Cross posted from RenounceUScitizenship.
Citizenship renunciations are soaring under the Obama administration. In a move that is sure to accelerate this trend, as part of Tax Amendments to Senate-Passed Highway Trust Fund Bill (S. 1813), the ability to get a U.S. passport is now tied to U.S. tax compliance. The provisions are detailed. But, the bottom line is that the issuance and renewal of U.S. passports is now tied to U.S. tax compliance. I suspect that (at least initially) this will affect few people. You should read the complete article (courtesy of ACA). Note the following comments from lawyer Charles Bruce.
One suspects that the State Department personnel responsible for the issuance and renewal of passports, especially those located in American embassies around the world, will not welcome these provisions. They will not make their work, which is already difficult, any easier.
In order to avoid being caught in a bind, where the individual, in effect, loses his US passport, some people undoubtedly will want to acquire a back-up passport from another country. Also, it is the case that there are hundreds of thousands of individuals that are already dual nationals, frequently by birth. If their US passport is revoked or they are not allowed to renew it, at least they will not be, in a sense, stateless, unable to travel from one foreign country to another and, as a practical matter, forced to return to the US. Some individuals who think these rules make their situation untenable, or may in the future make it untenable, may choose to renounce their US citizenship. Depending upon circumstances, they may have to “pay up” in order cleanly to renounce.
There may be constitutional issues lurking around these provisions. A US citizen generally has the right to have a passport and to travel freely. It’s not clear that the inability to pay his tax bills can be used to deny him this right.
Charles M. Bruce is a partner at Moore & Bruce LLP (Washington, D.C.) and counsel at Bonnard Lawson (Lausanne, Switzerland).
Mr. Bruce notes that “A US citizen generally has the right to have a passport and to travel freely.” I suspect that the Obama administration would argue that there is NO constitutional right to either leave or enter the United States.
Remaining a U.S. citizen is becoming increasingly undesirable. The issue is not the tax requirements. The issue is the disregard of fundamental human rights and (as Mr. Bruce alludes to) the constitutional issues surrounding much of its legislation and conduct. On the issue of respect for the constitution, see U.S. Attorney General Eric Holder explain former law professor Barack Obama’s view of what due process requires (or sorry, doesn’t require).
Renounce U.S. citizenship and rejoice!
@geeez, renouncing US citizenship without already having citizenship in another country (or a promise of Citizenship from Germany which will not grant citizenship until you renounce) is risky business. The double tax and no bank accounts are both because of US tax laws so they are the fall-out of US citizenship based taxation which torments US citizens abroad with loss of sleep and massive headaces. There are no limits on what congress can do to destroy the lives of US citizens living abroad. It is hardly a viable option any more. You must choose betwen returining to live in the US or becomig a citizen of the country where you live and renouncing your US citizenship, or you will never know from day to day what Congress will enact to make your life abroad impossible. First it was the tax itself. Then FBAR, then FATCA, then the real threat of elimination of the foreign earned income exclusion, having your US passport canceled if you owe the IRS money you can’t pay either because the laws of the country where you live make doing so a criminal money-lanudering act or becase of a retroactive tax law which from one day to the next creates for you a huge tax liability you did not have the day before. And the list just goes on and on. Perhaps tomorrow Congress witll decide that you can no longer use taxes paid to a foreign government as a credit against your your US tax obligation. Don’t bet someone in Congress won’t label foreign tax credits as a huge tax expenditure. After all, 91% of the tax returns filed from abroad show a zero balance after foreign tax credits. Tax returns like this cost the IRS a lot of money to process but produce zero revenue for the US Treasury. But if you live abroad you must file a return and all of its accompanying forms or you cannot claim either the foreign earned income exclusion or foreign tax credits. And don’t ever forget FBAR and now FATCA form 8938.
appreciate all your commentary, and analysis @Roger,
have read your other posts – and the documents you linked to (ex. GAO).
thank you very much for your help here.
@geeez
Have to agree with Roger here – As much as I imagine that you would like to get rid of US citizenship asap, I wouldn’t want to become a stateless person if I didn’t have to. How long should your BR citizenship take to process?
@Roger – yes, that Reed amendment is worrisome. It doesn’t impact me so much because all my family is on the West Coast (US and Canada) so if the US isn’t possible anymore all the family in Washington/Oregon can hike up to BC and we can fly into Vancouver from Paris and have a family reunion at my aunt’s ranch there.
