This is another great article that gives people a concrete example of what could happen if this nonsense continues. A lot of Europeans I talk to think it’s not really their problem because they are duals or because, even if they did work a few years in the U.S., they argue, “Well what could the U.S. government possibly do to me? I don’t live in the U.S.”
They firmly believe (and I hope from the bottom of my heart that they are right) that their government (France, Germany, U.K. etc.) would stand up for them against the U.S. But are they right to be so confident? Sokol’s article gives a perfectly mundane example of what might happen to a French citizen if the U.S. government decides he or is a U.S. person for tax purposes. And then he follows it to its logical conclusion – the European Court of Justice. Have a read and pass it along to your European friends…
Good work on finding this Petros. This is quite interesting since were discussing this in the comments section just yesterday.
I like how the author actually said something that makes sense.. paraphrased “More taxation is the result of war” So true, but the US always denies this, saying “As a percent of GDP, these wars are cost much less than previous wars”. Yeah right! Meanwhile, they wage a quiet war against us for money!
I wish these guys would mention the $450 fee (which is much higher than other countries) and the potential exit tax.
Unfortunately, now it looks like I have to tell me that my son is going to have to renounce, even though I never registered him. Craziness!
Interesting article. If this man were to win his case I believe that it would be a worldwide blow to the implementation of FATCA, FBAR’s and the whole U.S. principle of citizenship based taxation.
I think so too. Unfortunately it requires some poor person to be the sacrificial lamb. 🙂
Though I think any French person I know who found themselves in that position would fight like hell contre l’impérialisme américain….
Renonciation à la citoyenneté américaine est le moyen le plus rapide. Here’s a good article I found in French, but they should update it post 2010 rule changes:
A couple of comments:
If the US France Double Tax Treaty is at all similar to the US Canada one France cannot be compelled to collect taxes on its own citizens(To be clear for now that is just an interpretation by Finance Canada).
I am not as much of an expert on European Law but I do know the ECJ and ECHR have not looked favoribly on citizenship based taxation when EU countries have proposed it. I also supect the EU when they eventually get to the point of negotiating a tax treaty with the US as a single block(something that will one day happen sooner than I suspect many think) has enough clout to start a fight over the savings clause(which is the part of US tax treaties that in some ways legitimizes citizenship based taxation).
The other issues is you are US citizen living abroad it is unlikely in many cases to have any net tax due. You might have garbage like PFIC penalties and FBAR fines but I suspect those are much harder to enforce under tax treaties than actual tax due.
PFIC penalties and FBAR fines are not to be taken lightly just because your country of residence isn’t likely to assist the U.S. in collecting them. They still arise out of a basic problem which is that of the U.S.’s illigitmate practise of citizenship based taxation.
Don’t forget that it is this absurdity which has given rise to FATCA and our problems with banking and employment. We have nothing to do with America and it is wrong for the U.S. to essentially assert squatters rights over our lives based upon this one thing.
As many others have pointed out and as I can also attest to, it is expensive and risky to have to file U.S. taxes. The tax law is opaque and getting help in filling out the forms is expensive and not always trustworthy. We should only have to do our taxes once with our country of residence, only.
Our balance sheet with the U.S. government is perfectly balanced. We get nothing from them and they get nothing from us. It is the balance sheet that resident Americans have with their government that is not in equilibrium. 52% of resident U.S. households receive beneftis from the government but they pay no income taxes in order to fund those benefits.
@Tim – we’re entereing into a new era in terms of capital controls across the board, including Europe. As I’m typing this, European politicians are trying to work out details for a financial transaction tax (I call it a Tobin tax). Included and documented in the talks were resistrictions on capital movements as a way to prevent movements of capital from areas with the tax to areas without the tax.
I think this was one of the intentions of the FACTA, to have complete control over the money and restrict outflow. That way they can do anything they want to do (i.e, confiscate) your money. I really don’t think interest income was of much concern, since worldwide interest rates average about 1,5% per year.
Whether the Europeans or Canadian governments will start to enforce US Tax law.. I have no clue. But I can tell you the cooperation between countries has probably hit record levels so far. I consider this to be one of the main reasons we hear relatively nothing coming from non-US politicians. I think the only one so far was the Flaherty of Canada.
