, lawyers say. They believe that will strengthen the complaints filed on Tuesday in Luxembourg and Belgium. “We are convinced that it would go in our direction,” says Lehagre, the association’s president—an accidental American who is French and speaks no English; he has spent years fighting to change FATCA.
If the group wins its case, the ruling could be referred to the E.U.’s Court of Justice, and made applicable to all Europeans. That would make the data-sharing agreements with the U.S. illegal, “forcing the European Union to renegotiate with the United States,” Lehagre says.
If these lawsuits don’t work then individuals would be forced to keep trying to take matters into their own hands.
Ronald Ariës, 62, a retired KLM pilot in Barchem, Netherlands, left the U.S. when he was a few months old, after being born on a U.S. military base in New Jersey, where his father was a visiting Dutch Army officer. In 2018, his Dutch bank, De Volksbank, accused him of committing forgery, by stating on a bank form that he had “no other tax residence” outside the Netherlands. The bank demanded that he provide a U.S. social-security number, or face having his account shut. In late November, he sued De Volksbank to keep his bank account open, rather than accede to its demands.
Ariës says he is not confident he will win. And finding another Dutch bank to accept him as a customer has proved impossible, since banks routinely decline anyone with U.S. ties. His mortgage company has warned him that if he fails to resolve the situation, they could foreclose on his house, which he bought in 2018. He is considering renouncing his U.S. citizenship, but fears that under the rules, he could be forced to pay back taxes to the IRS.
“What kind of world are we living in?” he says, angrily. “Maybe we will go back to the way my dad was paid, in a brown paper bag in cash.” He says his FATCA battles have caused deep anxiety. “I have not had a single good night’s sleep in two years now.”
.https://time.com/5922972/accidental-americans-fatca/
 
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