Concerning the cost of processing those returns, I’m an IT person and, believe me, they can get those cost down to nearly nothing. They could even outsource the task.
On the other hand I received another note from a family member in the US about US taxes in the homeland. This person makes a decent income (about 75K) and has 5 kids, a house and a spouse that doesn’t work. This person not only did not pay one dime of Federal income tax, he actually is getting a 4000 USD “refund”. Now I do not begrudge this person the money but I was thinking this: I will pay about 2000 USD in taxes this year. Between the two of us the US is 2000 USD in the hole. 🙂 That is just crazy. How in heaven’s name is the US ever going to balance the books with a system like that!
@Victoria, I am sorry to say that currently those in charge of our government are leading us straight for the cliff. I can see no hope if elections do not change the course we are on. But change does not automatically insure things will improve. The replacement could be worse. We have far to many who have become dependent on government handouts like the $4000 received back from the IRS you menion when they paid nothing in taxes, as well as those that can get by on unemployment compensation rather than gitting out there and working at a lower paying job than they used to have, or even looking for work. The dependent on government class is growing and they will likely vote for the status quo. Money does not grow on trees and the only money the government has is what it takes out of our pockets or borrows from China.
Roger and Don, I think I have a good solution. BUT FIRST – just so you know, I have trauled the MdJ (Ministério de Justiça) website many times and they say it very clearly in several places: “A person who has Brazilian children cannot be deported, even if a crime has been committed.” (They also say if someone has had a Brazilian spouse for 5 years they can cannot be deported. So technically I have both! 🙂
Add to that, I’m a pretty simple guy – law abiding – I never try to irritate anyone here. My sensibilities are more Brazilian now than foreign. *BUT* should I need to travel, that’s the tricky part. To get a Travel Document and get a US visa would add up to be A LOT of money for just a there-and-back trip. That’s not worth it in $$$ terms.
So I came to the conclusion that the best thing is to just wait and see with the FATCA implementation rules. If the banks here say “Sir, we need you to fill out this US form” – I’m headed to the consulate the same day, stateless or not. If they don’t, then I’ll just wait for the citizenship to be approved and then renounce.
Looking back at the situation, I’m really quite lucky I ended up here. This maybe a challenging place to live, but it IS NOT a deport-happy country like the US, if the foreigner is supporting several Brazilian “dependents” whether through direct familial ties or through employment.
My heart goes out to the people around the world who are truly stateless without documents and unable to do anything. I don’t think it’s fair, and I wish that all countries had rules similar to Brazil.
@Geeez, the Transporation Bill with this draconian provision to revoke passports of those that owe over $50,000 in taxes, althogh approved by the Senate, has not been presented for a vote by the House. There are other “transportation” provisions in this bill which have met with the disapproval of the House leadership, so it is not likely to even be voted upon in the form that passed the Senate. That does not mean that this provision and its companion provison to prohibit the use of credit cards issued by foreign banks and institutions that are not FATCA compliant are necessarily dead, but that they could well appear again in some future legislation. Bad ideas don’t necessarily die easily.
I do recall that when we lived in Brazil it was necessary for residents of Brazil, both Brazilians and Foreigners, to obtain an exit visa in order to travel abroad. Originally that visa was granted only if you were current in your tax obligations to the Uniao – the Federal Government, but later it just became a procedure everyone had to follow. Thousands of “despachantes” made a living taking passports to the office that granted them and obtaining them for travelers. Then after we left the requirement for an exit visa was abolished. The loudest complainers were the thousands of despachantes who saw their rice bowls smashed when this exit visa law was repealed. Now if you are a resident of Brazil with a valid passport you can just buy a ticket, go to the airport and get on a plane and fly out of the country.
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Roger, despachantes are alive and well in Brazil! But I mostly see them for car-related issues, like vehicle registrations. I don’t think that there is technically an “exit tax” anymore, but when I have time, I will look at the passport application again to see if they have a check box. Nowadays, they will lock up your TAX ID in a skinny minute and then it’s hard to do anything.
Ha! I WISH I owed $50k in taxes to the USA because that would mean that I made over a million!! 🙂 The big banks here like Itaú, Bradesco, etc.. all trade on the NYSE, so I’m 99,9999% sure they will become FATCA compliant. But I’m not worried about it because the plans are to renounce. That’s the game that the US wants us to play, since we are “lucky” enough to be US citizens. So I will play their game.
