I have not written much in the past week or so and that was deliberate on my part. I decided to spend more time listening and reading and less on talking and writing. When I first came to Isaac Brock I was hopping mad and ready to fight. I’m still not particularly happy about the situation we all find ourselves in right now but, with a little distance, my thoughts are becoming much clearer. Just for the hell of it and because I know there are people out there thinking this through as well, I thought I’d share how my thoughts have evolved over the last month or so.
I’ve never hidden the fact that I wanted to stay a U.S. citizen and when I came in here renouncing or relinquishing was not at all an option I was ready to consider. So, why am I considering it now? There are two dimensions to this decision – let’s call them “push” and “pull.” Let’s start with the “pull”.
The “pull” is simply the fact that I love where I live. I love France. It’s like a marriage which has had its ups and downs over the years but its a rock solid long-term commitment based on many years of living together and clearly understanding each other’s faults, foibles and odd habits. If I ever left permanently I think it would rip me apart. I just don’t know what I would do without my friends, my colleagues, my church, my confessor, my family and my community here. In addition all my patrimoine is here and I am happy to pay taxes on it because civilization and services have a price which I am more than willing to pay to the French government because I find the French public sector to be humane, efficient and, oddly enough, very customer-oriented. So I decided to ask for citizenship so I can make my commitment to this country concrete and so I can participate in the last area not open to me as a resident: political life. France has one of the most amazing and vibrant democracies around. The political scene really moves and shakes though it has the capacity to make even the mighty De Gaulle throw up his hands in despair. I was also deeply impressed by how the French diaspora has representation in the Senate. These people are not afraid of their expatriates and are quite willing to have their participation in home country politics. So, in short, the “pull” here is France itself.
On the other side of all this is the “push.” To be very clear, it is NOT about taxes. I do not mind paying one whit for civilization and services. What I object to is the complete lack of services for Americans abroad and being castrated when it comes to participating fully in American political life. Living abroad we simply do not have effective representation in the U.S. and we can only stand by helplessly as laws are passed that effect us without anyone in the home country so much as nodding in our direction.
So between the “push” and the “pull” I think you can start to see a theme here. I want to be French because I want to be part of a democratic nation-state that I have a long relationship with and whose values I would be willing to fight and perhaps die for regardless of where I happen to be living. If I decide to give up my U.S. citizenship it will be because I have seen a better world and that I see that what the U.S. has to offer its citizens abroad is (and I think will be for a long time) limited to a kind of second-class citizenship where we can be manipulated, taxed and otherwise abused without much say and almost no recourse. After much reading and listening to all of you here and also the comments of Americans in the homeland, I am coming to believe that my US passport represents a citizenship that is inferior to what people in the U.S. homeland have and overall vastly inferior to what French people have everywhere. In both my head and in my heart, any decision I make really comes down to whether or not I think this will change. These days I’m beginning to believe that my hopes have been wildly unrealistic and that the U.S. will never change (under Obama or anyone else). Under those circumstances (which I cannot change and have no control over) I would be much happier and much more fulfilled as a full citizen in France as opposed to being a second-class citizen of the U.S.
Welll said. I congratulate you on coming to terms with how things really are.
I enjoy reading your comments, Victoria! I became a Canadian for many of the same reasons and, basically, because I wanted to participate fully in Canadian society.
With the current situation, I have found that I am left with three basic options: to maintain the status quo, live in Canada and complete the dreaded forms each year; to move myself, family and finances to the US; or to relinquish/renounce US citizenship.
I simply cannot live my life under the threat of huge fines and penalties, not to mention having this awful feeling of being unrepresented and seeing the US as a worldwide bully. The status quo is off the table.
As for moving back, I actually like the US (not government and policies!) and could happily live in many places. However, after 47 years here, my roots are pretty deep and it is not an option at all.
I don’t have much choice in the matter and will relinquish. That’s my thought process, for what its worth.
As recalcitrantexpat said, very well written…I have already decided to renounce because even though I am an EU citizen I still feel like a second class citizen due to my US birthplace, which has resulted in it being easier for a non-resident, non-EU citizen to open a bank account than for me as a resident and citizen. EU citizenship hasn’t offered me any protection from this mess. That isn’t right.
