Here is the link to the IRS News Room. I expect that within the next year, the U.S. will pass a law applicable to every country, making this (IRS News Room) the home page on every browser of the world. Not only is intended to be the “Latest News”, but it is intended to be the only news.
Here is the part that announces the December FS – the information to U.S. citizens and dual citizens living outside the United States:
Information for U.S. Citizens or Dual Citizens Residing Outside the U.S.
FS-2011-13, December 2011 – This fact sheet summarizes information about federal income tax return and FBAR filing requirements for duel citizens in Canada, the United Kingdon and other countries.
Do you see anything wrong with this? There are at least two mistakes. Do you think the use of the word “duel” is a Freudian slip?
@Roger, I’ve just conceeded to the fact that the US Gov (and most Americans) regard Americans who life in far away country speaking a foreign language every day as “fringe” Americans. Why? I think it’s too foreign to them. As another American told me: “Being James Bond comes at a price!” 🙂
Regarding the trade deficit, I don’t know for how long the US can continue to defy monetary-physics! I think the US is hell-bent on making the dollar worth nothing to export more, instead of using a more sensible approach and trying to sell more American products overseas.
An American the other day was trying to tell me that the US accounts for about 20% of the world’s output, mainly through the sell of high-ticket items and military hardware. Does that statistic sound right?
Ok, maybe it’s not a fact that they look at us as “fringe, that’s just my theory. But I know most Americans can’t possibly imagine this kind of life.
The 20% number is close, but even a little low – the US economy generates about 22% of the world’s GDP; only 8.9 % of it is generated from exports. The US population is about 5% of the world’s total population.
Germany’s economy is about 1/5 the size of the US economy but its exports in total are about 10% more than those of the US. Until about 10 years ago, even though the US share of the world market was declining, it was still the largest exporter. That is when tiny Germany bypassed the US for the #1 positon. A couple of years back China’s rapidly growing economy and its exports bypassed Germany to become the #1 exporting nation, and is headed to replace the US as the world’s largest economy in just the next few years.
Make no mistake about it, the US is still the largest manufacturing economy in the world and if it got the lead out of its pants and removed the ball-and-chain of double taxation from its citizens so they could go abroad and sell US exports, the US could well recuperate its no. 1 position, which it always had since WW II until bypassed by Germany.
There are also tax handicaps for US corporations that must be removed as well – like a 35% tax on foreign earnings that are repatriated back to the US whereas almost other countries encourage their corporations to get the best return possible on their overseas earnings by not taxing them at all, whether repatriated or not. That gives our trade competitor corporations a significant tax advantage over US corporations on foreign income. (The Simpson-Bowles Commissison, appointed by President Obama recommended the US abandon its world-wide taxation policy and adopt the territorial tax policy of all our trade competitor nations, in order to “level the playing field” for US corporations in the international market, but the recommendations of that commission have so far been totally ignored by the Administration). It prefers to blame China for all our trade deficit problems.
The pundits point to our massive imports from China as being the source of all our problems, but on a per-capita basis Germany’s China imports are slightly higher that those of the US. But Germany more than makes up for high imports from China by exporting 7.9 times more per-capita to China than the US, in spite of the undervalued Chinese Yuan and much higher product prices on German products than on our own. Germany has a growing trade surplus with China. Price is not unimportant, but it is only one of several factors that separates the winners like Germany from the loosers like the US in the export market. Products have to be sold and if you want to win the trade battle you don’t subcontract this task to foreign mercenaries who are citizens of competitor countries. That is akin the US sub-contracting keeping the Iranians from closing of the Straits of Hormuz to the Venezuelan Navy.
I hope this helps.
@Roger, The last comparison was great! I loved it 🙂
I wish there were some way to lightly “force” change, but I’m out of ideas in this department
Geeez,
I am tremendously encouraged to see the stand being taken by the Candian Finance Minister. Although Brazilian banks, it would appear, have not yet confronted the “obligation” placed on Brazilian banks, starting in 2014, to provide full details to the IRS on their bank accounts held by US citizens, I am hoping that you may have contacts in Brazil to get this obligation in in front of the Ministro de Finanzas in Brasilia; especially the fact that this includes the obligation to provide this information on Brazilians who, under US citizenship laws are dual citizens of the US which in all probability are unknown to the banks.