Here’s an interesting article/statistic for you. Emigration to Brazil is VERY low compared to other counties. With so few foreigners who have survived here, I’m very clearly the exception to the rule. I also found the IBGE statisitics. There are only a little over 100,000 US Citizens in Brazil as of the 2010 census.
Here’s an interesting article, entitled:
“Immigration policy keeps away foreign presence in Brazil”
Only 0.22% of the population consists of immigrants. Strict laws hinder entry of foreigners.
http://www.gazetamaringa.com.br/online/conteudo.phtml?id=1216512
(Unfortunately, this URL doesn’t work well with Google Translator :-()
Imagine! Only .22% (POINT TWO-TWO percent – for emphasis) of the population is made up of foreigners.
@geee, interesting statistics. When we moved to Brazil it was easy to obtain permanent residence. Our permanent resididence visa was stamped in our pasport by the Brazilian embassy in Lima, Peru. We took our Peruvian maid with us on a temporary 2-year visa (so our small kids would not forget Spanish) and that temporary visa was transformed into permanent when the 2 years were up. At that time 20% of Rio’s population was made up of foreign citizens, about half of which were Portuguese. Marcelo Caetano, the prime minister of Portugal fled to Brazil when his government was overthrouwn, and General Spinola, who had overthrown Caetano was himself deposed, he also fled to Brazil. Brazil used to be very open to accepting refugees from all over the world – from China to the Soviet Union and Jews from Europe when Hitler was rampaging through Europe, and from Syria and Egypt when the governments of those countries forced many whose ancestors for centuries had thrived in those countries to leave. And there were Indians from the former Portuguese colonies of Goa, and Africans from the ex-Portugese colonies in that continent that fled across the south Atlantic to Brazil on rafts and small boats when violent revolutions threw out the Portuguese. Much like the Cubans fleeing the shark infested Caribbean to Miami. And Brazil was the refuge for leaders of other countries whose governments had been overthrown- such as Strossner from Paraguay.
I never owned a car while in Brazil so did not use a despachante for that, but geting and renewing a driver’s license was not hard in those days. It is more difficult in Miami where today you must present your original birth certificate or valid US passport to prove your citizenship, your original Social Security card or if a foreign resident your green card and valid foreign passport to prove legal presence in the US, plus other documents to prove you actiually live where you say you live.
@geeez
That’s very internesting to hear! Brazil always cropped up in my head as a big immigrant destination, especially for Portuguese residents currently. I guess that most of the immigrants came in the 19th century then?
I don’t know the actual statistic for Belgium, but I have heard that we are, along with the UK and Switzerland, the most EU countries with the most immigrants. It has to least be 10% of the population here due to all of the EU and NGO people about!
While I am very pleased to read all of the stories of board members from Canada who have become very successful there, I must say that I personally know more “failed” Canadian immigrants than successful ones. Most of the people I know from the EU who moved there had trouble getting their qualifications recognised and eventually just gave up and moved back and were the better for it. I think that US qualifications must be more easily transferable to the Canadian labour market than European ones? Here is an article on the subject with a focus on immigrants to Quebec (I personally knew people who tried their luck in Nova Scotia and Toronto and came back within 5 years. All were native English speakers with good degrees, etc.):
http://online.wsj.com/article/SB118680079272894989.html
Why do you think that so many people fail in Brazil? I tried to translate your article but the translator didn’t really make any sense for me!
@Dom Podormo, I am curious about your statement that so many people fail in Brazil. My experience and observation is that people with experience, qualifications and a strong work ethic do very well in Brazil, whether they be Brazilians or foreigners. The incentive to be productive is very strong, because the government will not feed and clothe you if you don’t like to work.
@Roger Conklin
Did you mean my reference to failed immigrants in Canada? Geez’s remarks that many immigrants to Brazil fail are the first that I’ve heard of it and I was just curious if someone could share more since the article he linked didn’t make any sense in the translator that I used. I always viewed Brazil as a major immigration destination with the qualities that you listed above as well.
Roger & Don, really, many *DO* fail, even with skills and especially qualifications nowadays. I think I was reading some time back in the Financial Times, or similar publication saying that if an executive or manager can survive in Brazil for years, then they can survive anywhere.
True, in the past Brazil was VERY receptive to foreigners, and in many cases, recruiting and enticing them from overseas (Japanese and Europeans pre-WWII). There are two RECENT cases where the Brazilian government has been “nice” to immigrants:
1) When Lula was chumming up to the President of Iran, he agreed to settle some Palestinian refugees in Brazil.
