Given various unexpected results over the last 18 months (general election, following Brexit and trump as surprise votes), I have abandoned any attempts to predict what the future may hold.
This equally applies to the future of the Foreign Account Tax Compliance Act (FATCA).
There is certainly a ground swell for the complete repeal of FATCA but is that likely and what would that mean in the context of the global acceptance of the Common Reporting Standard (CRS)? In fact, the Administration of President Trump has been somewhat silent on this point.
The impact of FATCA has been undeniable. It has made it very difficult now to be a non-compliant US taxpayer, whilst holding assets outside the US with institutions/trustees within a jurisdiction that has entered into an Intergovernmental Agreement (IGA) with the US.
This has led to many previously delinquent US taxpayers voluntarily going back into compliance, through whichever route was deemed appropriate. In many cases this has been achieved without exposure to significant penalties, although this is of course dependent upon the specific facts of each case.
Those taxpayers then must consider their end goals. The project of "getting in” could be with the view to "getting out". The percentage increase in expatriations has been significant over recent years.
Many US Persons however do not wish to abandon their US status, so this has led to the need for significant planning around such issues as investment, structuring, succession planning etc.
As the aim of FATCA was to increase compliance with the unique US tax system, it has been a success in many countries. There are however many jurisdictions where the impact of FATCA hasn't yet truly "bitten". As these are predominantly low tax, or non-taxing, jurisdictions the potential tax take remains significant, with US taxpayers connected to these jurisdictions seemingly still unaware of their obligations in many situations. FATCA IGAs are being signed in these regions, which will increase the knowledge and awareness of the IRS.
If FATCA were repealed, would this impact the efforts to ensure that US Persons become and remain compliant? Almost certainly.
Is FATCA a vote loser? If the "man on the street" in the US thought that the IRS were not actively enforcing the US tax system overseas how would this be perceived? Presumably unfavourably.
What is certain is that the scope of the US tax system is better understood by professional advisors and institutions, and the repeal of FATCA wouldn't reduce that.
What has FATCA meant for the compliant US taxpayer?
It should be noted that, other than the introduction of Form 8938, which is purely a form to report assets, FATCA hasn't changed the tax obligations of US Individuals. FATCA hasn't introduced the US system of worldwide taxation, it has just highlighted it to a wider audience.
However, the everyday lives of many compliant US taxpayers have been impacted by FATCA. The simple process of opening, or maintaining a bank account outside the US has led to far more scrutiny, with a number of institutions being unwilling to hold accounts for US taxpayers, irrespective of account value or length of relationship.
The dreaded W-8 forms also seem to be a daily talking point when trying to identify beneficial owners of assets and income.
The costs (both monetary and time) incurred by the non-US banks, trustees and other financial institutions to "gear up" for FATCA has, to date, quite simply been huge and would be in the high hundreds of millions, if not billions, of dollars.
The "rest of the world" has also now adopted CRS. Famously, the IRS has not adopted CRS as they have FATCA. If FATCA is repealed, does this force the US to consider adopting CRS? Can the US reasonably not share information when that is becoming the "norm" around the world.
If FATCA is not repealed, it will only stand up to the extent that the individual IGAs around the world are respected. Many of these agreements are reciprocal so rely on information being provided from US institutions to foreign Governments, rather than this simply being one way traffic. In my view, I would see this as the bigger risk to the future of FATCA rather than an outright repeal.
So, in summary, on a very basic level, in many countries around the world FATCA has worked, but it hasn't yet had a global impact at the same level, although with the current trend that will happen if FATCA continues.
We will continue to monitor and provide updates as required.