I think geeeez is absolutely right. There is far more cooperation between the EU and the US than most know about. And it’s not just financial capital that they want to control, it’s human capital. The Migration Policy Institute does a good job of keeping track of joint efforts by the EU and US to control immigration and the movement of people across borders. There are some pretty spiffy EU databases tracking people like me with my brand new EU certified biometric identity card. 🙂
In the end perhaps human capital may be the very hardest to control. It doesn’t ,move as fast as money but when it does move governments have to spend horrendous amounts of money to manage it. And while all of the attention of the media is focussed on the average labor migrant there is another group of migrants that also frustrates governments: highly-skilled immigrants. They have credentials (education or experience) that makes it much easier for them to pick and choose where they want to live and work. Countries of origin want these people to stay put because they have invested hard cash in their development. Destination countries like them because they get their skills at zero cost. I’ve often wondered if other countries might decide that the Americans are on to something. Tax the diaspora. If your talent stays put as a result, that’s great. If it leaves, you can still get your investment back by taking a piece of their earnings abroad.
Just a thought I have when I’m feeling very paranoid…
The trouble with this, as businesses (but not governments) in the US discovered, is that if you keep your talent at home, they cannot develop offshore expansions of home-country businesses and industries, which promote trade and enrich the home country more indirectly than taxes on the diaspora. Furthermore, if you try to prevent the escape of your skilled young, they will go anyway and renounce, rather than go and remain ambassadors for you. It never pays in the long run to try to enforce behavior that goes against peoples’ own self-interests.
Taxing the diaspora is one way to keep people from leaving but just think about some of the ramifications to a nation if it’s people can’t leave. Especially what would be the harmful implications if people couldn’t leave during bad economic times.
Since the recession started in America there have been a few articles that have talked about the Americans who have had to move abroad in order to find work. Now those people should be seen by their fellow Americans as heroes, because they are being self sufficient and not taking benefits from the U.S. government, but instead they are either seen as traitors or they feel that they are seen as traitors for not staying behind and sharing in the suffereing. This because America refuses to see itself through anything other than rose coloured glasses.
People from many countries around the world are immigrating on a daily basis in their search for work. People from such places as Mexico, Phillipines, Eastern Europe, Middle East, South America etc. Now when these unemployed or marginally employed people leave the motherland and find work abroad they usually send a portion of that money back home to family. I believe that the second largest source of national income for the Philipines is money that is received from abroad. And of course these absent migrant workers actually leave the cash strapped government at home with less of a burden to bear. In other words non resident citizens are a structural fiscal expenditure saver, even if they send no money back.
I see the U.S.’s taxing of its citizens abroad as a variant of old world colonialism. This because it isn’t really the U.S. citizen that the American government is taxing but rather that citizen’s government of residence. I say this because although it is true that governments do have the power to tax it is also true that the portion of a worker’s wage that t government does tax is that wage which represents that worker’s excess productivity. So when the U.S. government says that it reserves the right to tax its citizens no matter where they reside what they are really taxing is not their citizen but the national productivity of the nation in which that citizen resides. This is because the wealth that the citizen produces is a product of the community in which he/she lives. If the American citizen is not living in an area of American jurisdiction then the American government cannot lay claim to taxing the wealth that is produced in the community over which it is sovereign and whose wealth creation it is responsible for facilitating.
In the end there is no difference between this colonialism through taxation and the colonialism of Britain that America revolted against.
Here is a link to an article on the Huffington Post which talks about the number of American corporations that pay absolutely no income tax. Yet these same corporations receive government services everyday. Not only do the receive them as a matter of course but they demand them.
Now what do us poor expats get for our aggravation in filling out tax forms, paying expensive accountants and lawyers so that we can stay out of jail or continue to be able to visit our relatives? The answer of course is abolutely nothing. And embassies and counsulate access doesn’t count since those things are established more for the government than they are for us. Also the counsulates and embassies do not provide us with representation, witness the silence from Ambassdor Jacobsen.
Well said, especially about colonialism! I was working for one of the largest US banks pushing their overpriced products. My department got a reduction of around 50% two years after I left. I could have been one of those people collecting unemployment and welfare, but I chose to leave.
I think that editorial from the NYT is good to show other Americans because:
1- It comes from a mainstream source
2- It shows how much US laws affect us
3- It shows how other people are renouncing in droves.
If Americans see this, they can see that it is the US government that is forcing us to renounce and NOT anti-Americanism.
