On December 29th, 2021, a Dutch court issued a ruling on FATCA that should make us all take pause and reflect on the state of tax reform for Americans living outside the US.
In the case, a local Dutch bank attempted to terminate the accounts of an “Accidental American” due to his refusal to obtain and provide a US Social Security Number (SSN). In an earlier hearing, he informed the judge that he spent only the first year of his life in the US, was unaware of his US citizenship until recently, and found the obligation to pay taxes to a country he never worked in to be unjust.
The judge ultimately ordered the bank to keep the American’s accounts open, conditional upon the account balance staying below the $50,000 threshold that would trigger special reporting for the bank. The expressed rationale was that even though non-US banks must collect SSNs from all American citizen customers, individuals have a clear interest in having the bank accounts necessary to live an ordinary life. Small accounts are also not reportable by the banks.
While this ruling applies to specific situations in one country, it is indicative of a broader trend of foreign legal scrutiny being placed on a US tax system that is often viewed as disproportionate, unjust, and broken.
Despite desperate requests from middle-class Americans abroad to lawmakers concerning financial access and tax issues, the situation has continued to worsen for many people. Because of this, a growing number of individuals have turned to foreign governments to seek protection from a US system in need of serious reform.
Countries are becoming increasingly aware of this indifference to the multitude of issues facing Americans abroad and at home, and they are taking measures into their own hands in ways that may not align with the interests of the US Congress. Americans abroad have a clear view of how the US is viewed and perceived around the world; we care deeply about our home country and want to ensure that the US continues to be viewed as a world leader. Fixing the US tax code to ensure middle-class Americans abroad are treated fairly is necessary to secure America’s future, both domestically and around the world.
In the coming months, the Democrats Abroad Taxation Task Force will be updating its policy positions and redoubling its advocacy for Residence Based Taxation. We have a model that addresses the needs of overseas citizens, is enforceable and sustainable even with limited foreign cooperation, and will continue to protect the interests of Americans worldwide.
We urge Congress to work with Democrats Abroad to properly resolve this issue which is clearly within their jurisdiction.
For English-language news about this court ruling, a number of free and paid articles are available:
- https://americanexpatfinance.com/news/item/875-potential-precedent-seen-as-dutch-court-rules-in-favor-of-aries
- https://nltimes.nl/2021/12/30/court-volksbank-wrong-close-accounts-accidental-american
- https://www.law360.com/tax-authority/articles/1452752/dutch-bank-can-t-close-accounts-under-fatca-court-says
- https://news.bloombergtax.com/daily-tax-report-international/dutch-banks-barred-from-shutting-bank-accounts-of-u-s-citizens
Click here to sign up for the Democrats Abroad Taxation Task Force Newsletter to keep up to date on our tax advocacy efforts.