A law which is unjust does not seem to me to be a law.
St. Augustine, On Free Choice Of The Will 1.5
Once a free person determines that a law is unjust, it is not wrong, if he or she disobeys that law. I consider the FBAR law unjust, especially in its application to US persons abroad, who by nature of their residency outside the United States, innocently open up financial accounts to store and invest the capital that they have saved after duly paying taxes.
Residents of the United States do not face similar requirements, like Form 8938, of enumerating their assets for the IRS and the Treasury department, and those of us living abroad feel that the law unjustly takes away our privacy rights protected by the Fourth Amendment.
Do we then become lawbreakers if we refuse to comply with FBAR, Form 8938, or Form 8854? It is a timeless principle of law that an unjust law is no law. So no, we do not become criminals when we refuse to obey laws that are unjust. Conversely, the enforcer of unjust law becomes a criminal, and hence, I accuse Timothy Geithner, Douglas Shulman and Barack Obama of committing crimes against Americans abroad because of their enforcement of unjust laws in an unjust manner–which would deprive Americans abroad of their property without due process of law.
Principle of Expediency
All things are lawful for me, but all things are not expedient.
St. Paul, 1 Corinthians 10.23 (KJV)
To the Corinthians, who claim the right to do certain things, Paul responds essentially that even if he were to grant their premise, it is not always expedient to exercise such rights. In the end, it is necessary to judge whether an action is expedient, given the circumstances. When in the position of powerlessness, a victim of unjust laws, the rule of thumb is to do what is expedient to the degree possible. Let’s say a tyrannical policeman comes to the door and demands $10 doorknob tax or he will kill me. It is not just to have to pay such a tax and the punishment is disproportionate, but it is not expedient to die over $10. One must therefore judge whether to obey an unjust law, or to disobey the unjust law and suffer the consequences. If the police man came to the door and said, “Do you have any Jews in your house?” If you lie, you save a life. You may have broken an unjust law, but in this case, human life is at stake, not just $10. A person must thus weigh the benefits and the consequences of civil disobedience.
Thus, I argue that as a Canadian resident in Canada with all my wealth in Canada, I can afford to disobey the following IRS requirements: FBAR, Form 8938, or Form 8854. (1) These are requirements of unjust laws; (2) the United States cannot enforce these requirements here in Canada; (3) I may, however, suffer the consequence of losing access to the United States. Indeed, I have already lost access, since I don’t want to go to prison over the comments I have openly made against FBAR and my intention of disobeying that law.
But it is expedient for me to file 1040 returns up to the time I expatriated, because in certain circumstances Revenue Canada will collect taxes for the IRS. Since I owe no US taxes, and they may decide that I do, it is likely better that I file, even though extra-territorial taxation laws are unjust–so much so that the United States and Eritrea are the only two countries in the world that think such requirements are good and proper–the rest of the entire world has realized that extra-territorial taxation is either unrealistic or just simply unfair.
Others will find that expediency demands them to obey all the requirements, including the most outrageous ones like FBAR. They cannot afford to have to lose their access to the United States. In that case, it may be expedient to obey an unjust law.
The U.S. government has become a “Monster”.
Or to put it another way, there is no necessary connection between law and morality.
Content of a law:
Once upon a time, the United States was country that legislated on the premise that there is a connection between the morality of the law and the content of the law. That is the reason for a number of constitutional protections including the bill of rights. Obviously Congress has little concern about the content of laws.
Administration of The Law
Let’s imagine for a moment that things like FBAR can pass some kind of “morality test” based on purpose. The administration of the law is immoral. The IRS is trying to collect FBAR fines from hard working honest taxpayers who did not (and arguably could not) have known about the FBAR rules.
It is clear that there are many laws (in terms of both content and administration) are immoral.
Compliance with the law:
It seems to me that “compliance with the law” raises moral issues (even in relation to immoral laws). There are many who believe that there is a moral duty of compliance. In other words, should one simply accept that if there is a law – that there must be compliance. Well, the IRS likes to make public examples out of those who don’t comply.
Ghandi and the British
As I write this comment, I am thinking about Ghandi’s “passive resistance” movement.You seem to have adopted a “Ghandi like” principle of “passive resistance”.
Many of us do find ourselves in a position of having to obey these laws to maintain lawful access to the US. It is an individual decision.
