Cross posted from RenounceUScitizenship.
By attempting to impose FATCA on the world, the US is attempting to place the world, not in its hands but in its Iron Fist.
The US is leading the world into a frightening Orwellian future. Those of you who have read Orwell’s 1984 will recall the importance of language. Language is used to shape our attitudes. Language is used as a means to enhance and contract our understanding of issues. Hence, the importance of “Newspeak”.
Today I had an interesting thought (a rare event). I realized that all of the discussion of US tax laws uses the language of “citizenship-based taxation”. This is misleading language. US tax laws apply to far more than US citizens. The Internal Revenue Code speaks of “US persons”.
US persons include: citizens, residents, Green card holders (whether they live in the US) and those who spend “too much time in the US”. Therefore, what we refer to as “citizenship-based taxation” is really “US person-based taxation”. But, who or what is a “US person”?
A “US person” is anybody or anything that the US defines as a US person.
Therefore, “US person-based taxation” is:
A system that allows the US to decide it has the right to tax anybody or anything in any place that it would like – including residents of Canada and other sovereign countries. It is a term defined by the US in various statutes including the Internal Revenue Code. Because statutes can be amended by Congress, the definition of “US person” can be amended by Congress. In other words, there is no permanent meaning to the term “US person”.
I repeat: what we refer to as citizenship-based taxation that we will call “US person-based taxation” which really is a system that means that:
A system that allows the US to decide it has the right to tax anybody or anything in any place that it would like – including residents of Canada and other sovereign countries. Furthermore, it allows the US to change the meaning of US person when it wants to.
This matters in the context of the “FATCA IGA” discussion. Why? The US is attempting to enter into FATCA IGAs that will require countries to “root out” US persons. Canada is currently engaged in FATCA discussions with the US. If we refer to this as an issue facing “US citizens” we are planting the seeds of indifference. Who cares about US citizens? Nobody. But, if it is understood that “US persons” includes dual citizens and a number of other people who are residents of Canada and no connections to the US then things might be different. Furthermore, the phrase “US persons”, by its very nature, suggests inclusion of people beyond US residents. All countries (except the US) tax only residents of their countries. Most people regard the notion of taxing people who are non-residents of a country as being preposterous, ridiculous, and a joke. It is unquestionably immoral. Because the term “US persons” does not restrict the definition to US residents, the use of the term “US person” may make it easier for people to understand the problem.
Therefore, from this point on, I will describe the US tax situation as follows:
First, the US taxes “US persons”;
Second, a “US person” is anybody the US defines as “US person”;
Third, US persons can include people living in any country at all in the world including residents of Canada;
Fourth, the US can change the meaning of “US person” any time it wants.
US Persons, FATCA and FATCA IGAs
As the US Treasury continues its attempts to bully various countries into signing FATCA IGAs, the focus continues to be on the details of an agreement. Theses details include a consideration of:
– what the FATCA partner country is required to do
– what the US is required to do
– whether the US can be trusted.
Let’s disregard what any agreement will require the US to do. Let’s forget about whether the US can be trusted to abide by the agreement. Let’s even forget about what the agreement specifically requires of the FATCA partner country. The details of the agreement are irrelevant. What is relevant is the effect of any FATCA agreement with the US.
What matters is that the effect of any agreement of this type will be to turn the fiscal sovereignty of the partner country over to the US. There are a number of reason why, but the most important reason is/are as follows.
1. Fact: Through “US person-based taxation” the US steals money from the treasury of other countries. Money that has been earned, taxed and created in other countries, which is part of the tax base of those other countries is turned over to the US. This is outright theft. What the US is saying is: because one of your resident/citizens was born in the US, we are defining your resident to be a “US person”. Since it is a “US person” the US has a claim on part of the economy of your country. In this way the US is in a continual state of war with other countries. The “weapon of choice” is “US person-based taxation”.
Recent examples of the US stealing from the economies of other countries include:
– the taxation of Canadian mutual funds (deeming them to be PFICs)
– the FBAR Fundraiser
– the OVDI terror campaign
“US person-based taxation” is immoral.
As Don Whitely has opined: what if every country “country-person-based taxation”?
2. Fact: FATCA is an attempt by the US to force other countries to help it enforce the immorality of “US person-based taxation” (citizens, green card holders and those who spend too much time in the US). Note that it is the US who defines who is a US person.
3. Prediction: Once a FATCA IGA is signed, the US will gradually expand the definition of “US person” to include more and more kinds of people.
Examples: Anybody who ever attended school in the US or anybody who has even watched NFL football (or anything else as stupid or arbitrary). This will turn more and more residents of the “FATCA partner” into “US persons” and into US weapons inside that country. It will result in a bigger and bigger share of the economy of the “FATCA Partner country” being turned over as a “forced tribute” to the US.
4. Fact: As more and more people are deemed to be “US persons”, more and more people will be forced to disclose their lawful, post-tax assets, to the US. (Or as former IRS lawyer Steven J. Mospick” would put it: “register their assets with the IRS”).
