Cross-posted from Perspectives at USxCanada InfoShop.
From a broadscale, abstract perspective, the voluntary and other disclosure programs of the IRS after 2009 bear resemblance to the post 9/11 decade of tottering toward ever more byzantine and restrictive financial reporting to U.S. authorities by unfortunate “U.S. persons” who merely reside “overseas.”
The Decade
At the level of decade, the multiple period provisions of Form 8854 Initial and Annual Expatriation Statement bear witness to a wish to tighten the screws ever more, with very different regimes operating pre-2004, 2004-2008, post-2008. One other indicator, from a different direction, is the institution in mid-2010 of a punitive $450 fee for renunciation of U.S. citizenship, in face of a skyrocketing rate of ship-of-state jumpers.
Voluntary Disclosure
The voluntary disclosure programs of 2009 to the present manifest steadily upward penalty increases, to a current 27.5 percent.
According to sketchy IRS reporting as of early 2012, the 2009 program generated $3.4 billion with 95 percent closure, and the 2011 program generated another $1 billion. [1]
More IRS reporting in mid-2012 shows acquisition of another $0.6 billion and 1500 further disclosures (compared to 33,000 in the first two) under the new third open-ended program. [2] (This 1500 quantifies the “hundreds” who were said to be eagerly coming forward after September 2011. [1])
This looks like a clear case of diminishing returns.
All Extraterritorials
Yet another enforcement prong, in operation for about a year, deserves scrutiny. In December 2011 the IRS restated existing procedures for persons “residing outside the U.S.” under the guise of advertising policy relaxation. [3] The IRS then followed up in mid-2012 with an announcement of specific guidelines to come. [4] At the end of August 2012 the specifications [5] made it apparent that potential participants would gain little assurance by “coming in from the cold,” could well expose themselves to unwarranted harsh scrutiny, and would certainly subject themselves to severe compliance costs in the form of legal and accounting fees.
The IRS together with its master the United States government increasingly look like dancers paired as a mad duo dervish, whirling ever faster in dubious pursuit of payoff phantasms, with onlookers increasingly bemused by the perverse chasing of the partner’s tail.
References
[3] Information for U.S. citizens or dual citizens residing outside the U.S.
The entire US government has gone over the deep end, expats shouldn’t consider themselves special:
Fast and Furious, NDAA, TSA, MFGlobal, Corzine, advertising foodstamps to illegal immigrants in their own language, small California baitfish devastates their entire AG industry, Keystone, bullet train from Bakersfield to Fresno, fighting on the same side with Al Queda in Syria, aircraft carriers in the persian gulf, drones, you name it.
Well stated, USX.
There is an anomaly in one sense. The 33,000 who went into the original OVDx’s yielded 4.4B. This is about 133k per person. If the third program has pulled in 0.6B from 1,500 people, then they are getting less fish, but bigger fish. Perhaps the oceans of minnows saw what happened to the first volunteers and weren’t going to put the same trust into these offerings.
The failure to answer to Nina Olson may have said enough to them. It is also likely that they have reached all who can be reached through US Gov communications/outreach. What is left is either the whales that they portended their efforts were aimed to catch in the first place or (equally likely with the dearth of transparency), much harsher treatment of the last to sign up as they threatened.
Without compliance with US law on tax transparency, the latest offer brings considerable risks to the earliest entrants. Despite the ACA’s (bless you Andy) and this wonderful web site’s (bless you Petros) best efforts, there are millions who remain in the dark. There are also numerous, hungry tax advisers who will exploit their clients by acting as bundlers for the IRS.
If it is diminishing returns for the US, then either FATCA will improve their returns or they will have to turn their efforts back to their compelling domestic fiscale issues. Expropriating from abroad has bought them a very little amount of time and even with a FATCA fueled expropriation machine that is backed up with legislation to repeal FEIE (which, by the way, I am a vocal advocate of doing), the clock will run out on them.
Let’s see what happens to the brave, naive, desperate or foolish who are the first to enter this new programme, but this may be the last best path to renunciation for millions of minnows and it will be frightening to see the reaction from the US Congress if they wake up next year to find a renunciation application rate of 2,000 or 4,000 people per month. What narrative will Congress demand of the US press when that happens? What retributions can be taken through expos-facto legislation that is available to Congress once these renunciants lose their rights as citizens?
