A prominent Israeli immigrant organization is urging Americans in Israel to protest new United States regulations that require financial institutions here and globally to reveal certain information about their accounts to U.S. tax authorities.
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“The legislation — designed to catch tax cheats — has turned the lives of hard-working Americans living abroad into nightmares,” warned Association of Americans and Canadians in Israel national president Asa Cohen in an email Tuesday urging its estimated 35,000 members to contact members of Congress.
Yesterday, the Bank of Israel announced a framework for a bilateral agreement between Israel and the U.S. that would provide for a liberalized implementation of FATCA — the Foreign Account Tax Compliance Act — in general and for noncompliant bank customers in particular. Complete terms of the tax treaty were not immediately disclosed.
In March, the Bank of Israel advised Israeli banks to begin gearing up to provide information. As Haaretz has reported, Israeli banks have been warning American customers for several years that their Israeli accounts would be frozen unless they report their bank accounts to the U.S. tax authorities.
“Because complying with FATCA is costly for banks — including those in Israel — many are refusing to open any new accounts for U.S. citizens,” wrote Cohen in the email, listing a litany of problems the tax legislation, first passed in 2010, has triggered.
“There have been reports of banks asking customers with a U.S. Passport or U.S. Green Card to provide proof they are compliant with current U.S. foreign account disclosure requirements,” Cohen alleged. “Some banks have even gone so far as to ask customers to close their existing accounts. There have even been instances where Americans living abroad have been refused local mortgages, pension plans and life insurance policies.”
Don Shrensky of Aboulafia Avital Shrensky & Co., an Israeli firm specializing in both U.S. and Israeli tax planning and compliance, has for many years assailed demands by some Israeli banks that customers submit a copy of their U.S. tax returns and waive their rights to privacy.
“Under FATCA, the Israeli bank has no obligation to ensure the customer is complying with U.S. income tax and bank secrecy laws,” Shrensky told Haaretz. “The banks only have an obligation to identify their client as a U.S. person and to report to the United States government information about the account in Israel, such as the balance of the account.”
Asked to comment on Cohen’s allegations about Israeli financial institutions, Ofra Preuss, a spokesperson for Bank Hapoalim, told Haaretz in a statement, “The Bank’s policy has been, and continues to be, to comply in full with all the requirements of FATCA. The Bank will not be able to serve American customers who do not adhere to said requirements.”