Prediction: Once those assets are registered they will be subject to confiscation and will eventually be confiscated.
Conclusion: Under no circumstances should any country enter into a FATCA IGA with the US.
I have no doubt that some readers of the post will view this is somewhat “alarmist”. You are wrong. Although, I am sounding an alarm, it is not alarmist.
I remind you of the following:
A. The FBAR rules were enacted in 1970. Who would have imagined that they would be used to steal the assets of US citizens abroad?
B. The PFIC rules were enacted in 1986. It was not until 2010 that the IRS got the idea of applying them to Canadian mutual funds.
C. The application of the Shulman voluntary disclosure programs continue to be an immoral attack on US citizens abroad – would you have ever imagined that the US would do this to its own citizens?
My point is a simple one. Under no circumstances should any country enter into an agreement with the US that allows the US to define who is a US person for tax purposes. Under NO circumstances should Canada enter into a FATCA IGA with the US. Not now! Not ever! History demonstrates that the US simply cannot be trusted.
Sooner or later the world will have to resist FATCA. It is less expensive to resist now. Peaceful resistance to FATCA will result in a new world financial order.
In law school last week, we learned that the Foreign Corrupt Practices act applies to US persons. This meant a person that is connected to a company which does business in the US. There is a warrant out for a German working for Seimens in South America who had alledgedly bribed a South American official. Somehow the fact that Siemens does business in USA made it a US company and he worked for that US company, and lo—-he’s now on the lam.
“Prediction: Once those assets are registered they will be subject to confiscation and will eventually be confiscated.”
That has been my thought for quite awhile too. I think confiscation might happen in the form of a wealth tax or you could simply find out one day that your penalty for a filing foot fault will equal exactly what they know is in your bank accounts and they will know exactly how much and where thanks to FATCA. Forget about trying to hide your assets in the form of cash in a mattress because all of your withdrawals will be reported, scrutinized, a magic algorithm applied and then you will be deemed to be hiding your assets to evade taxes. Then what? … You guessed it — confiscation! Anyway, that is how it will work for ordinary folks but the fatcats will always find a way to FATCA-proof themselves because only they can afford to hire expensive lawyers to find or create loopholes.
*@Renounce, I found your thread quite thought-provoking in that it clarifies and emphasizes the distinction between U.S. citizenshiphood and U.S. Personhood. I share your concern that its definition could be changed at any time to include more people. Who’s to say that it could eventually also include even renunciants to ensure they never have any escape from being subject to the IRS and U.S. taxation. This could be a stealthy way they might try to reduce renunciations.
@Em, I also wouldn’t be surprized if a wealth tax is eventually introduced or if FBAR/8938 penalties are a lot more widely enforced if FATCA is fully implemented. I’d imagine that this could be within three or four years. It is indeed Orwellian.
The new Form 8938 must now be filed with the US tax return. Presumably, this pretty much duplicative to the FBAR, though more complex, document is attached to the return so for the IRS non-filing, omissions regarding the actual tax returns can more successfully be penalized, more enforceable than for the “reporting” function of the FBAR. Finance Minister Flaherty has stated that Canada will not collect any penalties for any US citizen in Canada, be they dual or residents in Canada for FBAR.
I just hear that Mark Carney is leaving his post with the Bank of Canada to head up the Bank of England. Who will fill his big shoes?
@BB, Carney has devalued Canadian currency by keeping interest rates at zero and thus impoverishing all savings accounts; then he regularly castigated Canadians for too much debt, when it was his fault that there is a housing bubble in Canada. Our own house went from about $330K to $460K during ZIRP (Zero interest rate policy): Thank you for the money: hip hip hooray. Despite this, the sycophantic media is praising Mark “The Bubble-Maker” Carney.
His appointment is incestuous, showing that all the major banks of the Western world are interrelated–a cabal of financial and political power (including our friends Tim “tax-cheat” Geithner and Jon “steal-the-segregated-funds” Corzine): http://www.zerohedge.com/news/2012-11-26/goldmans-global-domination-now-complete-its-mark-carney-takes-over-bank-england
Anyway, good luck to him. He may find that he has less success with the Bank of England.
Perhaps Jon or Timmy might take over the top job at the Bank of Canada. That would make sure that the decisions in Canada will be made by a Washington insider.
Well stated. I do wonder if it is the U.S. leading or following the OECD as the co-conspirator in this FATCA fiasco? Maybe it is a “who’s on first?” question. They are certainly a cheer leader.
Now that the IRS is about to integrate with Canada’s financial institutions, maybe Doug Shulman might be a good choice, I hear he’s looking for a job.
US persons definition is included in the Inter-Governmental Agreement in detail, to change this a new agreement would have to be signed.
I agree on the citizenship point however – your green card is still applicable for tax law even if you don’t live in the US (and even if it’s no longer valid for residence/work purposes)
@Mark Twain. In some countries, such as Nigeria, if you don’t bribe, you can die.
Pingback: The Isaac Brock Society