We are most honored to have Roger Conklin as a reader and frequent commenter at the Isaac Brock Society. Today, he kindly commented on my post, A second response to Barrie McKenna.
Roger Conklin’s testimony before the Ways and Means Committee
U.S. citizenship-based taxation harms U.S. economy
A Saudi lawyer advises Obama to end citizenship-based taxation
Very well expressed indeed. As a law abiding US citizen living and working in Brazil who was forced by US tax legislation to either violate the laws of the US by not paying my income tax obligation as mandated by the Tax Reform Act of 1976, or violate Brazilian law by purchasing US dollars illegally on the black market and smuggling them out of the country in violation of its money-laundering laws, I also had to make a tough decision. I was younger then, so I decided to throw in the towel and return to the US to seek a new career, which I was most fortunate to find.
Some of my close American friends there chose to become naturalized Brazilian citizens and formally renounce their US citizenship before a US consular official in Brazil. Although it was not an easy decision for any of us to make, one way or the other, I to this day have great respect for those who chose to become Brazilians and stay in Brazil. It certainly was not easy for them. Fortunately at that time it was not as difficult as it is today since then there was no exit tax. Today the decision is much tougher as a result of the exit tax incorporated into the Renunciation process just a few years back.
I have not regretted the decision I took back then, but I have never ceased to work very hard to try to wake up our legislators and Administration officials that citizen-based taxation is an abomination that works against the best interests of the US. It has been a lonely battle. I remain totally convinced that in balance citizenship based taxation does far more harm to the best interests of the US which is far more important to the pittance that this tax generates for the US Treasury. Few US citizens living in the US are even aware that US citizens abroad are double taxed. And since very few ever expect to live and work abroad, the subject is of little interest or concern to them. And since it is not an issue on which our legislators will take a stand, is it does not enhance their chances of reelection, they just push it aside.
It is my firm opinion that the only way this is ever going to be turned around is if foreign governments, like Canada take a very strong stand with the United States that taxing its citizens who in accordance with US law are also dual citizens of the US, and US citizens who are residents of that foreign country is a violation of the sovereignty that it will no longer tolerate. I would certainly like to see the Canadian government take a stand on this. It would probably require more than words. Perhaps it would take some sort of serious threats of some kind of sanctions, although offhand I can’t suggest what they might be. This tax is certainly detrimental to the best interests of Canadians who discover they are also dual US citizens, and for that reason alone it would be most encouraging to me to see Canada take a firm stand against it. Our Congress needs to be made aware that it has created serious–problems for the US in its relations with Canada and our other friends.
Someday I’ll do a writeup of how the Canadian non resident tax system works but increasingly since the 1990s it is determined by the tax treaties Canada has with other countries including the US. Essentially what you have occur now is what the Canada Revenue Agency calls “deemed non resident status” where essentially a treaty partner of Canada’s “claims” you off of the CRA’s rolls automatically when you become a resident of their territory. The old way still in place with non treaty partners is someone actually has to cut almost all of the ties to Canada essentially becoming a “permanent” non resident of Canada. Even storing furniture in the country never mind keeping a house makes you ineligable to claim non residency. Now there are some people who get around this rule like the group of Air Canada pilots living in Bahamas who were fighting in the Tax Court of Canada over how the salaries should be prorated in terms of tax for the time the spent flying outside of Canadian airspace.
The other thing I’ll add is the “deal” Canadians woud appear to get from claiming non resident status and living in someplace like the Bahamas with no income tax is not as clear people as the Bahamas for example has very high import tariffs on most household items and utility costs can be five or six times higher than on the mainland.
I wished we could get something like this published on the front page of the NYTs, or at least as an Op Ed on the Opinion pages!
Frustrating battle for Roger, but at least he knows he is no longer alone in this battle to help US Homelander’s understand the fallacies of and harm done by the US citizenship taxation model.
There are many more, as represented by the readers and commentators here, who have now joined with him.
In its unwitting and bumbling way, the IRS has awaken an Expat constituency around the world that is becoming more vocal each and every day. Maybe from this unintended consequence something good can spring forth.
Until 2009 and the first OVDP, I must admit, I never gave it a thought. But now I know, and it is my passion to make everyone that I come in contract with understand the problem and the harm the IRS is doing with it’s aggressive enforcement on Expats around the world.
It is just wrong, and antithetical to everything I once thought America was supposed to represent.
Roger has inspired me to do more, and keep up with his pace and standard of communication!
