Anti-tax advocates on Wednesday applauded an effort by Senator Rand Paul to roll back important sections of a U.S. law designed to fight tax evasion by Americans with assets stored overseas.

In a move tax experts said would effectively gut the Foreign Account Tax Compliance Act (FATCA), Paul has proposed stripping FATCA of key enforcement and information reporting requirements.

Though the Kentucky Republican’s bill has little chance of winning approval in the Democratic-controlled Senate, it was greeted with enthusiasm by opponents of the controversial law.

“Unsuccessful tax systems attempt to force other countries to become their tax collectors,” anti-tax activist Grover Norquist said. “That’s what FATCA is, and it should be repealed.”

The Credit Union National Association, a lobbying group for thousands of U.S. credit unions, expressed support for Paul, saying FATCA will pose heavy compliance costs on credit unions.

The conservative National Taxpayers Union said FATCA’s international reach will add burdens for businesses and individuals in the United States. “Senator Paul deserves a round of applause,” the group said in a statement.

Starting in 2014 under FATCA, foreign banks, investment funds and other financial institutions will have to tell the U.S. Internal Revenue Service about Americans with accounts that are worth more than $50,000.

Foreign firms failing to comply could effectively be frozen out of U.S. capital markets. Under Paul’s bill, this penalty would be scrapped.

“Basically what this does is wipe (FATCA) off the books,” said Alan Granwell, a former U.S. Treasury official now with law firm DLA Piper, of the Paul legislation.

The bill would also eliminate a FATCA requirement that U.S. citizens report certain offshore assets as part of their income tax filings.

“FATCA violates important privacy protections, disregards the sovereign laws of other nations and will cost the U.S. economy hundreds of billions of dollars in compliance costs,” Paul said in a statement on Wednesday.

Popular with Tea Party supporters and libertarians, Paul is seen in some circles a possible presidential contender in 2016.

The U.S. Treasury and the IRS are already implementing FATCA ahead of next year’s start date. Paul’s bill will not affect the IRS’s implementation, said Mary Burke Baker, a former congressional staffer and now a lobbyist for major corporations.

Members of Congress will be hard pressed to support Paul’s bill and “say they support something that’s going to inhibit the U.S. ability to identify U.S. offshore tax evasion,” Baker said.

(Reuters)