As I was reading Peter Spiro’s excellent article this morning (many thanks to Just Me for this one) and after I had written my own post on recent Dutch efforts to restrict dual citizenship, I had a new (for me anyway) insight into this debate we are having with the home country.
Some of the arguments of the U.S. government (and some of the citizenry) seem to link our filing and reporting (FATCA and FBAR) and paying taxes, to loyalty to the American nation. They seem to be saying, “Prove to us that you are loyal Americans by filling out those forms, paying your “fair share,” and sacrificing for the good of the country.”
Now this argument gets a fair amount of traction in the U.S. because it seems so reasonable. A kind of “shouldn’t we all be in this together?” The fact that overseas Americans have real issues with this is sometimes taken as proof that we are disloyal and trying to get away with something.
My humble answer to this is, quite simply: are you folks sure you want to go there? Are you absolutely sure that you want to link filling out forms and paying taxes to the Federal government to loyalty to the United States of America?
Because that really would put the cat among the pigeons, wouldn’t it? Many Americans living in the U.S. do not have to file and, as I understand it, many of those who do file do not pay any taxes at all to the federal government. Not a dime. So, are these people disloyal? Are they second-class citizens? Are they undeserving of representation?
Or, to put in a way that I am sure some folks would find quite offensive, is the fact that I, an overseas citizen, filed and paid taxes to the Federal Government of the United States of America last year (and will pay again this year) make me morally superior and a far better and more loyal United States citizen than over 50% of my compatriots on American soil?
Frankly I would agree that the above is an asinine argument and if I dared to make it in a public forum I think I would deserve all the outrage directed at me. Believe me, I recognize this as the utter rubbish it so clearly is.
So, may I gently suggest that home country Americans stop tying FATCA, FBAR and the tax system to overseas Americans’ loyalty. Not only is this an argument that does not stand up under scrutiny, it is deadly for home country Americans because the logical conclusion to this is quite horrendous: that those who do not file or pay federal taxes to the U.S. government are “inferior” and “disloyal” citizens.
No, they should stop interfering completely in our lives!! We don’t live there!
I saw a video this weekend that says “being poor is the best investment in America.” I agree with that. Further, the video quoted the statistic – something like only 48% of Americans (most likely only Americans living there) actually pay tax to the Federal Government. Amazing!
I also went back and read ALL of the UBS offshore account court cases, since after all, that was the igniter for the FACTA. Also, I love it how ALL of those people live who were convicted live in America, who were breaking the law, but we are somehow lumped in there with them.
If you add up the fines and penalties from those cases, there’s still no point this FACTA, at least financially. So this leads to be believe even more that this is the US’s attempt to gain major leverage over world banking. If they succeed, good for them; bad for all the other countries of the world.
From my perspective, the likelihood of the US succeeding is quite high because I don’t envision all of the foreign businesses delisting themselves from the stock exchanges and selling all of their US assets quickly. But what these foreign companies seem to “just not get” (or maybe they get it and they just don’t talk about it very much) is that they will be subject to US law, and the whims of US politicians, wherever the company does business. I’m afraid this is inevitably going to result in US abusing this system. The only recourse of these foreign companies is to have subsidiaries or “partner companies” that hold US assets. But this is an *obvious* and logical fix, so I’m sure the US will do anything they can do to stop this loophole.
I don’t want to speculate too much about the future;we’ll just have to see how it all plays out.
Hi geeeez. I honestly think their best chance for success will be the extent to which they are able to cut deals with foreign governments. I’ll show you mine if you show me yours or something to that effect. I think they will try but US banks are putting pressure on Congress to not allow this since it would destroy any interest foreigners would have in keeping money in the US.
Could you pass on any good links to the UBS cases? This is the situation that my friends and family keep shoving in my face every time I complain about FATCA. See, they say, it worked last time and there is no reason it shouldn’t work this time around….
FATCA is to money what the Patriot Act is to data. The government wants to scutinize everything that goes through the US
rivka88, actually, no. This is much bigger than that. Read my post about “Why the US doesn’t want you to renounce.” There is a case in there I cited where a foreign company was penalized under US law even though all of the “alleged” transaction occured far away from America, and no US citizens were involved. If they have a “hook” in you or a company, they WILL exploit it.
Also check out all of the little extraterritorial laws America applies to citizens. Most of them don’t apply to people working a regular job overseas, but they keep adding new laws, and it’s not easy to keep up with since we don’t live there.
Victoria, look here:
http://www.justice.gov//tax/taxpress2009.htm
Since the actual UBS issue started in 2008, I don’t think actual cases started getting prosecuted until 2009. Keep in mind, all of these people who were prosecuted live in America.
I think the most totally unethical part of the IRS is that even a foreigner who saves money his entire life and then immigrates to America falls under these confiscatory penalities. But of course, no one every told them at immigration that they must “declare” their overseas accounts, even though all the money earned (and paid taxes on) was from overseas. This doesn’t apply to me. Remember, I can’t even get anyone to open an account for me overseas. But the idea that a government would stoop to such low levels is beyond words for me.
It also sends a very clear message to people: if you are smart and have money, don’t immigrate to America!