Not only do I think that the US will never change, but I don’t think that any other country is going to stand up for its citizens and say, crystal clear, that will not accept FATCA and that they consider US-citizenship based taxation to be an infringement of their national sovereignty. Sure, a couple of countries have said just that, but they’re not the ones where the majority of us live. I feel that I have been betrayed twice: once by a predatory US and the second time by my own country acting as a willing conspirator (Italy and the other four EU countries who are now “partners with the IRS”).
Victoria: I love your writing. Thanks for participating.
I have one thing to say about my situation: the United States with the extra-territorial taxation and HEROES Act, forced me to choose my wife over my country. With the recent FBAR crackdown, the United States has gone completely nuts.
“When the past no longer illuminates the future, the spirit walks in darkness.”
– Alexis de Tocqueville
“The journey of a thousand miles must begin with a single step.”
– Lao Tzu
@Victoria, very eruditely expressed!! I fully agree. I feel similarly about my life in England and how I’ve grown to love my life there and even prefer it to my former life in America. I also feel that things are inherently fairer in the UK for people on low incomes like myself. I would ideally like to retain both citizenships but because I tend to share your fear that things may never be reformed for expats, it probably is more practical to just keep my British citizenship instead of complicating my life by having divided loyalties.
I especially say this because I will be living in the UK for the rest of my life. I’m much relieved that my family would understand if I eventually renounced (after getting through my statue of limitations for my disclosure). However, the act of actually going through with it still terrifies me. I fear that in future renunciants may be forbidden from re-entering US soil ever again. They could thus start to universally enforce the Reed act or perhaps even lower the levels of assets that would ‘qualify’ one for becoming a covered expat.
To be frank, nowadays even two million dollars is not exactly a fortune any more. And with inflation, and the possible devaluing of the dollar in relation to other currencies, it could by default catch out many ordinary middle class people. What a mess!!
I resent so much how we’re being turned into collateral damage.
@Don, I also feel let down by the UK agreeing to be the IRS’s poodle. The thought of that bent head and raised tail sends shudders.
I am actually terrified to go through with renouncing, especially whilst still in the early stages of a disclosure. Perhaps I am cynical enough to conclude that this life is not always going to be fair and that life is too short to be bitter. We’ll just have to see, it’s still early days yet.
I agree that it’s outrageous how we, in spite of our dual citizenship, experience discrimination that non EU citizen residents in our countries don’t suffer from in terms of our financial planning and bank accounts, etc.
Thanks, folks. I was walking home from the store things just became strangely clear. I’m not happy about my conclusions – in fact I feel like someone or something I cared deeply about just died. After I respond here I’m going to go clean the house and answer ads – good therapy.
@Bruce – I think your three options sums it up perfectly. I’m with you – the status quo (the grin and bear it strategy) is off the table. I like the US too and I come from a pretty place – Pacific Northwest. 🙂
@Don – I was pretty disappointed as well about the EU reaction and the deal that they are willing to take. Even if Hollande wins I don’t think France will back her duals or pick a fight with the US. Not with over 500 start-ups run by French citizens in California just waiting to be plundered. Another good reason not to be a dual.
@Petros – Kisses from Versailles, mon cher ami. Yep, I think “nuts” is a good word. “Ka ching” would be another. http://www.urbandictionary.com/define.php?term=ka-ching
@victoria, Thank you for posting this. I went through a simiar thought process back in 1976 when the Tax Reform Act of 1976 was enacted and overnight my total Braziian + US tax obligation skyrocked from 10% more than the income tax obligation of any non-American of any nationaly in Brazil had to pay to 81% more. And even I could have afforded it, Brazilian exchange control and money-laundering laws back then made it illegal for residents to pay taxes to a foreign country on Brazilian income. Our 4 US-born children were small and I made the tough decision of closing down a successful new business and heading back home to start over in a new career. Some of my American friends with deeper roots there, married to Brazilians, opted for Brazilian citizenship and renounced their US citizeship back then, when it was much easier than it is to do today. Even though I testified twice at hearings on Capitol Hill and got lots of “we are truly sorry” condolences from senators and congressman, nothing positive happened in subsequent legislation which, over the years has pushed overseas US citizens like you closer and closer to the renunciation cliff.