I would agree Canada is in different situation than a lot of the EU and the US. Canada has always had a shortage of capital both human and financial; compared to its landmass and natural resources thus it has historically been deemed necessary by both major political parties to have an very open immigration policy. A big part of this included making it relatively easy for immigrants with who already have a lot wealth to enter the country. There is a five year phase in period for new immigrants to have to pay Canadian tax on offshore income(It only takes three for citizenship), no inheiritance tax, and of course residency based taxation. Now despite the fact over the years countries such as China and India should be seething at Canada “stealing” their dispora by standards of the US and Europe both in fact welcome the large number of their nationals living in Canada. Even Cuba through its consulate in Toronto has been trying to reach out to Cuban Canadians in the past year or two. On the otherhand a small but growing number of Europeans and Americans with substantial amounts of wealth have starting immigrating to Canada too something that I wonder how receptive the US and EU will be to.
Interesting Maclean’s article for non Canadians.
Great post. I came across this article shortly after it was published. Thanks for posting it. We are all discussing this problem as a “tax problem”. The reality is that it is and is fast being recognized as a “diplomatic problem”. I wrote a post on this a while ago.
The bottom line is that when the IRS comes a confiscates the wealth of residents of another country they are harming that country directly.
For example, if Canadians turn their retirements over to the IRS, then they will be a burden on the government of Canada.
In the modern world, where mobility is the norm, citizenship based taxation is really a declaration of war not only on U.S. citizens living outside the U.S. but also on the countries in which they reside.
It is time for the rest of the world to put an end to this.
Stop citizenship-based taxation and repeal FATCA.
Hey Tim, thanks for the comment and the link. I read the MacLeans article and I have to say that I don’t think that there is any worry about Canada being a tax haven. The U.S. still has a majority of the world’s top wealthy people and the U.S. also offers comparable immigration investment programs that are targeted towards the rich.
The only thing that my stop the U.S. from remaining as the top immigration destination for the world’s wealthy is the financial legislation that has either been enacted by Congress or will be enacted. FATCA and FBARS are making it less desireable to have any connections with the U.S. unless absolutely necessary. I bet that all of those people who had anchor babies in the U.S. are not happy about it now. I am sure that they never anticipated that there were going to be eternal financial reporting obligations for them and their child(ren).
The U.S. is shooting itself in the foot just like it did over the debt ceiling issue.
J’arrive enfin à comprendre que c’est la methode la plus efficace…. 🙂
I am really enjoying your comments recalcitrantexpat and thank you for the links. From what I can see, receptivity to emigration in Europe really varies depending the country. Germany and UK, for example seem to be pretty positive about it. Germany has a tradition of strong jus sanguinis laws so you could say that they don’t feel that they lose nationals by it – these people just absent themselves for a couple of generations until they decide to come back. 🙂
In France not so much. I’ve been trying to figure out why this is so. There is certainly some resentment against the rich who move but then they tend to go to other places in Europe like Belgium. Most of the negative comments I’ve heard concern my daughter (the Elder Frenchling) who is studying in Canada. “They are stealing the young,” they say.
The U.S. view seems to be either negative (“rich tax cheats sunning themselves on the beaches of Nice”) or oblivious. I think the latter may be the most common. The American Narrative does not have space for emigration – we are a place people come to, not a place people leave. For example I’ve noticed a real reluctance on the part of my friends and family in the U.S. to admit that I am an US emigrant/French immigrant. Sometimes when I talk with them I get the impression that they think I’m on a 20-year extended vacation and when I come to my senses/grow up I’ll come back to “where I belong.” Anyone else have a similar experience?
And thank you for that link, Tim. I knew Canada was welcoming but I had no idea about the tax situation. I will say that my daughter who is studying in Montreal is really enjoying herself. I visit from time to time and I know B.C. pretty well (my aunt is Canadian and lives in Vancouver).
I don’t think that the people in the U.S. will care too much about the rich moving to Canada. What really seems to get them upset is Switzerland. The last fight I had with a family member over FATCA is was all about those evil tax evaders in Switzerland. Or the Caymans.
Victoria, I think I gotcha beat on misconceptions of foreign life. Even when I call places like Switzerland, or other European countries, the attendants usually say “Oh.. cool! I bet it’s fun there” or something along those lines. Grrrrr… I’m 4 hours from the beach.
