FATCA pushback erupts for first time in Middle East

"U.S. expats in UAE call for reform of tax rules for overseas citizens" was the headline of the article on the website of Arabian Business, a weekly magazine published in English and Arabic out of Dubai.

"American expats from both sides of the U.S. political spectrum are calling for an end to laws that mean they have to report and pay U.S. taxes on money earned abroad, with Democrats and Republicans alike calling for the practice to be abolished," the article went on, before going on to explain how FATCA, coupled with the U.S.'s system of citizen-based taxation, results in millions of Americans who live overseas being "unable to avoid paying taxes both to their country of residence and to the U.S."

The article then quoted Republicans Overseas chief executive and vice chairman Solomon Yue as saying that the system was "unfair", and resulted in expats "paying your local tax [abroad] and Uncle Sam's tax". 

Democrats Abroad UAE spokesperson and executive committee member Tony Graham then added, according to the Arabian Business article: "The overwhelming majority of Americans, including most members of Congress, don't understand this is a global anomaly that needs to be reformed." 

Although official data isn't available, estimates of the size of the American population currently resident in the UAE is relatively small – one 2015 estimate put it at around 50,000, or 0.52% of the total. And if anything, experts say, that number has probably fallen since then, as other nationalities are cheaper to hire – in part because of FATCA – and as the UAE has been encouraging companies to hire Emirati nationals whenever possible.

Major corporations have also been cutting back on the lavish expat packages that used to be routinely offered to encourage executives to relocate to unfamiliar outposts, which, for most Americans, the UAE would be considered to be.

However, in addition to such corporate expats – who rarely stay in the UAE more than a few years – an unknown but probably sizeable number of UAE residents are believed to fall into the category of "accidental Americans", that is, individuals who consider themselves to be citizens of other countries, such as the UAE or Saudi Arabia, but whom the U.S. considers to be American citizens, and thus obliged to file tax returns and potentially to pay U.S. taxes. 

As recent events in Europe have shown, such "accidentals" tend to be particularly resentful of suggestions that they should file tax returns and potentially pay tax to a company they have spent little, if any, time living in, and which they have no intention of returning to. 

To read the Arabian Business article click here.

One Middle Eastern country that did briefly push back against FATCA a few years back was Israel, where opponents managed to postpone the law's implementation by two years, and a group known as the Republicans Overseas Israel managed to take a legal challenge as far as the Israeli Supreme Court. The challenge proved unsuccessful, however, and no further attempts are known to have been made.