Estimated world population as of Oct. 31, 2011 7 billion
Estimated population of the U.S. for 2012 313,281,000
Estimated number of U.S. citizens living abroad 6 million
Estimated costs to administer FATCA and chase those 6 million- billions of dollars forever. Net benefit to be derived at the best is most likely zero but is more than likely to be negative because the taxes collected are not likely to ever exceed the cost of FATCA compliance. Of course we will never know because the U.S. very conveniently refuses to establish any criteria for costs calculation.
@omghesstillanamerican- the logical answer is to adopt a territorial system of taxation. The present system is obviously unworkable if you have to adopt punitive measures in order to enforce it.
Steve – let me ask you something. You said “Some of you are hiding assets and don’t want to pay your fair share.”
If someone paid taxes where they live, let’s say 30%, and they save this money in the bank, what does the US Government have do with this? And how do they deserve a “share” since taxes have already been paid?
This is the argument of many of us. We are ALREADY taxed where we live. If we receive ZERO benefits and services from the US, then why should we have to pay there too? We’ve already paid.
And one more thing: US Citizens in US Territory should be ashamed of themselves for letting Obama charge $450 for someone to renounce. That’s the 21st century equivalent to a slave buying their freedom! Whatever happened to the American attitude of “good riddance!”??
@recalcitrantexpat Absolutely on point! “The present system is obviously unworkable if you have to adopt punitive measures in order to enforce it.”
BTW @WhoaIt’sSteve
Continuing your education, you should read the National Tax Advocates recent report to Congress on Foreign tax issues and bad practices by the IRS. There are some at the IRS that understand the problems, but unfortunately there have been no hearings or discussions on these matters in Congress. Certainly nothing in US media.
Under areas of Focus, read item K. IRS’s Inconsistency and Failure to Follow Its Published Guidance Damaged
Its Credibility With Practitioners Involved in the Offshore Voluntary Disclosure Program
Read about the TAS directive to the IRS where this problem stems from.
http://www.irs.gov/pub/irs-utl/recommendations_tad2011-1.pdf
Read about the Most Serious problems that the TAS has identified…
Introduction to International Issues: Compliance Challenges Increase International Taxpayers’ Need for IRS Services and May Undermine the Effectiveness of IRS Enforcement Initiatives in the International Arena
http://www.irs.gov/pub/irs-utl/2011_arc_internationalmsps.pdf
Finally, not to overburden you with educational material, but since you have taken finance classes, this should be a piece of cake for you…
Familiarize yourself with American Citizens Abroad, a non partisan group trying to represent Expat issues with Congress.
This on FATCA…
http://www.aca.ch/joomla/index.php?option=com_content&task=view&id=466&Itemid=2
This a proposal for a Territorial Tax system and abolition of the Citizenship taxation model.
http://www.aca.ch/residencebased.pdf
Happy reading….
@recalcitrantexpat, I think at it’s core the US government is afraid of tax competition which is what the territorial tax system introduces to the equation.
They need to find ways to broaden their tax base at home. There are too many deductions that other countries don’t offer to their citizens that US residents enjoy. US politicians need to bite the bullet and change the system now while it’s in upheaval and less Americans will notice what’s really happening.
You can’t spend more than you take in forever. They need to broaden the tax base, become more competitive with business taxes, find ways to export more, and reduce the government bureaucracy.
@omghesstillamamerican, you are so correct. The only way any nation pays for its imports is to export. That’s the only real way to get your money back, but what Capitol Hill totally fails to understand is that it takes feet on the ground in order for exports to be sold. Foreigners do not come on bended knee begging to buy what you make. Exports have to be sold and that takes blood sweat and tears. Hanging a millsone around their necks in the form of double taxation to keep Americans from going abroad to sell American products is absolutely insane. And the US currently has a $740 billion trade defiicit to show how “successful” this supression of the sale of US products really is. It is not higher labor costs that kill US exports, but restraining salesmen from selling them by double taxation so they will stay home.
The average hourly wage (2010 numbers) in the US is $33.74. In Germany it is $43.76, Switzerland $53.20, Canada $35.67. Germany’s current 12-month trade surplus is $224 billion. China’s is $153 billion. If it wasn’t for China’s $300 billion trade surplus with the US it would have a world trade deficit of $154 billion.
Roger,
Look at this table with countries by net exports. Depressing for the US; they come in at the very bottom. http://en.wikipedia.org/wiki/List_of_countries_by_net_exports
From what I have seen, the US uses this “open market” as a political tool. I also think that they will have to bite the bullet on this one too, one day.
@omghesstillanamerican- the U.S. is already engaged in competitive taxation and it is losing the battle to other countries that practise territorial taxation. Let’s not give the U.S. another illusionary boogeyman to use in their refusal to what is right.