If these are diminishing returns, then what do we face next? Clearly, 6,000,000 – 34,500 are not bankrupt. There will be innovations to come.
zuludogm – It looks like the math is now $5 billion extracted from the 33,000. So now up to a crude average of $151,515 per person for the 2009 and 2011 groups. Even now all of those from the first two programs are unlikely to be closed cases. The 1500 third-phase participants seem still to be in process, probably too new to account for at all. On the cost side, and providing an indication of further harvesting attempts, are those reports of hundreds of additional recent hires for the pursuit of extraterritorials.
Demagogues do not look for real solutions but for scapegoats to blame. The demagogues like Barack Obama and Chuck Shumer have effectively done this to expats and anyone with a “foreign” bank account. They will never admit to the really problem, the fundamental profligacy of the United States government which they run essentially as a criminal network. If and when Romney becomes president, there is no way he can bring honesty to the office without severely restricting the size of government, which would requiring laying off a major part of the work force. So they use demagoguery in the United States–blame Eduardo Saverin, Denise Rich and other ex-US citizens for the problems. Apparently, Mahmoud Ahmadinejad does the same in Iran–only he blames Israel for all Iran’s problems. Demagoguery requires that one divert attention away from the real problems to pretend problems which will appeal to the emotions of the audience and outrage them. This is what is happening to expats.
“This is what is happening to expats.”
That and that the majority of expats have the misfortune of having pale skin during the reign of the food-stamps-and-reparations presidency.
The outcome of all of this is creating two classes of expatriates: the exposed and the hidden. Again, it is inconceivable that the IRS will go after the seven million that are remaining hidden. The exposed will have to take their lumps. Sadly.
@Joe Smith
Well put.
https://twitter.com/USCitizenAbroad/status/242618042603937792
Pingback: The Isaac Brock Society - Last Dance: New Filing Compliance Procedures for Non-Resident U.S. Taxpayers – Effective September 1, 2012 – A Preliminary Analysis
OVDI’s final numbers may be significantly reduced by many taking advantage of the penalty mitigating provisions of the Internal Revenue Manual.
@USX
Point taken – and as Treasury will not reveal to US citizens or the Taxpayer Advocate the details, many more may be swept into the maw long before the injustices are exposed.
Oh, quit with the “reverse racism – pity me party”. Con-H. My wife is a pale-face…and she’s married to a Jap…OK? Do you think she’s going to be treated any differently? She’ll probably be taken to the cleaners just as much as any of you will. But owing to her last name, she’s going to be considered an “Asian minority” as well. But she’s just as Caucasian as you. That ain’t going to give her any favors.
Thank you, Animal!
As of late his posts have started to piss me off. And I’m sorry, petros, but I call it as I see it. I will not temper my anti-American government tone for anyone. That’s how pissed off Obama and his term has gotten me. I’m not sold on Mitt either.
@Animal:
“reverse racism – pity me party”
I don’t want pity, but one should “know thy enemy”.
Romney is a disgusting cleptocrat-neocon. But after 20 years in a church praying for “black liberation theology” and 3 1/2 years of non-stop race baiting it seems pretty clear that Obama and Jarret have some kind of grudge against pale-face. You may choose to ignore it but you do so at your own peril not only if you are a US person but also if you were born in the US. 4 more years of an unrestrained Obama will have sever consequences for current and former expats.
I don’t like Obama nor do I find Mitt Romney any hope at all. Frankly the only Candidate that I would find has any hope of turning America around is Ron Paul. The chances of him getting in are worse than a snowball’s chance in HELL. Mainly because most Americans are either feeding at the swill bucket of Obama or courting the wolf in sheep’s clothing that is Mitt Romney
Con-H, don’t make the mistake of likening me to an ostrich. I saw the writing on the wall during the 2008 campaign when he was campaigning on his Hope pile of shit. I stated that if Americans voted for him, he’d introduce protectionist policies that would wreck America. Don’t keep drinking the Kool-Aid and acting like you’ve never seen this shit before.
@ConfederateH: 4 more years of an unrestrained Obama will have sever consequences for current and former expats.
Oh, please… Four more years of anyone will worsen the lives of expats, just as sure as night follows day. It started long before Obama and will continue long after him. All of congress is swirling in xenophobic rhetoric, with the only competition between the two sides being which can outdo the other in grandstanding faux outrage. Obama. Romney. Doesn’t matter. Expecting improvement is futile. When it comes to expats congress is a bipartisan equal opportunities hater.
It may have started long before Obama election in 2008 but anyone who denies that his administrations FATCA and FBAR enforcement efforts don’t represent an accelerated worsening in the expat misery index is denying reality. And 4 more years of Obama/Jarret without the shackles of having to pander for reelection will be far worse for expats than Romney. But I really don’t care what US persons that are too blind to see this think because I renounced 2 years ago.