But unjust laws in some cases lose their legitimacy when large numbers of people refuse to obey them. There were many such laws under the Soviet regime and those which proved unenforceable were widely flouted, such as the requirement for citizens to register overnight guests with local authorities. Laws that are viewed in this way undermine the respect and fear the people have for the law and for the governing regime that enforces them. The IRS is increasingly viewed as illegitimate due to the unreasonable demands for reporting and tax filing upon people who have no ties to and no history with the US, and for the impossible rules that banks and other financial institutions have to adhere to in order to maintain access to the US economy. In the end the world will move on and leave the US behind.
To use a “Malcolm Gladwellism” – FATCA will be the “Tipping Point” that forces the rest of the world to “move on”.
I still suspect that in a few years they’ll realize it’s costing far more both in costs and reduced investment in the US than bringing in; and with its universal unpopularity may hopefully be stopped. But I am also certain that worldwide reporting of income and possibly worldwide assets will become the norm for residents in many other countries, due to more openly exchanged information. We’re all globally connected so we’re in a new era…
But, of course, it’s the onerous reporting and compliance costs being imposed on expats and accidental Americans living overseas which is causing so much resentment.
Yes, it is incredibly discriminatory. Clearly one way to solve the problems (at least prospectively) would be to move to the U.S. But, after all of this, the resentment is so great, that I suspect many who would have returned will not.
Also, if you have the courage, you could put your money in banks located in the U.S. For those with no other assets this could solve the FBAR problem.
Yes, I almost feel it would be easier to leave my US assets in my American brokerage account because it’s completely US compliant with the annual 1099. I am going to seek further professional advice but could remit the dividends to the UK annually for a small fee. I also think it’s handy to keep some money over there in case I had an emergency during a visit, etc. I seriously doubt that these assets will be seized, especially as I have become compliant.
“Our lives begin to end the day we become silent about things that matter.”
— Martin Luther King Jr.
For Canadians there is a filing requirement if foreign assets exceeds $100,000. This requirement comes with excessively draconian fines as well.
This is just the thing: if anything, I think more and more countries will require their residents and tax payers to declare all their foreign accounts and assets if they are above a set limit.
The UK is also cracking down on offshore tax evasion. Unlike Canada, I have the impression they would be willing to cooperate with the IRS to collect US taxes and FBAR fines, especially if they suspected deliberate under-reporting of my US income.
The UK also has similar discrimination against investing in offshore mutual funds to US pfic taxation. I believe global reporting will become a widespread requirement, especially as it’s become so much easier to invest abroad via the internet. Welcome to the future!
But, of course, it’s the outrageous way that the US imposes such onerous reporting on all US persons living abroad that is unique. It thus forces me to pay for extra professional fees of at least $2000 annually, going forward. I realise that’s not a fortune but it means an extra expense I’ll have to budget for indefinitely. I resent being liable to two tax jurisdictions and all the complex tax planning it requires.
Eventually such reporting would collapse under its own weight. Banks can’t report to 90 different countries in the world. They would spend all of their time filling out paper work for two different countries for nearly every account– satisfying the requirements in dozens of different languages. It is ultimately self-defeating. Thus, I predict the opposite. I believe that FATCA will soon instead lead to greater bank secrecy as nations seek to steal other’s financial capital and protect what is theirs. The two opposite tendencies do not bode well for globalization and peace in the world, and it may result in multiple wars, especially as the most bellicose nation in the world, the US, sees its capital flee.
FATCA and FBAR also applies to US citizens and resident aliens living IN the USA.
Hi Tina: Civil disobedience is more difficult if you live within the jurisdiction of the United States. If you have accounts with over $50,000, and thus covered by FATCA, and your bank knows that you live in the United States (even if you are a citizen of another country), you may have a problem.
One way to solve this I suppose would be to back to the really “old” way of doing things which is charge a witholding tax on any us investment payable to a foreign payee and then make everyone foreign payee(US citizen abroad, Canadian, European etc) file a tax return with the US if they want to qualify for a lower treaty rate or claim it using a foreign tax credit on the country of residences tax return. In Canada non resident receipients of CPP and OAS have to pay a 25% witholding tax which is not much lower than the FATCA 30% tax. The real problem is much of the financial services industry would throw a hissy fit at paying a 30% non avoidable tax under any circumstance.
Pingback: Civil disobedience in the face of desperate government: John Rubino video | The Righteous Investor
Pingback: The Isaac Brock Society | Conversations on RRSPs, renunciation of US citizenship, and civil disobedience with Jack Townsend