The loyalty test cuts both ways, Dual citizens are regarded in both countries with suspicion about where their “loyalty” lies. I appreciate the links to articles about multiple passports and the discussions about the issue of multiple citizenship. We are becoming a global village where restrictions on citizenship interfere with the natural evolution of businesses and careers and communities. Some natural human tendencies do not conveniently limit themselves to national boundaries that were decided by fiat by previous generations.
Very true foxyladyhawk. My only regret is that the article doesn’t mention the cost and difficulties that one must go through to renounce US Citizenship.
Frankly, I believe that the US would not even *allow* a respected publication like the Economist to tell the real FACTS behind holding US Citizenship (FATCA, taxation, exit tax) because it would simply make the US look too bad. Think censhorship doesn’t exist? Think again.
geeez, communication is one area that does not respect boundaries, thanks to the Internet, which is one reason I suspect why certain members of the US government are trying to regulate it in the name of patent protection.
geeeez,
You may be surprised to know that at least some of the writers at the Economist sympathize with the plight of Americans abroad.
Below is a link to a 2008 article titled, “America’s Berlin Wall, Congress increases the ransom expats must pay to escape the taxman.”
http://www.economist.com/node/11554721
And a 2006 article: “The tithes that bind, America should scrap its distorted system of taxing those who work abroad.”
http://www.economist.com/node/7086783
I was pleasantly surprised to read these in the Economist. Been buying the magazine ever since.
@Boiled Frog – Great links. I guess the US doesn’t have their finger on the Economist after all. I wish they would talk about the onerous changes like the $450.
It’s a little amazing reading articles from 5 years ago, how politicians thought that were going to get soooo much money from this, and all it is doing is forcing people to renounce.
I thought all this mess started under Obama, but it looks like it started under Bush. ** That’s why I believe you can change the President tomorrow, but this is never going to change. **
@Petros – maybe you should add those links to the link list.
Renunciation is the clearest expression of civil disobedience. The body count of Renunciants will need to be in the tens of thousands (maybe more) to make a difference.
They don’t like it. My results were not “the bureaucrat just acted like a robot and filled out the paperwork.” He wasn’t used to it [seeing people who want to renounce] and it seems like everything I said, he entered into the computer. When I said I don’t want my kids to be US citizens.. he beat that into the computer as well.
I think that 99% of the consulate’s case work in developing countries is tourist visas, so to “imagine that an American would want to give up citizenship” came as a bit of a shocker.
Since they’ve seen me once, the 2nd interview should go smoothly, I hope.
The first interview was very rigid and a bit like a police interrogation, lots of questions about why I wanted to renounce and do I own any property. Then they sent me away to think about it for a couple of weeks.
The second interview was much more polite and focused on trying to talk me out of it. At the end of the interview, I raised my right hand and repeated the words as they were read to me from the Oath of Renunciation.
In general, I found the State Department employees to be very professional. It was clear that they were not very comfortable with or happy to see Americans end their citizenship. The Consular even told so and then almost fell over when I told her that I will always be an American, just no longer a US citizen.
For some reason, the USG (and Americans in general) seems to have trouble making the distinction between nationality and citizenship. It tries to merge the two concepts together. Case in point, a certificate of loss of nationality rather than loss of citizenship.
For me it is clear, my nationality runs through the blood in my veins. Citizenship is a social contract, which I was born into, but no longer agree to accept the terms and conditions thereof.
Two months later I received my CLN.
Once again, good luck!
Just now tuning into your comments of January 6.
I agree wholeheartedly with Boiled Frog in the distinction between citizenship and nationality. However, most Americans would probably consider those of us who have renounced as no longer Americans by nationality or citizenship.
I’ve had some exchanges that highlight this issue. For example, my tax accountant, who helped me file my final tax forms, wished me Happy July 4th, and then followed up with a pathetic and vapid retraction. “Sorry, I shouldn’t be wishing you Happy Independence Day since you are no longer an American.”
It seems that those of us who have renounced are likely to always be facing the challenge of getting people to recognize that we are still Americans by cultural, identity and nationality. That’s why I’m very selective about who I admit my status to. Perhaps I –and those like me–who are reluctant to speaking out on this should do so. To get the word out and speak forcefully about the issue.
Brash, thanks for sharing that. I will always be a “gringo” or “Americano” in Brazil because I have an accent (even though everyone says it’s small, it’s still noticeable). That will never change because I am a foreigner here.
But when and IF I ever go to America, I don’t really plan on telling anyone. Why should I? They are like children and ignorant on the issue. Their lives are not affected as ours are. Most of them don’t even have a clue as to what is going on.
I think some Americans get offended when I talk about renouncing, even on the internet. That’s probably why I hang out here because there are other people here who are having the same difficulties as me. Let me add to that: I *talk* about my situation and why I want to renounce, but I’m not recommending it for anyone else. Everybody’s situation is different; I know there are some Americans who just don’t want to renounce, and I DO NOT fault them for that.
@geeeez I for one really appreciate your being open about both your decision to renounce and your reasons for it. It’s not something I’ve ever considered for myself – it was always a “Never that!” but there wasn’t much thought behind it. You are helping me think this one through. Darn useful exercise, in my view. Thanks.
@geeez, thanks for your thoughtful reply. What would be valuable would be better PR about what the IRS is doing to to overseas taxpayers and the price paid for remaining a US citizens overseas. As you point out, people in the US have no idea.