Next time I’m going to say Somalia or Ethiopia to hear that reaction 🙂
In general the American narrative has a very hard time with Canada. I think in general Americans would rather not think that much about Canada. In some ways it the independence of Canada was a failure of manifest destiny in American mind and they would rather forget wars they lost(1812). I would say that for many years both right and left in Canada and the US were at an emotional level heavily invested in the idea that Canada was a much more “left leaning” country than the United States. Now if you really know Canadian history well you know that historically wasn’t the case and I would argue is no longer the case anymore either. I think the biggest danger for Canada is someday the left in the US will wake up to what is happening and want to lash out at Canada’s betrayal. Most politically active left wing Americans don’t know who Stephen Harper is but those who do suspect he is someone in their mind who is a really “bad guy.” The problem for the left in the US is that they are forced to do a 180 and start “attacking” Canada they are going to look pretty inconsistent given their past praise.
You are correct, Victoria. There is no room in the American mindset for the idea that someone who is born in America would actually want to leave the country for more than just a vacation. I saw this when I was reading Sen. Tom Coburn’s arguments for the removal of the “foreign earned income credit” As you read his speech it becomes clear to him that he believes that U.S. expats are only “temporarily” absent from U.S. soil. Since we are only gone for a little while it is our duty to continue to support the motherland through payment of taxes. He thinks that we need to pay our share of such things as medicare.
Now I find it rather ironic that a nation that doesn’t have a national medical plan would claim that expats, who do live in countries with national medical insurance” shoul be obligated to pay for two national medical systems. I find this rather ironic because the U.S. national medcial system is so inferior to the national systems that we support through the tax regimes of our countries of residence that his contention souinds laughable.
For a nation that doesn’t believe in class warfare, especially the Republican Party members, it is interesting that it is willing to promote the myth of classwarfare, when it comes to it expats. The spirit of envy that surrounds the expat community is irrational. When you consider that America is supposed to be the place with boundless opportunity and the good that this is suppose to represent, I find it odd the politics of envy with reference to expats, are so easily embraced- especially by the members of the Republican Party.
If America is seen by its residents as being the promised land then I have to wonder why there is the assumption that all expats are rich? It seems that as soon as you leave U.S. soil that you are guilty of being wealthy and a tax evader. Why is this so? Is it because the world outside of America is so much better than that of the U.S?
The anti expat attitude also has a strong strain of anti intellectualism at it roots. Expats are viewed by many Americans as believing that they are intellectually supreior to those Americans who never leave U.S. soil. Maybe this is because America sees a lot of the world as being out to “get” it. And if you leave America to live outside of it then you have become a part of that hostile world. A world that in former days saw the presence of the evil Soviet empire. Now even though the Soviet Union is gone the world is still a harmful place for the U.S. because today’s world is populated by evil European Socialist, radical Muslims, Mexicans who don’t even speak English, and U.S. tax cheats. If your’e an American life isn’t easy because of all the enemies that surround you.
It all comes down to an inflated sense of U.S. self importance and a strong mercenary belief that America is the promised land. Why would anyone leave the best country in the world?
Don’t forget that this is a group blog. I can’t take credit for Victoria’s work. I would, however, be willing to take credit for finding Victoria.
Oh Petros.. I thought you posted it, so that you found.
Ok.. Good job Victoria!
Ok, I concede, geeez. You definitely win the award for “host country most likely to provoke envy.” 🙂
Tim, that’s a very interesting take on the U.S/Canada relationship. Reminds me of the Diaz quotation about Mexico. “Poor Mexico. So far from God and so close to the United States.” When we look at states we tend to look at them in a vacuum without thinking about how states that border each other have very complex relationships. You can’t really understand French history without looking at her relationship with Germany, for example, or Spain. Equally true of Canada and the U.S. Maybe instead of studying Canadian, U.S. and Mexican history, it would be better to study “North American History.”
I’d say also that the American left has a similar relationship to France. They are emotionally invested in thinking all sorts of silly things about how “progressive” the country is. This annoys me to no end. They are looking at French politics through the prism of their own ideology which makes for some very inaccurate perceptions. France is very conservative in some ways and very “progressive” in others. If you want to have some fun, check out one of my favorite blogs “Arun with a View” and his take on the Front National in France (Far Right) and the Tea Party in the U.S.