For two years, much of the global financial community has been in an uproar about a pending U.S. law that has barely been noticed in the United States. That may soon change as the unacceptable costs of the "Foreign Account Tax Compliance Act" become fully apparent.

Enacted in 2010 as a supposed revenue-raiser pasted into an unrelated bill with almost no debate, FATCA requires every foreign financial institution in the world to collect data on U.S.-owned assets it holds and report them directly to the Internal Revenue Service. Any FFI failing to comply will have 30 percent of its U.S.-derived income withheld.

Together with additional complex rules, firms expect aggregate compliance costs in the tens of billions of dollars. In February, the U.S. Treasury Department released 388 pages of draft FATCA enforcement regulations, now being finalized.

At the same time, Treasury announced an agreement in principle with five major EU governments for a reciprocal "partnership": instead of requiring FFIs in "partner" countries to report U.S.-owned assets directly to the IRS, they will report to their own governments, which will pass the information on to Washington.

In return, the United States will require domestic American institutions (banks, stock and equity funds, pension funds, insurance companies, etc.) to report to Treasury on assets belonging to citizens of the "partner" countries for transmittal to their governments.

As additional countries join the initial five "FATCA partners," a multi-governmental, perhaps eventually a global, financial information-sharing structure is forming.

Draft regulations on U.S. institutions to implement the international "partnership" agreement have yet to be published and understandably most Americans have not yet noticed FATCA. But as the FATCA boomerang begins its return flight back toward the United States, myths already well-established abroad are beginning to shatter:

Myth 1: FATCA's costs will fall only on foreigners, not Americans.

The canary in the FATCA coal mine is the 5 million strong U.S. expatriate community, already being treated as financial lepers by FFIs afraid of the 30 percent withholding penalty.

If only a tiny fraction of $21 trillion in foreign investment in the United States were pulled out over FATCA fears, the impact on the U.S. economy and jobs could be devastating.

Now, with FATCA-like requirements also in the offing for U.S. domestic institutions, costs can be expected to be passed on to consumers, raising expenses for all Americans.

Moreover, the "partnership" agreement will require transfers of personal financial information of millions of Americans (starting with dual nationals) and foreign residents with uncertain data protection to foreign governments and, in all likelihood, eventually to a central international repository.

FATCA may also facilitate longstanding efforts to create a "global high-tax cartel" and even a supranational financial transaction tax.

Myth 2: By cooperating with the United States, foreign "partner" governments are rescuing their firms from a crushing compliance burden.

Many firms in the five "partner" countries are breathing a sigh of relief that they will report to their own governments, not to the IRS, and firms in other countries are demanding their governments join in. They are mistaken.

Upon examination, it's clear who really is being rescued here: the IRS.

Saddled with the Sisyphean task of extraterritorial enforcement on each and every financial firm (as broadly defined under FATCA) in the entire world, Treasury already had delayed by more than two months the release of draft FATCA regulations last year -- until it could unveil the "partnership" agreement, which in effect "allows" foreign governments to do IRS's job for it.

While it's possible the "partnership" may provide foreign firms with some modest respite (and eliminates their terror of FATCA's withholding provision), compliance costs -- under domestic laws and regulations that will parallel the IRS's 388 pages -- may actually turn out to be greater than just complying with the IRS's mandates.

If, as described in the "partnership" announcement, FATCA becomes the "common model for automatic data exchange of information," FFIs face the prospect of reporting on assets from multiple countries, not just one. In addition, under domestically imposed "partnership" compliance requirements, individual firms could be deprived of the ability to make their own business decisions about maintaining U.S. clients and investments weighed against compliance costs.

Myth 3: FATCA is only about making "fat cats" pay their fair share.

The congressional Joint Committee on Taxation estimates FATCA's revenue benefit to the U.S. Treasury at less than $1 billion yearly, out of yearly tax revenues of about $2 trillion a year. No cost/benefit study has been conducted about the comparatively trivial revenues FATCA stands to "recover" versus untold costs of compliance (soon to be extended to domestic U.S. firms and consumers under the "partnership"), administrative costs to the Treasury and foreign investment withdrawn from the United States (and consequence job loss and reduced tax revenues), not to mention the incalculable impact of creating an international financial data fishbowl.

Myth 4: FATCA is set in concrete -- all we can do is live with it.

Absolutely not! FATCA's vulnerabilities are increasingly evident as a clearer picture emerges of the long list of oxen that will be gored: American expatriates, dual nationals, resident aliens, U.S. consumers of financial and investment services of any sort, workers in foreign investment-dependent industries and anyone and everyone who doesn't want their private financial data shared with who-knows-who -- not to mention U.S. and foreign firms (notably those in countries inclined to resist joining the "partnership") saddled with costs completely out of balance with FATCA's supposed revenue purpose.

To the trained Washington eye, FATCA presents what military planners call a "target-rich environment," for first rendering unenforceable the "partnership" agreement and the FATCA regulations (slated to be phased in beginning in January) and then for final repeal of this monstrosity.

During this election year, presidential and congressional candidates need to be put on the spot where they stand on FATCA.

(James George Jatras is a principal of Squire Sanders Public Advocacy, a Washington government relations firm, and specializes in international issues. He previously served as a policy analyst for the U.S. Senate Republican leadership and as an American Foreign Service Officer. He can be reached at [email protected].)

(United Press International's "Outside View" commentaries are written by outside contributors who specialize in a variety of important issues. The views expressed do not necessarily reflect those of United Press International. In the interests of creating an open forum, original submissions are invited.)