Tiny island nation standing up to ‘hare-brained’ tax haven law

In the 1950s Cold War satire The Mouse That Roared, the minuscule Duchy of Grand Fenwick declared war on the United States in the hopes of a speedy defeat and a Marshall Plan-type reconstruction. Instead, the plucky Fenwickians inadvertently won.

Unlike Grand Fenwick, the island Republic of Trinidad and Tobago is a real country located at the southern end of the West Indies, just off the Venezuelan coast.

{mosads}Nobody’s talking about a war there, but in a gutsy move, Kamla Persad-Bissessar, Trinidad and Tobago’s former prime minister and current leader of the parliamentary opposition, recently took an action that leaders of far more powerful countries feared to take.

Persad-Bissessar questioned the future of the so-called “Foreign Account Tax Compliance Act (FATCA),” an ill-conceived U.S. law few Americans have heard of. 

FATCA, enacted by Democrats in 2010, is an indiscriminate information dragnet requiring all non-U.S. financial institutions in every country to report data on all specified U.S. accounts to the IRS.

How can foreign institutions outside legal U.S. jurisdiction be forced to comply? Simple — the threat of sanctions. If any country refuses to comply, it will be hit with crippling penalties to its financial sector that will tank its economy.

Experts around the world have called FATCA “hare-brained,”  “sheer idiocy,” the “worst part of the internal revenue code,”  “an act of economic strangulation,” “heavy-handed, inequitable and hypocritical,” and “a hammer blow for American jobs and the broader U.S. economy.”

Even worse, for reasons too complicated to detail here, because FATCA is unenforceable without abrogating other countries’ personal data privacy laws, Barack Obama’s Treasury Department concocted a series of bilateral “intergovernmental agreements” for which the Treasury has no statutory authority, under either FATCA itself or any other law.

While these agreements read like treaties and are duly ratified as such by foreign “partner” governments, they are not submitted to the U.S. Senate for its advice and consent under the U.S. Constitution.

Presented with the ultimatum of signing the faux treaties that compromise their sovereignty, gut their citizens’ privacy protections, and pass FATCA’s staggering compliance costs on to their consumers and taxpayers, countries have rushed to submit.

Even major financial powers like Britain, Canada, Switzerland, and Germany have bowed the knee, both signing the agreements and enacting domestic legislation to implement them. 

But not tiny Trinidad and Tobago.

More precisely, the Trinbagonians signed like everyone else, but when it came time to pass domestic laws dictated by Obama’s Treasury Department, the opposition, led by Persad-Bissessar, hit the brakes.

She and her party successfully blocked efforts by the government of Prime Minister Keith Rowley to rubberstamp the legislation and, instead, forced it to a special committee where its impact on all Trinbagonians is now being assessed.

Further, Persad-Bissessar noticed something seemingly overlooked by every other government or opposition leader on the planet — the United States just had an election, and the 2016 Republican Platform calls for FATCA’s repeal.

With appropriate deference, Persad-Bissessar suggested to Prime Minister Rowley that he write then-President-elect Donald Trump and ask him what he intended to do about FATCA.

The government refused, with Finance Minister Colm Imbert scolding her that Trump “did not have time for this.”

So, on Jan. 13, a week before Trump’s inauguration, Persad-Bissessar decided to write to Trump on her own, noting both the GOP Platform language and Trump’s pledge to overturn instances of his predecessor’s executive overreach.

Writing in the Trinidad Guardian, Dr. Hamid Ghany of the University of the West Indies also noted that Persad-Bissessar’s letter to Trump is copied to incoming Treasury Secretary Steven Mnuchin, OMB Director-designate Rep. Mick Mulvaney, White House Chief of Staff Reince Priebus, Sen. Rand Paul (R-Ky.), and Rep. Mark Meadows (R-N.C.), as well as the respective ambassadors of both countries.

These recipients are well-chosen. Sen. Paul and Rep. Meadows have sponsored bills to repeal FATCA, and  Mnuchin and Mulvany would have legal authority to nullify the agreements without which FATCA is unenforceable.

Also, as Ghany notes, Priebus has shown a personal interest in FATCA, pointedly denouncing it as a violation of constitutional rights and protections afforded to overseas Americans. 

“Priebus has the ear of the president and runs the White House. It is absolutely imperative that the Parliament of Trinidad and Tobago get some indication from Washington about the approach of the Trump administration to FATCA before legislation violating human rights is enacted here,” Ghany stated.  

In response to Persad-Bissessar’s letter, Obama’s departing ambassador, John Estrada, has undiplomatically impugned her integrity, baselessly insinuating ulterior motives.

The Rowley government likewise has resorted to a sleazy scare campaign, warning of the economic ruin we Americans will inflict on Trinbagonians if they don’t submit and accept “some adjustments to local law” — code for surrendering national sovereignty and privacy rights.

The fact that none of this harm would ensue if FATCA is repealed went completely ignored.  

Persad-Bissessar is to be commended for her Fenwickian audacity. She has pitched a softball to Donald Trump, who can now hit it out of the park.

Their response to her should be that they will keep faith with the platform language and include repeal of “the worst law most Americans have never heard of” in the upcoming tax reform package. They can also expedite FATCA’s well-deserved demise by pulling the plug on the faux treaties.

James George Jatras is a former U.S. diplomat and foreign policy adviser to the Senate GOP leadership. He edits www.RepealFATCA.com and recently published a major study, “How American Media Serves as a Transmission Belt for Wars of Choice.”

The views of contributors are their own and not the views of The Hill.