FATCA Now the Law of the Land in France

For those of you who missed the FATCA debate yesterday in the French parliament, here are the essential links:

The video of the discussion (go to the box on the right side of the screen and scroll down and click on ACCORD FRANCE-ÉTATS-UNIS D’AMÉRIQUE RESPECT OBLIGATIONS FISCALES (LOI FATCA)
The transcription of the debate

I watched it this morning and here are few of my thoughts.

First of all, I was impressed by the high caliber of the discussion. All the individuals who spoke did so clearly and thoughfully.  I heartily wish American politicans could do half as well.

Framing:  I was very interested in seeing how the pro-FATCA camp framed their arguments and addressed certain reservations already put forward in previous debates.

The larger context, of course, is the Good Fight against tax evasion and fraud.  Even Pierre Lellouche (UMP) who spoke against the law admitted:

L’objectif affiché se passe bien sûr de toute discussion. Il s’agit d’œuvrer pour la transparence fiscale et de mettre fin, grâce à la coopération des États et à la transmission automatique des informations, à la fraude fiscale massive que connaît le monde : environ 6 000 milliards de dollars qui échappent à toute imposition.
De ce point de vue, personne ne peut être contre. Comme disent les Américains, personne ne peut être contre la tarte aux pommes et la patrie, apple pie and motherhood ; tout le monde est pour ! (Sourires.) À mort la transparence !
(The objective obviously needs no discussion. It is about fiscal transparency and the end, thanks to cooperation among states and the automatic transmission of information, to widespread tax evasion in the world:  6 000 billions of dollars that escape taxes.
From this point of view, no one could be against it.  As the Americans say, no one can be against apple pie and country, apple pie and motherhood;  Everyone is for! (Smiles).  Death to Transparency!)

Is FATCA THE Solution to Tax Evasion?  Not one speaker thought that FATCA was perfect, they simply differed as to how bad it was and whether or not these problems were deal-breakers.

Expressions of discontent peppered the debate: "extraterritorial", "unilateral"  and the rather grim indictment, "Americans have a tendency to privilege their interests over international law."  If a better, more multilateral proposition had been on the table, then that would have been preferable.  But it's not a perfect world, said its proponents, and it's better than nothing.  If nothing else it has had the salutory effect of moving other information-sharing initiatives forward (OECD, for example) which means that FATCA is just a step on the way to a true and legitimate worldwide standard.

Reciprocity is a Problem:  I was pleasantly surprised that they were aware of just how fragile the US commitment to reciprocity really is.  US law does not at the moment permit the US government to provide the same level of information to France, but the FATCA proponents did not mention ALL of the potential legal and political problems with FATCA on the US side. Mme Odile Saugues:  

Tout d’abord, il existe une incertitude sur le principe de réciprocité, et notamment sur le solde des comptes et la valeur des actifs. Les États-Unis se sont formellement engagés à transmettre ces informations dès que leur droit interne le leur permettra – ce qui n’est pas le cas à ce jour. Les élus républicains du Congrès – Rand Paul, sénateur du Kentucky, et Bill Posey, représentant de l’État de Floride – bloquent actuellement la transmission de ces données dans le cadre du dispositif... Cette situation risque de durer jusqu’aux élections de mi-mandat aux États-Unis, qui auront lieu le 4 novembre prochain.
(First of all there is uncertainty about the principle of reciprocity and especially about account balances and stock values. The US has formally committed to sending this information as soon as their internal laws allow it. Republican lawmakers in Congress - Rand Paul, Senator from Kentucky, and Bill Posey, representative from the state of Florida - are blocking the transmission of this information in the context of this law... This situation may continue until the mid-term elections which will take place on November 4.)

Interesting. To my knowledge there is no projet de loi on the American side, just a brief paragraph hidden in the Obama budget bill. Furthermore, there are court cases launched (or about to be launched) in the US and Canada which are a real risk to FATCA. The American lawsuit, in particular, should have been mentioned since it calls into question, among other things, the legality of those inter-governmental agreements on the American side - those IGAs that the French government says they were in part responsible for forcing on the US along with other European countries like Germany.  

I would also say that even if the Democrats were to win and take control of the US Congress, Americans banks and financial institutions are important campaign donors to both parties and they will surely have something to say about reciprocity on the US side.

As one speaker put it about those IGAs and American promises: "Cette rédaction alambiquée est, pour qui connaît les institutions américaines, une vaste plaisanterie, qui rappelle le vieux proverbe selon lequel, en politique, les promesses n’engagent que ceux qui les écoutent."  (This convoluted text is, for those who know American institutions, a joke, reminiscent of the old adage in politics, promises only bind those who listen to them.)  Well said.

Impact of FATCA on French Citizens and Residents: Frédéric Lefebvre was the only speaker who addressed the impact of this law on French citizens. He spoke very eloquently in defense of the French abroad, the "Accidental Americans" in France and the 100,000 US citizens who are legal residents of the French Republic. (The full text of his speech is here.) No one will weep for the tax evaders caught in the net, he said, but:  "Il faut cependant prendre garde, je le dis avec gravité, aux effets pervers du dispositif tel qu’il nous est proposé." (You must be careful, and I say this to you with utmost seriousness, of the perverse effects of this law that you are proposing." )

Frédéric Lefebvre's motion to delay the implementation (and the vote) until these matters can be studied further was voted down and the law implementing FATCA in France was approved.