Thank you so much, Mr. Conklin, for all of your efforts on our behalf. It’s hard to explain this issue to Americans at home as they have some very quaint ideas about who we are and what we are up to. For the record, I am an IT manager here in France and when I read the U.S. papers I’m floored because their characterizations of emigrants like me bear no resemblance to reality. It’s not only frustrating but it really hurts to hear this kind of rhetoric. I’ve tried very hard to be a productive, law-abiding legal resident of my host country and a loyal American. But being lumped in with “tax evaders” just makes me want to throw in the towel. I don’t expect to be thanked for being a good unofficial ambassador from my country of origin to my host country but I sure didn’t expect to be crucified either.
As Just Me points out the one good thing that might come out of this is that the American diaspora unites and starts to act as many other diasporas do by being active in home country politics. Up until now we’ve been pretty quiet – has citizenship-based taxation, reporting and FATCA changed the game? I surely hope so.
Hi Roger, thanks for the post. I think the Brazilian Real was so unstable till about the late 90s that a lot of people asked to be paid in dollars. Doleiros (the people who have exchange dollars) are still around. I know there is one in my city. I know of a handful of wealthy Brazilians that buy a few dollars every month just to have them for when they go on vacation, or a shopping trip to America. Everybody knows it’s illegal, but everybody leaves the doleiro alone. Because they know that if he were jailed, he would lose his livelihood and end up begging on the streets. The same goes for the street vendors. They pay just 1 small and simple tax to city hall and they can sell their imported chinese junk tax free. Whereas a real shop has to pay an eye-watering amount of taxes. The government does this to keep from ruining peoples’ lives, and one of the many efforts to reduce poverty. It’s a double-standard, but people accept it because they know the alternative is much much worse.
This is the most striking difference that I see between the USA and Brazil. The USA does not care one bit about the “person”. They will deport illegal parents of US citizen children in a skinny minute. They will throw someone in jail for breaking the smalllest of laws. They will have a student extradited to America because he posted links on his website. (And I doubt the MPAA and the RIAA are ever going to reimburse America for the costs of doing this). They don’t care if families will be destroyed or someone will live in poverty for the rest of their life.
Seeing that the headlines seem to always indicate more Americans being impoverished, I think America could learn a lot from Brazil
[I didn’t put this in the forum because I don’t think Roger has ever gone there before…]
@Roger, I don’t know how much you keep up with life in Brazil, but I bet some things are still the same and some things have changed:
– Nobody trusts the government :-). This never changes. But I have never seen the Brazilian govenment be so “cruel” to people like the American government has been with US Expats.
– Nobody trusts the water – so we get these 20 litre galões for R$ 6/each. I have 2 of them everywhere I go (home or office).
– We still boil water to make coffee. I have a coffee machine, but I don’t use it. My wife has employees that use the coffee machine, but I don’t at home.
– Middle class people don’t have maids anymore. I pay a person who is very close to the family to assist my wife (babá). The only people I know who have multiple REAL maids are doctors and business owners, who make a lot of money, even to US standards. The minimum wage (registrado) with all the benefits much more costly than it was, even 20 years ago.
– What’s probably the same is that .. oh my gosh.. these people love soccer.
– There are 3-4x as many holidays here compared to America.
Life in the big cities: São Paulo, Rio Janeiro, Belo Horizonte are a little different. Those people tend to work harder, stress-out about time, just like Americans, but in the “interior” where I live, it’s still more laid-back.
@Roger, my last comments for tonight:
I heard my wife tell someone else 3-4 years ago “Você não pode torcer para dois times / duas bandeiras” / In this case, it was “you can’t root for 2 different teams”. I have to agree with that.
IF I keep US citizenship, ultimately I will be forced to be dishonest TO Brazil OR the US, and that’s what I DON’T want to do. I made that abundantly clear when I went to the consulate. I told them that “i’m here because I’m an honest person and I don’t want to do anything wrong in ANY country…”
I won’t even go into the conversation with the people at the consultate… Unfortunately, US Citizenship comes with those little “probleminhas” if you live overseas. I wish it didn’t.. but that’s just life. Não tem nada no mundo que é perfeito.
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Mr. Conklin, I just want to say thank you for your efforts on this. And I hope you continue in this fight. We need men like you and all the help we can get.
I think you may be right that a country, most likely Canada, taking a stand on this would be the most likely potential path for success. It certainly makes sense that Canada would have the largest percentage of dual citizens who are affected by and harmed by the US’ byzantine laws.
Is this an avenue anyone here is actively pursuing? I’m not Canadian, but it certainly makes sense to have Canadians putting pressure on their own government to stand up their own Canadian citizens’ rights.
Maybe we should have an Isaac Brock Action List of suggested action ideas that people can take, which could include a form for Canadians to contact their representatives asking them to put pressure on the US to stop harming Canadian citizens in this way. Maybe that would be too complicated to set up. But if not, it sounds like one potentially effective step in the right direction.
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