The IRS is going to extreme measures to make headlines …
U.S. tax attorney Chris Rusch arrested in Panama City
If you pursue the link below to read the rest of this gripping story, also consider (1) Where the story is coming from, and (2) The veiled pitch for business.
If only journalists in Canada and elsewhere would dramatize the persecution of ordinary extraterritorials with such fervor.
The kinds of press releases being circulated and picked up by all the media right now not only make headlines. They also frighten some of the folks reading them into voluntarily coming clean regarding unreported income or unreported offshore bank accounts. …
The trouble is that most Americans don’t understand all the current, new, and ever-expanding filing requirements. You need to work at keeping up right now, because the playing field is being reconfigured all the time.
Read more at http://blog.artiopartners.com/2012/02/04/expats-prepare-and-beware-the-tax-man.aspx
Very poorly written article. I’m sure that the author could have provided a bit more info about what this man was actually doing. It basically just reads as the following:
1) This guy was arrested for some reason. The reason doesn’t matter so much as demonstrating that the US can catch you no matter where you are in the world.
2) Regardless of how complicated living overseas can look, we claim that it actually can still be cheaper and save you on your taxes. The catch? Work with us!
As to where its coming from I have to admit to not being too aware of US- Colombian/Panamanian relations. What does the location specifically imply? Is Colombia not participating in FATCA or what? Are they tax havens for US citizens?
At the risk of seeming like a complete contrarian if not a curmudgeon, I am troubled by usxcanada’s post about the arrest of Chris Rusch. I don’t know Chris, or anything about him, and all I was able to learn from usxcanada’s post and the link was that Chris is a tax attorney who was arrested in Panama City, and a lot of people think of him as a good guy. As a tax guy and as an attorney myself, my first reaction is to say that I personally presume Chris to be innocent unless proven guilty and I wish him well in his battle with the government. That said, usxcanada then goes on to draw some parallel between an arrest of a tax lawyer, the complexity of the tax laws and how menacing the IRS has become! Excuse me? Is usxcanada suggesting that innocent people better watch out because the IRS may come after them too and falsely accuse them of committing tax crimes, and don’t even think of trying to get out of it by claiming that the tax laws are so complex!! It won’t help you! Or, is usexcanada just sore about the very fact that the IRS made an arrest in the first place when they should just shut up and mind their own business?
Or, when usexcanada refers to the government’s press releases and says, “They …..frighten some of the folks reading them into voluntarily coming clean regarding unreported income or unreported offshore bank accounts,” exactly what is the point? Unreported income and having a secret bank account can, under certain egregious circumstances be found to be criminal conduct. Felonies. Stuff our society believes some people should get locked up for and kept apart from their loved ones and property. Chris’s sad misfortune and presumed innocence aside for a moment, is usxcanada saying we shouldn’t have tax crimes? Or, if society insists on having those laws they shouldn’t be enforced and most of all the IRS should just stop scaring us !?
What am I missing here?
@Don Pomodoro: “Very poorly written article.”
Yeah, I didn’t get it either. I suspect the author was trying to drum up business. Or maybe just fill column inches to meet a deadline or get paid. The less sensationalized version of the story is here:
http://www.justice.gov/opa/pr/2012/January/12-tax-136.html
@Watcher
Thank You. Now I understand what is going on. If Rusch and the others are guilty of even half of what is claimed here I think that the IRS is going to make quite the example out of them!
The danger here is that this sort of story will become big news in the US and drum up more and more support to crack down on offshore accounts and the ability of US citizens to do anything overseas. I heard once that Bill Clinton and other senators became so incensed at reading about all of the multi-billionaires who renounced in the 1990s in a famous Forbes article that they then started to really crack down on everything. The Reed Amendment was passed in that political climate too. I am very concerned about what might happen after the US elections this year…we’re probably safe from any changes until at least early next year, but then who knows what will happen once the politicians aren’t busy being re-elected anymore…
If you google chris rusch, more information is available.
http://www.panama-guide.com/article.php/20120131165609122
Sensationalistic writing aside (and Steve, usxcanada didn’t write the linked piece), I really do not like these “soft extraditions” where a sovereign country revokes a legal resident’s visa at the request of a foreign government. But maybe that’s just because I’m used to a higher standard of rule of law, since I live in a place where permanent residents are actually permanent and cannot have their status revoked, and even non-permanent residents cannot simply be refused permission to re-enter and kicked out to another country just because some U.S. officials come by and pressure whoever’s on shift at the airport that day.
Sadly very few countries nowadays seem to protect their own citizens. The list is small: France, Germany, Switzerland, Russia, China, Hong Kong residents come to mind. Any others?
I should mention that the US is known to give sanctuary its own citizens wanted overseas. Most notable example is that India has wanted to extradite the head of the company involved in the Bhopal disaster but nothing has ever come of it.
@ Steve “Unreported income and having a secret bank account can, under certain egregious circumstances be found to be criminal conduct. … What am I missing here?”
The “law” of the United States makes no distinction between an unreported account in Canada, UK, and Germany, and an unreported account in Switzerland, Cayman Islands, Barbados or Panama. That is, the law criminalizes me if I decide its none of IRS’s business how I conduct my affairs in the high tax jurisdiction of Canada. I am made a criminal. But when law makes innocent people criminals, the enforcers of that law become criminals. Thus, I am routing against the forces of Mordor, the IRS.