You have my best wishes. Meanwhile I am still battling this overwhelmingly negative and self destructive citizenship-based taxation every way I can and though hopeless as it appears today, will never stop as long as God gives me breath.
@victoria, Very well written! I also agree wholeheartedly.
@Roger, I think the US was going through a very hard time back then due to Vietnam, right? If I remember correctly, the highest tax bracket shot up to be around 80%.
It’s amazing to me how the US wants to always say that these “wars” have nothing to do with public finances, but apparently they do. During this last Iraq war, I read several things on the internet saying that “The defense budget is much lower now per GDP.” I think that’s baloney. These wars cost money. The number of people of people there on welfare has shot up considerably in the last few decades. I really don’t know for how long the US can continue to indulge in these these things before they just break.
If there are no more expats to harass and try to tax, then what?
@DonPomodoro
A couple of things first we don’t what the details of the agreements the five EU countries signed with the US. At some point they may need to be ratified by the EU Parliament which has a peculiar history of not going along with things. I am sure as of three weeks ago the US thought ACTA was a done deal now its becoming completely unglued.
China is a real problem for the US. The main form of legitimacy of the Commmunist Party is their “nationalisitic stance” and thus it is quite possible they refuse to go along with this. Canada is still an open question. I do think it is a hallmark now of US policy to try to start these coalitions of the willing whether it be on ACTA, FATCA, TPP etc. I am going to write more about China later today in particular what their latest battle with the EU Commission says about them. I think Stephen Harper’s(Canada’s Prime Minister) visit to China went unbelievable well this week and I think their are several reasons for that.
Thanks Victoria. Can I send what you wrote to ACA?
@geeez, I do not believe the 1976 legislation had anything to do with generating tax revenue. The estimates of additional revenue expected were a few million dollars, but when the first round of tax returns were filed, as I recall, the additional tax revenue was some 8 times more than what had been forecast. By that time hundreds of thousands of US citizens responsible for the US having had a positive trade balance for 95 of the prior 100 years threw in the towel and came home. The fall-out was so dramatic that from 1975 to 1976 the US went from its largest trade surplus in history to a massive trade deficit. Never since 1975 has the US recorded even one trade surplus. But do you think that having gone through this any American who had come home would ever consider an overseas assignment after that? Not on your life! With citizenship based taxation Congress has the authority to change tax laws affecting Americans aborad by legislation introduced and enacted in the space of about 10 minutes. Having been destroyed once none would ever want to go through that again. And American companies quit sending their US employees abroad because with this additional tax burden they could and were forced for economic reasons to hire 3rd country citizens at from 1/3rd to 1/5th of the cost of US citizen employees considering the reimbursement cost of these additional US tax obligations.
What then was the reason for this 1976 legislation? It was vendetta reprisal legislation directed against never-identified Fat Cats who were perceived to be living abroad “to spend their tax evasion dollars while swathed in mink at the gambling tables of Monte Carlo,” as was clearly stated by Wisconsin Senator William Proxmire. He was the moving force behind this legislation. He stauncly maintained that having US citizens living abroad served no useful purpose as far as selling US exports or for any other reason, and they should not have any “special priviliges” any more than Americans living in remote areas of Wisconsin.
Sadly this same mentality still permeates Capitol Hill, except today that overseas Americans are mistakenly perceived as being the potential source of billions of dollars in tax revenues being evaded by by those living abroad.
For this double taxation to be repealed it is going to take firm and unyelding stands by foreign governments against the double taxation of their dual-nationaly US citizens.
FATCA will also most certainly result in massive and econonomically crippling resulting from foreign capital flight from the US. I fear we may have to learn the hard way. But even then, rest assured that Congress will soeomehow find a way to balame it all on China’s currency policies rather than on their own actions. When the blind lead the blind, they both fall in the ditch.
@Monalisa – I echo your fears. I’m afraid that when the 2012 renunciation numbers finally come in there will be a backlash and things will get even nastier. I think time is running out.
@mark – go right ahead. 🙂
@Roger – Thank you very much for your words. I’ve seen how hard you’ve been fighting – I encounter your replies to articles all over the Net and I deeply appreciate what you are trying to do. Alas I think we are dealing with a group of people who are not rational and not listening. Some days I think they are entirely prepared to tank the US economy and pull the US entirely out of a globalized world if it means that they can punish those who have offended them.
