The FATCA Law: An Exception to the General Principles of Law

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Abstract

For a long time, fiscal cooperation between states, as a tool to combat international tax fraud and evasion, was primarily based on bilateral or multilateral agreements. These arrangements allowed the exchange of information within a strictly conventional framework, thereby ensuring the respect of state sovereignty.

Today, this dynamic has taken on a new dimension. The most striking example is the U.S. law FATCA (Foreign Account Tax Compliance Act), which requires banks and financial institutions worldwide to report information on their American clients—whether U.S. citizens or residents—to the U.S. tax authorities. Non-compliance with these provisions can result in severe sanctions, including the potential loss of banking licenses in the United States, which has compelled many countries to implement FATCA’s requirements.

This study thus aims to closely examine the various implications raised by this American information-exchange standard. Although it is a domestic law, the U.S. approach to combating tax evasion raises several critical issues, as it challenges fundamental principles of law, such as state sovereignty and certain public freedoms.

FATCA therefore marks a new era in international tax cooperation, where American unilateralism plays a driving role, sometimes at the expense of the traditional balance in fiscal relations between states. Nevertheless, U.S. efforts in this domain have inspired similar global initiatives, such as the Common Reporting Standard (CRS) promoted by the OECD. Unlike FATCA, the CRS is based on multilateral and automatic exchange of financial information among participating countries, aiming to establish a universal standard to detect tax fraud and prevent taxpayers from hiding assets abroad.