The Senate Hearing on unintended consequences of FATCA on April 26th may not have been a lively affair but, as a non-American with some small knowledge of the subject matter, it was certainly very interesting to hear the different viewpoints offered to the committee.

For instance, we heard metrics within the different testimonies offered what appeared to be somewhat contradictory and often not necessarily directly applicable to FATCA. It was equally strange in 2017, seven years into the mission, to hear that a committee raised to hear about unintended consequences had some people that clearly had different understandings of the, structure and implementation challenges and even the purpose of FATCA. I came away with the feeling that many of those concerned were, as the saying goes, using numbers like a drunken man uses a lamp-post – for support rather than illumination.

Several comments were made that if repeal were not feasible, that modification may be workable. In particular, what was called the Single Country Exemption. The problem as expressed to the committee is that many Americans with no real connection to tax evasion, are being caught up in FATCA and its reporting. These Americans are usually expats who need domestic banking facilities to be able to operate in their day to day lives. So, the single country exemption would provide a non US financial institution with an exemption on due diligence and reporting if their US client is resident in the same country as that in which they have their bank account.

But the single country exemption idea would not fix FATCA nor even come close. FATCA is a negative proof system. You have to do work in order to establish the status of your client. There is no essential difference in the work involved in establishing the FATCA status of your client, whether that result is a positive or a negative. The only difference that such an exemption would make would be to remove the reporting of such accounts to the IRS, but financial institutions must set themselves up to be able to report anyway under FATCA because they may otherwise have US clients that would not meet the conditions of the proposed exemption.

What’s really intriguing is trying to figure out in a post-Trump era whether this committee can actually get any real traction for a repeal. Were there to be a repeal, it would also have seismic, probably unintended consequences for the broader OECD initiatives. If the US repeals FATCA on the basis that its too blunt and expensive a tool and doesn’t actually generate enough additional tax revenues to justify the effort – the same argument could also be used by many governments (and their financial institutions) that are currently gearing up for AEoI.