The Israeli High Court has issued a temporary injunction against the enforcement of the controversial American global tax law: FATCA (Foreign Account Tax Compliance Act).
The Israeli government planned to start actively implementing the law in the country on September 20, which requires all non-U.S. financial institutions worldwide to report the financial information of American clients and U.S. green card holders who have accounts holding more than $50,000 directly and routinely to U.S. authorities, as well as proving that they don’t have American clients who don’t report earnings to the IRS.
Not limited to banks, FATCA compliance was specifically demanded from online forex and CFD brokers in Israel in order to not be disqualified from receiving a ‘Trading Arena’ license. However on Wednesday, just days before this process was due to go into operation in Israel, Justice Hanan Meltzer ordered officials to stop the preparatory work. An emergency hearing is to be held on the matter before September 15.
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Nigel Green, longtime vocal critic of FATCA and the founder and CEO of deVere Group – an independent financial advisory organization with more than $10 billion of funds under its advice and administration, and over 80,000 clients around the world – commented on the move saying it “should serve as a wake-up call for other countries to rethink enforcing this toxic, flawed, imperialistic legislation.”
Green explained: “Justice Meltzer’s action should be championed. His wise caution should serve as a wake-up call for other countries to rethink enforcing this toxic, flawed, damaging legislation that is being imposed on sovereign states around the world by the U.S. There are important questions to be asked about the imperialistic nature of FATCA. Countries and FFIs have been coerced into complying with FATCA’s sovereignty-violating, expensive, burdensome, privacy-infringing regulations by the U.S. – or face heavy penalties. In effect, these countries and FFIs are now working as de facto agents of America’s tax authority.
It is claimed by its proponents that this law is designed to catch tax evaders who illegally shelter money offshore. This is a noble aim. But FATCA cannot possibly tackle this extremely important global issue effectively due to its dragnet, untargeted approach. Instead what it does – because of its plethora of serious unintended adverse consequences – is to brand the 7 million Americans who choose to live and/or work overseas, including many of the 300,000 in Israel for example, as financial pariahs.
U.S. expats are now routinely rejected from foreign financial institutions (FFIs), such as banks in their country of residence, because FATCA’s costly and onerous regulations mean Americans are now typically deemed more trouble than they are worth. Similarly, American businesses working in international markets are now often branded with a leprosy-like status. Clearly, this can only be detrimental to their global competitiveness and could, in turn, hit American jobs and the long-term growth of the U.S. economy – which would then, of course, have far-reaching consequences beyond the U.S.”
Green concludes: “I hope that Justice Hanan Meltzer’s bold action will encourage other people of influence worldwide to reconsider FATCA. This could be a landmark moment in the fight to have this controversial and damaging law resigned to the history books.”