FATCA from the European Union perspective

Abstract

The Foreign Account Tax Compliance Act requires foreign financial institutions to report to the US Internal Revenue Service the information about financial accounts held by US taxpayers, or by foreign entities in which US taxpayers hold a substantial ownership interest. This aim of FATCA, which is to increase the ability of the American tax authorities to combat cross-border tax evasion by US persons, is reasonable. However, it imposes burdensome due-diligence, information reporting and withholding obligations on all foreign (non-US) financial institutions. It also raises legal concerns – notably data protection issues. The article analyses the main issues connected with FATCA, presents the pro and contra opinions, and looks at the reaction of EU Member States at the announcement of American provisions.