I can well remember as if it was yesterday the strong attitude taken my Ministro de Finanzas Defim Neto back in the 1970s in directing the Banco Central to deny requests from US citizens for access to US dollars from Brazil’s hard currency (moeda dura) reserves to remit payments to the IRS in US dollars for taxes levied on the earnings of US citizens resident in Brazil.
The response back then was a clear and firm denial of these applications. The basis was, as I recall:
1. Brazil does not recognize that any foreign country has any right to levy and collect taxes in Brazil on the incomes of its citizens resident in Brazil.
2. Brazil considers it a violation of its sovererignty on the part of any foreign nation to attempt to collect such taxes.
As a result this rejection and the unavilabity of dollars, except on the illigal black market (mercado parallelo), the US consulate in Sao Paulo unofficially engaged in exchanging local currency for US dollars so US citizens there could obtain dollars for US citizens to pay their US taxes, presumably from dollar funds remitted to fund the US diplomatic representation in that country, rather than these dollars being exchanged by the Embassy for Cruzeiros legally through the Brazilian banking system.
Shortly after news of this exchange facility began to circulate by word of mouth, the Brazil Herald reported that in accordance with instructions received from the US Embassy in Brasilia, this exchange operation by the consulate was suddenly suspended. No reason was ever released as to why, but I have always suspected that it was the Brazilian Foreign Ministry that put its foot down and told the US Embassy that this practice had stop immediately.
When this happened US citizens were totally “on their own.” in finding dollars to comply with their US tax obligations.
Even though Brazil no longer has the strict foreign exchange regulations of yesteryear, somehow I suspect that Brazil may still have strong feelings on who can levy and collect taxes in Brazil and who can not.
Does this give you any ideas? Perhaps some local press coverage on what is going on in Canada might help.
@Mona Lisa
I think that you are right with the prediction that a lot of specialist banks and financial services will open up specifically for US clients not resident in the US. I can’t remember which bank it was, but one of the big Swiss banks now has a special branch exclusively set up for FATCA and US citizens.
I personally would refuse to use them on moral grounds: I don’t like being segregated into the “US persons” section as an EU citizen. I was joking with a Russian friend today that he could open a bank account as a tourist in the EU easier than I can as a citizen and resident. That’s not right.
@Roger Conklin
What are considered to be the main US exports? Automobiles and IT services and industries? I’m not sure that any number of US salespeople on the ground could really help the sell US sell more cars here since they aren’t very fuel efficient and benzin costs a fortune where I live (about 1.20 Euros per litre, which I think is something like 7-8 dollars per gallon according to my unit converter..). Where I live maybe 1/3 cars aren’t much larger than this for example 🙂
http://upload.wikimedia.org/wikipedia/commons/c/c1/Euro_car_smart.jpg
I guess that my point here is that the US needs a combination of competitive products and salespeople on the ground, and I’m not convinced that the products themselves are competitive enough even if US citizens were competing on a level playing field without citizenship taxation. I can say completely unscientifically that most people I know tend to view US services and IT products as being excellent, but in most other areas would prefer a German or Japanese product due to their reputation. What do you think? Would getting more people on the ground help to change these sorts of perceptions? Which US products do you think are currently being unfairly held back due to the lack of feet on the ground? I find it to be a fascinating question personally that you have raised!
Dom Pomodoro. You are absolutely correct that “one size fits all” doesn’t work. American companies, just like those from countries that are more successful in capturing foreign markets than the US, absolutely have to meet the requiremenst of foreign markets in order to capture them. However, US companies need Americans in foreign countries to learn and understand the requirements of those markets in order to successfully address them. And you have got to we willing to make products that meet the requirements of those markets in order to be successful. You can’t for example, expect to sell cars with the steering wheel on the left side when traffic is on the right side. The German
Korean , Japanese, auto manufacturers understand this and make automobiles that fit those market requirements. I certainly learned this lesson well when living in Brazil introducing US products into the then booming telecommunications market there. To be successful we had to comply with the market requirements of all of the standards there, or we would have never gotten our foot in the door. So that was an important part of my job, gathering this information and convincing the marketing people back home to make products to fit that market. That is exactly what manufacturers from other countries are used to doing and doing successfully.