2) In that article, it mentions that Brazil has agreed to give 1,500 visas per year to people from Haiti to settle in Brazil.
But now, Brazil is for Brazilians. The government can care less about traditional “American” concepts like Productivity and Efficiency. Unless a foreigner has a really unique skill set, they can pretty much forget about getting a cushy government job. Most foreigners come here and last on average for about 2 years. Why do people fail here?
* Education creditials are very difficult to get recognised. I haven’t done this yet. I don’t even know if I will be able to;
* The minimum wage is around $350/month plus benefits;
* There is usually a glut of available workers, especially for the easy degrees like phycology, physical therapy, dentristry, law, humanties. And preference will usually go to a Brazilian.
* Language barrier;
* Cultural differences.
My guess is that the last 2 things I mentioned result in the #1 reason people leave after a couple of years. It’s not easy to learn another language for most people. Nobody here speaks English.
Cultural differences are also VERY different. I remember when I got here, how many times I was frustrated at having to pay twice for something, general lack of attention to detail, or bureaucrats refusal to comply with laws, or the sheer difficulty in getting VERY SIMPLE things done. It really feels like walking up the side of a steep hill. I have seen/heard of several cases where Americans, Canadians or Europeans come here and “act” like where they come from, and if anything, it hurts their cases more.
Where I live, there are 2 US citizens: Me, and another guy that was born here.
Roger & Don – here’s an interesting statistic for you guys. According to the Brazilian Statistics Association (IGBF) 2010 Census here in Brasil, there are:
TOTAL HOMENS MULHERES
Estados Unidos 117 104 57 857 59 247
( I hope the formatting comes out OK).
There are a total of 117,104 US Citizens in Brazil. 57,857 are men and 59,247 are women. So you see, there are few of us here. Add us all together and we would only make up a small town, depsite having 190 MILLION people in this country.
@Dom Pomodoro, I totaly misinterpreted your “failure” comment to apply to immigrants to Brazil, and I apologize for that.
The article in Portuguese explained in detal the difference beweeen Brazil’s prior policy when immigrants were welcomed with open arms to it much more restrictive policies today, giving the views of both those who favor the current policy and those who feel strongly that does more harm than good.
Brazil, like the US and Canada, is a nation built by immigrants. Back in the 1870s when Brazil’s poulation was very small Don Pedro II, Brazil’s then emperor traveled to the US after the end of the US citil war, to recruit confederate soldiers and their families to immigrate to Brazil and start over developing agriculture in the vast and fertile lands that were free for the asking if they would do that. Some 10,000 “Confederatos” as they were know as later, did precisely that. And today the city of Americana with a population of some 200,000 about 100 miles from Sao Paulo is a monument to the success of that immigration from the United States. The first Protestant church in Brazil was erected their by the Baptists and the tombstones in the local cemetery have names like Smith, Brown, Jones etc. Even today there is an active society of the descendants of those early immigrants who still speak English and make sure there children learn it, who gather to comerate that mass immigration to Brazil. It is not unusual to hear English spoken downtown on the streets of that city although today they are all Brazilians and Portuguese is their first language.
You will find German, Italian, Swiss, Polish, LIthuanian and and other national groups whose ancestors arrived in Brazil many years ago, that still maintain strong ties to their homelands and maintain the customs and languages of their forfathers. One time I visited a small town in the Brazilian state of Parana and noticed that the notices on the bulletin board on the front of the local grocery store were all in German. And Sao Paulo, with over 1 million Japanese and 7 daily newspapers in the Japanese language, is the largest concentration of Japanese anywhere in the world outside of Japan itself When we lived there in the 1970s one member of the Presidents cabinet was the son of Swedish immingrants, another the son of Japanese immigrants and the president himself was the son of German immigrants. It is hard to find a more better and more thouough integration of people with such diverse heritage anywhere else in the world.
@Victoria: Just saw your post. Scary story and also frustrating that we risk being treated as criminals for renouncing. At my renunciation ceremony I was treated very politely and the U.S. Consular wished me the best of luck. I wonder how it will be the next time I try to enter the US? Slainte writes that he hasn’t had any problems. Random, I guess.
@geeeez That’s about the size of the US population in France but most “Ricains” live in Paris (about 75,000).
@rodgod Sounds like its a real crapshoot and must depend on the border guard and how he/she feels that day. 🙂