An Israel court has thwarted a petition calling for data not to be transferred from Israel to the US as required under the US FATCA legislation.

An attempt to block Israel from sharing information with the US over the latter's extra-territorial FATCA regime has been thwarted by a court, media reports said.

Earlier this week Israel's High Court of Justice threw out a petition that sought to stop Israel's government sharing data with the US. Reports said the judges' reasoning for rejecting the petition will be made in due course.

Already subject to several delays in its rollout in recent years, the US Foreign Account Taxation Compliance Act, to give its full name, requires foreign financial institutions doing business with the US to show they have taken steps to identify US clients, or be subject to a 30 per cent witholding tax. The act, enacted originally in 2010, has encouraged dozens of foreign banks and other organisations to turn away US expat clients and close existing accounts, on the grounds that Americans pose an unprofitable compliance burden. Deutsche Bank and HSBC, for example, no longer serve US expat clients, although some firms, such as Royal Bank of Canada, make a point of doing so.

“It is difficult to think about a purpose of a law more worthy than this legislation, which is part of a long series of acts taken over the past 20 years to combat the black market, tax evasion and international crime. All of them require reporting that harms privacy,” Justice Menahem Mazuz was quoted by Israel-based news service Haaretz as saying.

The plaintiffs who brought the petition - a non-profit group linked with the US Republican Party and a dual citizen, Rinat Schreiber, who had an account at Bank Hapoalim - claimed the mechanism Israel had used for sharing data under FATCA breached Israel's Basic Law on Human Dignity and Liberty.

The FATCA Act has arguably been superseded to some extent by the Common Reporting Standard regime, which came into force for a first group of countries this year. The CRS creates a framework for countries to share data in the hunt for tax evaders. (For more details, see here.) Israel is among the second group of countries to adopt CRS, taking effect from 2018.

The FATCA legislation remains controversial and there have been attempts to repeal it or change it in US Congress. Rep Mark Meadows, a Republican member of Congress, has proposed legislation to ease its terms.

Announced on 7 September, the bill (HR 5935) would repeal the heart of FATCA. He has argued that FATCA “goes well beyond what is appropriate” and violates US citizens' constitutional right to privacy under the Fourth Amendment (source: Bloomberg BNA).

In 2013, Rand Paul, another Republican, sought to weaken FATCA but his legislation did not make it to the Senate floor for debate.