Everybody hates FATCA and all its siblings — UK FATCA and the multilateral pilot for automatic exchange of information. Everybody, that is, except the US politicians who have convinced under-informed voters it is the solution to their budget woes, and professional services firms experiencing a significant increase in their businesses.
US citizens living abroad have loudly expressed their discomfort as many are being kicked out from their banks or handed significant bills and additional fees to pay for the additional compliance they require.
Most other Governments don’t like it either, as the additional resources required to comply are likely to exceed any potential benefits – even under a reciprocal agreement under which the US would provide similar information to them.
Financial institutions are also unhappy. To comply, they have to undertake significant investment in systems for its implementation in a timeframe that looks incredibly short, even after the repeated delays that have occurred (as not even the IRS has been able to have their systems ready), and they continue to see their sales and front office departments reduced while compliance departments are the only ones that continue to consistently grow across the industry.
I have not found one person in the financial industry who believes the tax to be recuperated by the IRS will be anywhere close to the much larger cost of compliance.
So not being a lawyer, accountant, or tax advisor, what do I like about FATCA?
FATCA and its siblings will be the most powerful public relations weapons Cayman has ever had. FATCA will cut through corporations and other entities, and the financial institutions will report the balance and income of the accounts per beneficial owner. The myth that Cayman is still a place where the wealthy hide their money from the tax authorities will fall apart in a demonstrable way like it never had before.
Those who have predicted over and over again the end of Cayman as secrecy falls and refused to recognize there is no secrecy and the immense majority of business in Cayman is not dependent at all on any ability to hide the beneficial owners, will have to face reality when Cayman continues to flourish with FATCA fully implemented.
FATCA has the potential to be the turning point in our long fight against the outdated Hollywood-based picture that has annoyed us for so long.