That indeed is a vital part of having Americans overseas. And that is why it so absolutely rediculous to for those who wrote the plan commissioned by President Obama on how to double US exports in 5 years could possibly believe that increasing commercial attaches abroad and bringing product deciders from abroad to “see” American products, or conducting trade fairs abroad can ever solve our trade deficit problem. It takes feet on the ground abroad to do all of the many things that are necessary for US companies to be successful in those markets.
Oops, I got it backwards on the steering wheels, but hope these concepts make it little clearer.
@DonPomodoro
I actually looked at some of Swiss institutions “setup” to be US tax compliant and they do not at all look to be all that welcoming to anyone who is not superwealthy. Plus if you don’t live Switzerland you run into a whole nether set of tax problem in your country of residence. While from the US perspective I am sure they would love for “specialized” institutions to be setup overseas specifically to serve US Citizens I have a feeling this is quite unlikely except for the ultra high net worth crowd. Look at Citibank which historically served a lot of US expats in many places. Citi has long pulled out of the retail market in Canada, France, and Germany. I believe they are on the way out in Belgium and have even announced they have no long term future in UK(essentially there only presence to begin with is in London). Now one might say someplace like HSBC is in line to take up this role but not really either. HSBC does have a presence in Canada but only in the major metropolitan areas i.e. Montreal, Calgary, Toronto, and Vancouver. HSBC has been pulling out regional France for several years and really has no major European presence outside of the UK and Paris. Supposedly HSBC is also in line the UBS treatment according to what is being said over Jack Townsend’s blog including some cases where Americans were hiding money in HSBC Canada of all places.
@Tim
Yes, you’re quire right – I did forget to mention that. Most banks generally have an entry requirement of 500,000 dollars before they will talk to US clients in Switzerland, with some of the larger banks requiring at least a million…
@Don and Tim – I have found 2 Swiss banks that offer accounts with any size, but like I said, they are’t free. Administration fees run around 1,000 CHF/year. I found a place that offers a *savings account* that has an administation fee that is around CHF 250/year. And that’s a new offering, so I don’t know if there would be some headaches in the beginning.
But you can see, the fees are definitely not worth having a swiss bank account.
@Roger, an interesting statistic popped up in the Folha de São Paulo yesterday: For every car made in Brazil, approximately USD $1,647 is remitted back to headquarters in other countries (i.e, US, Japan, France, Italy, Germany)
I’m not sure of the exact market share of Brazil because most major carmakers are in this market, but Ford and Chevrolet seem to do well. When Chrevrolet was being taken over by the US Gov in 2008, I remember thinking “What is this! They are doing very well here!” Their cars here are also more European than the stuff in the US and Canada.
@Don, the reason why you would most likely need Americans on the ground is that there are things that exist in America that don’t exist in other countries. Especially bigger ticket items that are NOT geared for mass consumption (like dialysis machines, specialized glass, etc..) I know there is a lot of competition with Germany in this regard.
Even for agriculture, there are products that are made in the US that are exported overseas. I heard about a case recently where I live that an American company employeed Mexicans to sell their products in all of Central and South America. I think it was just easier for them because they wouldn’t have to worry about American “issues”.
@geeeez
Well, I certainly wouldn’t open an account where I have to pay that much to keep it open – Where I live almost every bank offers free current and savings accounts, or, at the very worst, an admin fee of about 20 Euros per year. I speak for the time being, mind you, I imagine that in 3-4 years’ time US citizens abroad will be forced to use these very expensive “expat” accounts.
@Roger, times sure have changed. Brazil has one of the largest foreign exchange reserves after China, maybe 4th – 5th largest.
I live in a city with ~150,000 people. There are products that are made/grown here that are exported all over the world. There is chicken that goes to Canada and Asia; roses that go to Europe; fruit, vegatables, and minerals are also sent all over the world. They say that Brazil is becoming the world’s breadbasket. I believe it.