You are correct when you say that the U.S. tax system with regards to its residents must change. When over half of your resident households pay no income tax while still taking services, then you have a problem. I still say that the best way for the U.S. to go is to institute a VAT but it probably won’t happen since the Americans associate such a tax with the Liberal European nations. VAT’s are beautiful in their simplicity of administration and notable for the fact that they are hard to avoid.
But probably one of the America’s other biggest problem is a military that is spread around the world. Fighting two unfunded wars hasn’t helped at all and the tax cuts for the rich have only made things worse.
An American single payer health system would also enhance the competitiveness of U.S. businesses since it would rid them of a very expensive employee expense that does not burden the foreign companies that they compete with. When it comes to cost savings ability, ObamaCare isn’t even in the same league as that of a country that has a singel payer system. But unfortunately Americans don’t seem to get that fact even though their present system costs them over 2X as much to deliver health care.
Oh crapola, my memory failed me about that letter I sent to the Treasury Dept. when they informed us one year that my husband’s DOB was not filled in on the FBAR. I just found the darn thing and it was so dripping in sarcasm that I’m sure there has been a neon-lit red flag on my husband’s file ever since. It began …
My MOST sincere and humble apologies for neglecting to inform the MOST exalted and almighty Department of the Treasury of the MOST omnipotent and esteemed nation in the universe (namely, the United States of America) of this MOST important piece of information regarding my husband (namely, his date of birth).
And after that it got worse for 5 more paragraphs. Honestly, what came over me? I guess back then the form was a mere annoyance whereas today it is terrorizing. What I did was the equivalent of poking your finger in a policeman’s belly.
lol Em. I would love to read the rest of the letter.
@em- it sounds like it was a very good letter(LOL). I am sure that the rest of it is very, very good.
@Em, that gave me such a laugh, it felt really good to be on this site and burst out laughing!
@geeez, The US has no plan. Our government just lives in the vain hope that someday it will get better.
It reminds me of the old poem of Casey at the Bat.
http://www.baseball-almanac.com/poetry/po_case.shtml.
@Em
Great letter, Em. Made my day.
… and mine!! The things that we say in our head sometimes get on paper. And, you even mailed it. Good for you, Em!!
@omg…
I wasn’t born until well in to the Reagan Era like 2nd term time, so I can only go from what I’ve learned in history (-: hehe
@Just Me
Well it takes understanding to empathize, and I’m beginning to understand.
Here in Ohio we are dealing with some of the issues of a post-industrial era United States, and our state is handling it pretty well. With a below average unemployment rate, and growing economy Ohio is heading in the right direction. Manufacturing is only a facet of what the United States needs to do to maintain it’s strength. The trade deficit is an issue but thinking that correcting that with manufacturing will make everything ok, is thinking too simplistically, it won’t go away as long as there are nations with slave labor wages. We need to make more things domestically, but that should not be the sole focus or even a major part of any economic program…this is getting way off topic Sorry lol.
I have changed my mind that anyone complaining about citizen taxation is trying to evade, I think it’s just complex and being human we don’t like complexity. I can be wrong, I’ve been known to be very wrong but I’m always open to be corrected by someone smarter than I am.
I just perused TD F 90-22.1 and it seems straightforward enough, yes complex but so are most government forms, a 1040 is also pretty straightforward. My father is an accountant so I may be a little more knowledgeable than most, I mean I still pay an accountant about $300 to do my taxes for me.
@calgary411
That sucks that you wouldn’t be able to visit or bring your children to the US, but I think you just have to do what’s in the best interest of your family.
@Ben Franklin
Not sure I see the correlation? The Colonist’s did not choose to place themselves in a situation where they were taxed but not represented. Anyone with American citizenship is free to enter and take up residency thereby allowing them to register to vote.
@geeez
Isn’t that why tax treaty’s are signed to alleviate double taxation? In the process giving you credit towards your bill in the US because you’re paying a bill in a foreign land?
I know it sounds jingoistic but you know as well as I do that the US doesn’t see itself as just another nation. I understand how this comes across, but this is the US Government you’re talking about and they have you over a barrel for now it would be like an ant trying to push a semi-truck, the best solution I can see is that you extricate yourself from the bad situation.
I don’t have an opinion about the fee, I think it’s probably along the lines that one is utilizing consular services and that takes time and money, Passport’s are not issued for free either.
@WhoaIt’sSteve
‘Anyone with American citizenship is free to enter and take up residency thereby allowing them to register to vote’. Perhaps the Brits believed that any of the colonists could always go back to England if they did not like what was happening in the colonies.