The problem you have in the United States is there is no such thing as an illegal foreign bank account. There is only the reported ones and the unreported ones. Right? That is the point of FBAR and the Bank Secrecy Act. The United States government wants to know about your banking activity. Well, you see, almost all of my accounts are unreported too. That makes me a criminal, right? And something like half a million other residents of Canada. And 3 million US persons elsewhere.
Do you now see what you are missing? If the government turns evil, then suddenly the people that it hates, Conrad Black, Charlie Engle, Irwin Schiff, Wesley Snipes, and Jonathan Lebed, suddenly these people become my heroes.
@Steven
Once again thanks very much for your comment. They always provide a reminder to us that the perspective of U.S. citizens abroad is just one perspective. Your comments always act as a gentle reminder that there is the perspective of those of live in the United States and just trying to enforce the tax laws.
What you are not seeing is that the central message of the post is that:
– the so called “cross border professionals” are using the fear and confusion that expats (who are trying to come into compliance) are feeling;
– to generate business from them (which in many cases will be a push into ovdi)
It is very difficult to trust the “cross border professionals” (as you know given the comments on some of your posts.
To understand the fear and confusion you might find the following to be of interest:
http://isaacbrocksociety.com/2012/01/05/the-taxpayer-the-irs-and-the-cross-border-professionals-where-to-go-from-here/
There is a clear difference in perspective between those who are the “hunted” (U.S. citizens tax compliant in their country of residence) and the “hunter” (the U.S. government).
Imagine the perspective from the “hunted”!
These guys were rich *US residents* who were clearly breaking the US laws. I think they deserved what they got. They were there benefitting from all of the *services* provided by the US, so shouldn’t they have to pay for them?
If the US wants to make things easier, why don’t they elect some sort of Citizenship system like Singapore? I’ve read that Singaporeans have to take several oaths of allegiance; otherwise, they can be stipped of citizenship. If the US is so “exceptional”, why don’t they do this too?
Steve Mopsick – Enough of what I would say renounceus has already said. I applaud his/her ability to read. For the record: I have no interest whatsoever in supporting tax evasion criminals and/or their tricky facilitators.
The current U.S. Income Tax Code has been falling apart for years!
Those who can afford armies of tax attorneys and CPA’s to navigate around this tax code and lobby the government for tax breaks are the ones who don’t pay income taxes.
And those of us who can’t afford to lobby or pay for all the legal help necessary end up losing and paying.
The Income Tax code is almost 75,000 pages long and that does not even include all the thousands and thousands and thousands and thousands of pages of tax publications, instruction booklets, revenue rulings and tax court cases.
The only solution is changing the current Income Tax system as it has proven to not work and cannot be fixed, as the model does not work.
There are currently about 26 countries in the world who do not have an Income Tax code like the United States – they operate off of a Flat Tax (no lobbying for deductions and credits, etc).
So if you really want to solve the problem, the solution lies in changing the current Income Tax code and replacing it with a system that does not allow for the lobbying of tax breaks and does not make it necessary to have to hire an army of tax lawyers and CPA’s to navigate around it.
@Scott Greene, welcome! I and I think everyone here of course agree with your comments about the complexity of the tax code and the fact that every year we are left to reconcile its definitions of categories of income with the different definitions of categories of income in the tax codes of our own countries of residence. But that said …
So if you really want to solve the problem, the solution lies in changing the current Income Tax code and replacing it with a system that does not allow for the lobbying of tax breaks and does not make it necessary to have to hire an army of tax lawyers and CPA’s to navigate around it.
Tying together the issue of taxation of expats with comprehensive US tax reform does not seem to me to be a winning strategy. The first problem is that plenty of American homelanders make the assumption that foreign tax credits or exclusion of taxation on foreign income are a form of “subsidy” and should actually be eliminated as part and parcel of “tax reform”. One good example of that mentality can be found in Pew’s “Tax Expenditure” Database. Or you can just refer to pretty much any garbage that comes out of the mouths of politicians on both sides of the aisle like Chuck Grassley, John Tierney, Tyler Coburn (see p. 35), etc. It is an uphill battle to convince these people otherwise, and telling them “look at what the rest of the world does” is useless because they think the rest of the world are either Evil European Socialists, Evil Asian Job Stealers, or Evil Caribbean Tax Havens.
The other problem is that every country which has a flat tax either decided on it after overthrowing a communist government, or are ex-British colonies who retained the tax policy that London gave them while they were non-self-governing and have fought tooth and nail to keep lobbyists and bought politicians from degrading it into something more complex. I doubt the US has the political ability to move to such a tax system.
@Eric
Quite right. Russia has a flat 13% tax rate no matter what income bracket you fall into. I don’t know much else beyond that about the tax code, but my Russian friends make it seem like its pretty easy to understand.
I agree also that the US does not have the structural capability to enact a real reform to the tax code. The entire presidential system with its system of check and balances precludes a government from actually being able to govern. Take for example Obama’s attempts to get proper healthcare just boiling down into forced insurance. The same thing would happen should one party really try to reform the tax code, since neither would agree on anything and the reform just be trading one form of bulk for another partisan compromise bill full of bulk and loopholes. I wonder if it is a lost cause really.