updated 2:11 PM CET, Oct 31, 2023

French lawmakers’ report on ‘accidentels’ says France should consider unilaterally giving up FATCA reporting

A French Assembly report is calling on the French government to engage in further negotiations over FATCA, and if necessary abandon it altogether, if it is unable to resolve the "extra-territorial tax" problems currently being faced by thousands of French citizens who also happen to be Americans. 

In addition, the U.S. must create a new role of a “fiscal attaché,” to be based at the American Embassy in Paris, to give dual American/French nationals someone they can go to with their issues, the authors of the report, French Assemblymen Marc Le Fur and Laurent Saint-Martin, say.

And in the short term, the U.S. should extend a soon-to-expire moratorium that currently exempts European banks from having to report certain information to the U.S. authorities about their American account holders, Le Fur and Saint-Martin note.  

Le Fur, of the center-right French Republican party, and Saint-Martin (pictured above), of the center-liberal En Marche party, unveiled the report at a press conference this morning in Paris.

FATCA (the Foreign Account Tax Compliance Act) is a package of regulations that was signed into law in 2010, which has enabled the U.S. to enforce its globally-unique citizenship-based taxation regime for the first time, with major consequences affecting American expats ever since. 

Today's report is the latest in a series of indications that a growing number of countries around the world are becoming increasingly unhappy about FATCA – or, as this report suggests, the combination of FATCA with America's citizenship-based tax regime, which is said to be unique in the world, apart from that of Eritrea.

Last month, a U.S. Government Accountability Office report acknowledged that FATCA was causing severe problems for those having to comply with it, and noted that it had contributed to a "nearly 178%" increase in the rate of citizenship renunciations between 2011 and 2016.

With respect to renunciations, the French lawmakers' report unveiled today calls on the U.S. to make it easier and cheaper for French citizens who wish to renounce their American citizenship to do so, including by returning the renunciation fee to its “previous amount of US$400” from its current US$2,350 – and exempting altogether anyone on a low income.

A copy of the report is due to be posted on the National Assembly's website here, in due course, a spokesperson for Saint-Martin said.

'Denunciation' a 'perfectly feasible option'

In their report, a synopsis of which was made available to journalists, Le Fur and Saint-Martin say that if a satisfactory outcome with respect to making life easier for France's dual U.S./French citizens is not forthcoming, the “denunciation” of FATCA “should be considered as a perfectly feasible option.”

First, though, they say, the French government "must engage in genuine negotiations" with the U.S., and, with respect to "all these issues," a "common approach must be sought and promoted at [the] EU level."

They also urge the French authorities to "force [French] banks to stop discriminating" against clients on the grounds that they're American.

Strength of proposals welcomed

Fabien Lehagre, the founder and president of the Paris-based Accidental Americans Association, who has been lobbying French and European lawmakers about the way American expatriates are taxed, particularly if they – like he – have lived most of their lives outside of the U.S. and don't consider themselves to be American, welcomed the report, and praised its forceful recommendations.

"Some proposals are extremely strong politically, and that is good, because the U.S. government will not be able to turn a blind eye to the problem," he said on Wednesday.

Lehagre, who was born in the U.S. but came to France at the age of 18 months, founded the AAA in 2017. The organization has estimated that there are more than 10,000 ‘accidentals' in France, and as many as 300,000 across Europe.

'Perverse and unforeseen effects'

Le Fur and Saint-Martin begin their report by explaining how France's "bi-nationals" come to be subject to "considerable injustices in banking and taxation."

They cite three legal quirks that combine to cause the problems the accidentals are experiencing: the fact that it's possible to acquire American citizenship "simply by birth in the United States or by descent," without any need on the part of the individual to maintain ties with the country; the unusual, citizenship-based nature of the American tax system; and the introduction of "an extraterritorial law" (FATCA) in 2010, prior to which "the imposition of American taxation on American-born French nationals or [children of American parents] remained largely theoretical."

They go on to describe FATCA's effects on accidental Americans living in France as "the perverse and unforeseen effects of a commendable scheme for the fight against tax fraud and tax evasion in the context of the 2008 [global financial] crisis."

Among some of the other possible solutions to the problems currently facing accidental Americans in France, according to the two French Assemblymen:  

  • The "situation of 'accidental Americans'" be placed on the agenda of the European Union's Council of Finance Ministers

  • The U.S. administration be "remind[ed]" of "its commitment to obtain from Congress the authorization to communicate to the DGFiP [General Directorate of Public Finance] the balance of accounts and the surrender value of life insurance [contracts] held by French [citizens resident] in the United States and, in the interval, suspend the transfer to the IRS of [this] data collected by [France's] banks"

  • Key elements of the existing U.S./French tax convention "relating to income, contributions and capital gains" be updated, in such a way as to prevent the risk of double taxation  

European bank warning 

As reported, the head of the Brussels-based European Banking Federation, which represents some 3,500 banks across Europe, warned U.S. Treasury officials in February that American expatriates could be expected to continue to struggle to get and keep bank accounts if measures weren’t taken to address many of the problems his organization's members were having to deal with in their efforts to comply with FATCA – particularly beginning next year, when European banks will begin having to report their American clients’ “Tax Information Numbers.” This is because the moratorium suspending this requirement is due to expire on December 31.

TINs are said to be problematic for so-called “accidental Americans” who weren’t born in the U.S., because few such individuals have them, and they can be difficult for non-resident Americans to get.

In March, as part of its efforts to keep up the pressure on France’s banks and its government, the AAA filed a legal complaint against a number of French banks, alleging that these institutions had been actively discriminating against French citizens who also happen to have American citizenship, in violation of European banking laws.

The complaint was filed with the Paris Public Prosecutor "against several online banks" on behalf of the AAA by Dupond-Moretti & Vey, a French law firm. The banks in question have yet to formally respond to this complaint.  

Also yet to be ruled on is whether FATCA is constitutional, under French law, following hearings held by the Conseil d’Etat, France’s top administrative court. Similar hearings were held recently in Canada, while an earlier attempt in the U.S. to challenge FATCA's constitutionality failed. 

To view a video of Le Fur and Saint-Martin discussing the issues facing French-American dual citizens in France, as a result of FATCA – in French  – click here. 

Click here to receive the American Expat Financial News Journal's free weekly news bulletin, and occasional breaking news bulletins...