Look, the teaparty has clearly been smeared as being racist. Opposition to Obamacare is racist. Being a global warming denier is racist. Currently The Condensed Liberal Handbook of Racial Code Words doesn’t include the word “expat”, but if Obama is reelected it surely will, because if you are an expat whining about paying your “fair share” of taxes (this means everyone reading this blog), then you are clearly a racist.
THE core Obama administration conviction is race in politics. It is how he and Michele made it into law school and how he made it into state senate, senate and the presidency. A leopard cannot change its spots. The Romney administration would diligently try to avoid all accusations of racism, while in his second term Obama and Jarret would tear open the racist divide even wider. Use your brains and figure it out.
@confederationH
I am not going to deny that race baiting exists, I just don’t want to feed into it. Canadians don’t have the black vs white racial divide as part of our history and all the baggage that goes with it, as well as the exploding liberal vs conservative phenomenon we’re seeing south of the border. The issues are framed differently for me than they are for you, so the direction I might choose in support of a solution will be different from yours, and everyone else’s for that matter.
@ bubblebustin,
And, as recalcitrant has pointed out, going down this path is wasting our emotional energy.
@Calgary
United we stand, divided we fall, or maul, or something like that…lol.
The Obama administration has declared war on US citizens abroad. As Conferderate H notes:
“It may have started long before Obama election in 2008 but anyone who
denies that his administrations FATCA and FBAR enforcement efforts don’t
represent an accelerated worsening in the expat misery index is denying
reality. And 4 more years of Obama/Jarret without the shackles of
having to pander for reelection will be far worse for expats than Romney”
The issue should NOT be framed as “Romney vs. Obama”. The issue is:
How to get rid of Obama. The Obama presidency has clearly demonstrated that anybody can occupy the Oval Office. During the last four years, Obama has destroyed the lives of Americans Abroad. Give him four more years and he will destroy Americans Abroad period. The vicious FBAR and FATCA enforcement have made his intentions very clear.
So, the question is:
How to make sure that Obama vacates the oval office in January 2013. Romney (no matter how you feel about him) is the means to that end! The way to get rid of Obama is to vote for Romney.
@Watcher
Your frustration is understandable. We are all frustrated. But, to say the improvement is impossible, no matter who the next president is, is simply wrong. We have experience with an Obama presidency (if you want to call it that). We do NOT have experience with a Romney presidency (whatever it may be). Expats have nothing to lose by taking a chance that things could change. You point out that the abuse of Americans Abroad has been going on for years. But, for none of those years have Americans Abroad been fighting back. That is the difference now. Americans Abroad are now fighting back. That changes the context and may change the result. But, to get a change, you have to change. That means that you have to at least recognize the logical possibility of change.
So, here are your choices:
1. Nothing can ever change, so I will not try to rid of Obama; or
2. Take some step to get rid of him.
And …
My view of Romney is that he is the only candidate who has the potential to understand these issues. As I write this comment, I am listening to a conversation from some “well informed” Canadians about how “smart Obama is”. Obama does not have the life experience (occupying the oval office is his first job) to even begin to understand the problems here. Not only is Romney a walking argument for tax reform (the carried interest stuff is perverse) but he will understand that without tax reform the U.S. is finished.
Watch Jay Leno tonight to see if Ron Paul will run as a Libertarian candidate:
http://www.breitbart.com/Big-Government/2012/09/03/Ron-Paul-Not-Ruling-Out-Third-Party-Run-Ahead-Of-Tonight-Show-Announcement?utm_source=twitterfeed&utm_medium=facebook&utm_campaign=Feed%3A+BigGovernment+%28Big+Government%29&utm_content=FaceBook
If there is any remaining hope, it lies in a Ron Paul linkup with the libertarian party. But thats a looong shot.
“Romney will understand that without tax reform the U.S. is finished.”
Romney can’t save the US any more than Obama. Romney is owned by many of the same people who own Obama. But Romney certainly won’t be as bad for expats as Obama, and he probably won’t be as bad for expat’s homelander’s families either.
The myth of a democratic socialist society funded by capitalism is finished
The welfare state is going to crash and burn. Our elites, across the western world, know this. They are not going to give up power gracefully. They are going to squeze wealth out of all low hanging fruit, not just expats. By instituting capital controls they will prevent wealth from fleeing their harvest. It’s called austerity slave, learn to like it. It’s for your own good.