{Special to The Jewish Press Online}
If you think that the order by Israel’s Supreme Court to delay the release of personal financial information to the Americans will last, ask yourself:
Do you really think Israel will jeopardize its relationship with the United States to protect information about Americans’ accounts here that those Americans are supposed to be reporting to the IRS anyway?
While the case is waiting to be heard, it is possible to project two possible outcomes:
1. The Court won’t let its citizens’ financial privacy jeopardize its overall relationship with America and will in good faith transfer information that law-abiding dual citizens should have been reporting anyway.
2. The Court will prioritize the personal privacy of Israel’s citizens and block the transfer of information, which will potentially create a 30% withholding penalty of U.S. transactions by Israeli financial firms.
Israel’s Supreme Court Trying to Stop Privacy Violations
“Israel’s highest court has temporarily blocked the government from transferring the financial information of every American citizen to the U.S. Treasury in accordance with FATCA regulations, pending a September 12 hearing contending the regulation is unfair,” reports The Jewish Press.
“Unfair regulation?” Probably. But ultimately, the transfer of financial information is a major policy goal of the Obama administration. They’ve been successful at getting bastions of confidentiality, including Switzerland, perhaps the most secret banking jurisdiction of all, to hand over details of its American clients to the U.S. government, so why should Israel be any different?
Countries not cooperating with America’s imperial FATCA decree (Foreign Account Tax Compliance Act) include real winners like Afghanistan, Botswana, and the Democratic Republic of the Congo. Does Israel belong on this list?
What Americans in Israel Need to Do
American tax-payers have been required for years to submit an FBAR (Foreign Bank Account Report) to the United States, informing the government of accounts held outside the U.S. Those who don’t file are subject to harsh penalties.
Many have decided that the risk of non-compliance and the hassle of being kicked out of their banks has made investing in Israel – or anywhere in the world
other than the United States – too much trouble. On the other hand, they’ve also discovered that brokerage firms and banks in America don’t want to open accounts for them either. As a result of an October 1, 2016 deadline implemented by some big U.S. brokerage firms, many clients have had to move their investment relationships somewhere else. They’ve been left in a lurch, since they can’t invest normally in Israel, and their American firm has locked them out.
How to Open a U.S. Account from Israel
In my office in Jerusalem where we help people in Israel with their U.S. investment, IRA (Individual Retirement Accounts), and brokerage accounts, we’ve seen a great demand for guidance about how to open a U.S. brokerage account when you don’t live in the United States. We even produced an online toolkit to give people the resources they need to solve the problem. Anyone can download the toolkit for free by clicking here.
Since I deal with investments, I’m not a constitutional law expert, so I can’t predict the outcome of the current Supreme Court case in Israel. However, given the fact that Israel signed a deal with the United States in 2014 to engage in information sharing, and since banking centers around the world, from Australia and Brazil to the United Kingdom and the Vatican have made FATCA a norm in the banking world, I don’t think that this court case will do anything more than delay implementation for a short time.
What should you do now?
Americans overseas need to get their financial affairs set up properly and transparently (learn how to do this here) and they need to speak with their accountants to make sure that they are in compliance with all tax reporting obligations.
Some people describe the FATCA information sharing agreement as “Google for the tax authorities.” They will simply type your name into a search engine and find out everything about you. Though we may have philosophical disagreements about the sanctity of privacy, the reality is that there is none.