Recently I interviewed with a big US company with a subsidiary here in Europe. It was pretty clear that if I had been an American from the homeland I would have had zero chance at the job. They were even a bit hesitant about hiring an American who was just a legal resident. It was only when I said that I was applying for EU citizenship that they started to be enthusiastic about my profile.
Yes, I am indeed very scared. Some of us feel frozen in the headlights…and by the time I would safely be able to consider all the options, it may well be too late.
@Tim
Looking forward to your post on China!
Victoria – Welcome back. A week or so ago I sailed over to your blog to make sure you had not been hit by a bus. We at IBS are the rustle in the leaves that presages the hurricane. Early adopters – or whatever the opposite is. There is nothing in the long view or the short to indicate significant change in current US direction or momentum. The main uncertainty is how fast things will get even worse. Part 3 of Kwong details how volatile the US treatment of expatriates has become in the decade since 9/11. Foreign r bad. 2012 offers the lull of an election year. Then what? Allons enfants …
@monalisa1776: “Yes, I am indeed very scared. Some of us feel frozen in the headlights…and by the time I would safely be able to consider all the options, it may well be too late.”
If you don’t mind my asking… if you do decide that you are going to renounce (and you seem conflicted at the moment) what is it you hope to gain from waiting out the statute of limitations first?
The IRS has limited resources and like any parasite will pick easy victims before hard ones. Their preferred list probably looks something like: 1 – resident citizens, 2 – resident non-citizens, 3 – non-resident citizens, and 4 – non-resident non-citizens. If you move yourself from 3 to 4 your risks seem to go down, not up. The IRS is essentially powerless to do much of anything to people in group 4. As it should be.
@Watcher, I’m frightened that renouncing might enrage them and cause them to be vindictive and play rough, especially as I could be hit with several years of multiple delinquent FBAR penalties. I’m not wealthy by any means but had quite a few accounts due to having had numerous savings’ bonds that had already matured but were still technically open, plus various mutual funds all over the place which would be separate financial accounts for FBAR purposes. I tend to think that if I wait it out that they will accept reasonable cause but that they could turn me into a poster child if I were to do anything as ‘outrageous’ as renouncing and thus becoming an ‘enemy of the state’ and ‘traitor’.
I had been filing all along but had misunderstood how I was meant to declare my non-US income so had only declared my passive income to the British tax authorities so it could look to the IRS as though I was deliberately hiding income to avoid US taxes, especially as I had significant phantom capital gains on non-US mutual funds which are taxed in a very disadvantaged way by the US (in spite of being tax-efficient investments for UK residents). I feel I’m being doubly penalized, both because of the double taxation on phantom gains for funds I never even sold, plus the fact that these investments were tax free in the UK so I feel screwed and punished by the system.
I’m scared that my disclosure will look very messy whereas if I hadn’t been filing at all, it could look a lot more innocent even though I can swear on the Holy Bible that I didn’t do any of this intentionally. If I had understood the anomalous US tax treatment of UK mutual funds, I would have simply either stuck to company shares or quite possibly just simple savings’ accounts because in both instances, I wouldn’t have even owed any US taxes due to foreign tax credits offsetting the US taxation. But, alas, due to my lack of awareness, I completely screwed up my tax planning by investing like a Brit instead of taking into account my American tax treatment.
I’m frightened that my amended returns will inevitably raise red flags and that if I did something as brazen as renounce during the statute of limitations that I would be risking vindictive examinations because I refuse to roll over and enter into the OVDI to be turned into fish fertilizer. They well assume I’m a slippery eel guilty of tax fraud. 🙁 I thus want to wait it out till I’m completely compliant and my mess cleared up before considering renouncing.
It breaks my heart to have to burn bridges because I still love America in spite of its imperfections but especially now I have my Mother’s blessing, it’s dawning on me that my life would be so much less complicated if I only had to consider the UK tax authorities…but it’s so complicated because I also fear that if I renounced that my future inheritance from my parents could be largely seized by the US government if I were a renounciant. I don’t understand things well enough to know how renouncing would effect any future legacy.