For many of us, Steve, who have been gone from the country of their birth for years and years (in my case 51 of my 69 years), it is safe to assume they have made a life in their new country. Speaking for myself, I know that after my Canadian born husband died 19 years ago, I thought briefly (about 10 minutes) that perhaps I should move back to the States where my mother and siblings stilled lived. But then I quickly realized how silly that would be. I had grown children, grandchildren and many friends here in Canada. This is where I had spent all of my adult life, where a daughter was buried and a husband was buried. Now the US is trying to reclaim me or at the very least lay a claim on some of my late husband’s hard earned dollars. Do I resent it. You bet. At my age, too many sleepless nights is not good for one’s health.
@tiger
I agree, that’s probably the issue I think is the most serious and worth looking at of all those being brought up here. If someone wants to abandon the United States then it should be easy and simple. I can understand though why it would be a little tough as it is irrevocable.
Are former US citizen’s who renounce or relinquish permitted to apply for Permanent Residency after?
@WhoaIt’sSteve
Most(More like all) tax treaties between countries other than the US actually prohibit citizenship based taxation. The US though has always demanded theirs be negotiated to allow it(The US Senate refuses ratify any treaty without the so called “savings clause”)..
@whoait’ssteve- not exactly true. The Colonists or their forbears did intentionally put themselves in a situation where they knew that they would be taxed but not represented. Remember that the Colonists voluntarily came to North America and they knew the political and economic arrangement that existed between the New and Old World.
When it comes to the ease of the 1040 you have to be in the situation of an expat who is trying to reconcile the 1040 with the income reporting laws of his/her country of residence. What you fail to understand is that the 1040 is just the surface of U.S. tax law. Underneath that 1040 lays a whole bunch of other rules that you have to understand if you are to fill in the 1040. The IRS Tax Advocate points out in her report that every explanation of the tax code leads an expat to countless other tax rules that are on other pages. This is a real problem and therefore usually means that an expat has to go and get help from a highly paid tax professional in the way of an accountant or lawyer.
There is also the problem of the fact that the IRS forbids its non-resident citizens to make investments that are perfectly legal in their country of residence. Then their are other investiments that you can make but you have to make sure that you use the proper form to tell the IRS that you hold those investments.
The whole point is that there is no way to reconcile the tax codes of the U.S. with the tax code of your country of residence. It is this inability to reconcile the U.S. tax code with that of other countries which leads to an income reporting gap that the IRS can exploit for purposes of extracting additonal tax or for levying penalties and collecting tax. Take an investment like mutual funds. If you live in America you can freely invest in any mutual fund that is issued by a U.S. financial institution. However if you live outside of America you are not free to invest in mutual funds unless you inform the IRS about it.
Any mutual fund that is issued non-America institution is known by the IRS as a, Passive Foreign Investment Corporation(PFIC). THe investment is still a mutual fund and as a matter of fact it is probably going to be invested in the same companies that the U.S. mutual fund is invested in. The legality of the investment all rests on the nationality of the institution that manages the fund. Bacially what it all comes down to is that an expat U.S. citizen has to each year prove to the IRS that he/she is NOT committing a crime The Tax Payer Advocate in her report also points out this deficency in the IRS rules- that a taxpayer has to prove his/her innocence as opposed to the IRS having to prove guilt. The FBAR forms are a part of this having to prove one’s innocence.
What it comes down to is that a U.S. citizen can leave America in a formal sense but he/she cannot leave America in a real sense. As a person who has rights that exist without the government’s having to grant them or as the U.S. Constitution calls them-inalienable rights, I resent being placed on probation by the IRS until the day that I die. I also have a right to have financial accounts in the land of my residence and the right to make any investment that is allowed under the laws of my country of residence. I should not be placed in the position where the rights that I have under the Constitution of my land of residence are abridged by the U.S. government. The other real travesty is that a person who is a native of his/her own country cannot return from the U.S. and be placed in the same legal situation that he/she enjoyed before leaving to live in America.
@whoaitssteve- a U.S. person who has renounced or relinquised U.S. citizenship is free to apply for naturalization should the desire arise.
@tiger
Also if I’m remembering correctly colonist’s could not take up residency in England, and even if they could voting was limited to landowners. The correlation between someone choosing now to permanently move outside the country abandoning any residency they had for purposes of registering for elections and the colonist’s is not valid.
@recalcitrant…
I was just Googling that. How likely is one to be accepted for the naturalization process that has before given up US citizenship?
@whoait’ssteve- As I understand it one’s previous citizenship does not give you an advantage. Once you give up your U.S. citizenship you are on the same level as any other immigrant who wishes to gain entry into the U.S. You have to go through the exact same process. There are no shortcuts allowed for previous citizens.