I wouldn’t be surprised that in the next 10 years if even I have timber or produce that are shipped off for sale in other countries. Then if the Americans want to take credit, they will have to refer to me as the ex-American. 🙂
@Don, 20 Euros is quite cheap. I pay around $120USD/year for a checking account in Brazil. There are 2 banks here that have “electronic only” (free) accounts, but the banks are greedy, and they don’t want to set one up for me.
I can easily envision what you are saying coming true. Personally, I don’t know how anyone who is living in a foreign country – far away from the US – could stand to be controlled by the US!! This fact just drives me crazy. So crazy that I’m willing to risk being stateless until my citizenship is being approved.
By the way, take a look at the FOX videos that come after the video about Americans renouncing. I watched 3 of them, and I think the US has fallen off it’s rocker: Go to jail for feeding whales, drone strike areas in downtown New York. That place sounds like a nightmare. I do not want to go back there.
geeez,
I always drove GM cars when we lived in Brazil. They were indeed much more European than anything GM ever made in the US. This is living proof that US producers are totally capable of making products that meet foreign standards and can capture foreign markets if only the tax disincentives imposed by our own Government did not go out of their way to discourage it.
I am 10nth generation American on both sides of my family. The men who came here did not bring women and right away married Indian women who were here forever. I viewed American citizenship as the luckiest thing that even happened to anyone, now is just one generation the Marxist Democrat Party has made it an undesirable bit of luck to be born American. The only one who want to come her now are the uneducated, who never even understand that they are the desired citizens the Marxists want as their model. Dependent and dumb subjects for King Obama to rule over.
In a way, like Monalisa I have an inclination to trust the fairness of the IRS. And I want to do whatever is expected from me in terms of the laws in the USA and Brazil (they sometimes conflict). I did not know about the FBARS when it started and started to report as soon as I learned about it. Yes, US lawyers and CPAs scared me and charged me a lot of money. But let me say that since then I live in fear because the IRS do not have a clear statement on what I can expect. At least I don´t read it. And because they increased the statute of limitations and created heavy penalties even for people who accepted the “amnesty”. Hate to be suspicious of a Country that I always considered fair and honest. But I can´t help. My life in a sense has become a nightmare. This is not fun.
@markpinetree, You are totally correct, what you describe is an absolute nighmare.
I do have a clarification with respect to Brazilians and others who come to work in the US on a H1, L2 or other non-permantent visa: Their foreign income is generally not subject to US income tax. But again we have the world “generally.”.
However, For non green-card holders, US tax residency is defined in Section 7701(b) and/or a tax treaty that may exist between the US and the individual’s country of citizenship. This can become very complicated, so the individual considering coming to the US absolutly needs the best tax and legal advice he can obtain, because among other things if he stays too long he could be caught in the exit tax trap even though he does not have a green card.
There is no tax treaty with Brazil, only an exchange of tax information treaty and as far as I can find out none is in the process of being negotiated. There are tax treaties between the US and only a minority of the world’s countries.
And of course what is in US tax law can be changed tomorrow so you cannot depend on today’s US tax law provisions as being engraved in stone. I was always led to believe that tax law changes could never be retroactive, but I recall so well that the Tax Reform Act of 1976 was enacted and signed by President Ford in October of 1976, but it was made retroactive to January 1 of that year. So tax traps that don’t exist today can indeed be built and sprung without knowing about them until it has already happened.. Remember that the stacking provisions of TIPR which increased the US taxes on Americans abroad, enatcted a few years back, were introduced and incorporated into that Act just 10 minutes before it was voted on and passed by Congress without any hearings or even discussion by Congress befroe the vote was conducted.
@Roger, that’s why I keep saying over and over again that I don’t think the US Gov is compatible with expats.
Putting in laws that affect us when we can’t even contest them shows this very clearly.
@geeez,
What you have stated is absolutely true. The US,. my own country of citizenship, is decidedly and deliberately unfriendly to US citzens who live and work or retire in a foreign country. You do so at your own risk if you are a US citizen.