I also feel that if I can become compliant and afford the accountant on an ongoing basis that I would be willing to keep my US citizenship because I still love my country in spite of everything. But it’s obviously a matter of degree of how much I can afford to put with going forward and it’s still too early in the game for me to know how it’s going to turn out. It’s an onerous situation because I consider myself an honest person who naively assumed that I would be fully protected by the tax treaties from all this nonsense and hadn’t realized all the exceptions in them that still allow for double taxation against US ‘persons’, etc. What a mess!! 🙁 My hair has been rapidly going grey over the past few months. It’s aging me, all this… I just want to get it all resolved as best as I can and to have peace of mind. I’m not a tax protestor but have a sense of fairness.
I was only a young student in my early 20s when I moved to the UK and hadn’t understood all the US tax obligations. I have essentially spent all my adulthood within the United Kingdom. Had I realized everything I would have obviously done everything to be compliant and not have created the mess. I have lived abroad for almost 24 years.
I certainly am not a tax evader and am completely compliant to HMRC and am doing all I can to be US tax compliant too. All my intentions are to do the correct thing. But to face life-changing fines for a genuine misunderstanding is to my mind unconstitutional, especially against the 8th Amendment against cruel fines and unusual punishment. This is why I feel that OVDI is so unfair to minnows because it also forces one to enter into its false world of artificially waived constitutional rights which I refuse to give up. I am not an idiot.
I’m just so glad I have the British passport too. I realize it will only offer limited protection but anything has to be better than nothing. 😉
@monalisa1776- one thing that you need to consider when you are contemplating the possibility of remaining and American citizen and putting up with the ongoing compliance burden is this: what would happen if you should lose the mental/physical ability to maintain yourself in compliance?
U.S. tax law does not give any slack to a disabled or mentally impaired person when it comes to tax compliance. At the time that your disability is incurred it could be possible that you have accumulated a substantial sum of money. But even if you haven’t done so the costs of ongoing compliance would be a financial drain your limited resources. And no one else can get you out of it.
The only time in your life when you get to consciously make a choice about your life is now, while your are whole. Do you really want to leave it to family to have to deal with the IRS on your behalf? Good health, be it mental or physical, is a fleeting thing.
geeez said: I think the US was going through a very hard time back then due to Vietnam, right?
Correction: Vietnam was going through a very hard time back then due to the US. That 50 to 1 death ratio amounted to genocide. But winning a war takes a lot more than killing the most people!
@monalisa1776: “I’m frightened that renouncing might enrage them and cause them to be vindictive and play rough, especially as I could be hit with several years of multiple delinquent FBAR penalties.”
My hunch is that your fears are overblown. First and foremost, the IRS is process driven to the point of being sclerotic. You’ll have observed this in disclosure. Almost everything runs along rigid and predetermined lines. This has been a major complaint of the disclosure processes. But in this case it could be good news — I’d say the chances of the IRS becoming difficult is no more if you renounce than if not, because renunciation doesn’t really factor into their rigid process. On the flip side, no longer being a citizen offers some protection against the IRS. And of course being able to fully participate in UK investments, shielding from US estate and gift taxes, no more FBAR forms, FATCA forms, and on and on; less gray hair right there.
Clearly it’s a very personal decision. And I’ve no insight into what the IRS would actually do to you other than speculation. But maybe at least consider that renouncing now rather than later — if indeed you do wish to renounce — might perhaps help rather than harm.
@Watcher, Hi there :). I see what you’re saying and even my Mother is taking this slant but I don’t want to burn my bridges unless I have to. I would like to think that they will realize that all my mistakes were unintentional and be easy on me.
@Recaltrit, I also see your point but still believe that one could please reasonable cause in such situations. I just can’t believe the IRS would really be that horrible, especially when it would be obvious that all my intentions were to be doing things correctly.
I also think that once I’m old and infirm that I will no longer even be entering into America so even if they were to get awkward they would have to go after me with all my assets in the UK. No longer low-hanging fruit so probably not worth their bother. They would have to seize my assets through a British court and I doubt they’d be overjoyed to go out of their way to help the US in such an instance.
I appreciate both your words of encouragement though. 🙂
monalisa1776 – Before I started getting better informed, I was always thinking, well, they could exclude me if I am not a citizen. http://www.renunciationguide.com/ did a lot to relieve those fears.