The Centre for Freedom and Prosperity (CF&P), a US-based organisation which seeks to “promote economic prosperity by advocating competitive markets and limited government” is one of the high-profile critics of America’s soon-to-be implemented Foreign Account Tax Compliance Act (FATCA). This controversial new piece of legislation, say its opponents, will be financially detrimental to the vast majority US citizens living abroad.
Here the President of the CF&P, Andrew F. Quinlan, shares his FATCA concerns in an exclusive interview with iexpats.com.
You, and the Center for Freedom and Prosperity, have been vocal opponents of FATCA. Why do you feel this new piece of legislation, which aims to catch tax evaders, ought to be repealed? Why are you lending your support for the anti-FATCA campaign?
First and foremost, the law simply doesn’t do what it is purported to do. Rather than target actual tax cheats, it burdens all Americans living and working abroad as if that were tantamount to criminality. As a result of FATCA’s sweeping new burdens, American expats are now toxic assets. Unwanted by foreign banks and financial institutions, and hounded by a government that has scapegoated them for problems created by the profligate spending of politicians, it’s not a good time to be making a living as an American abroad.
Overall, FATCA is just an affront to the principles and mission of the Center for Freedom and Prosperity. It violates the fundamental financial privacy of millions of Americans, eviscerates the most basic and long standing concepts of national sovereignty, and seeks to limit tax competition by controlling the free flow of capital. Furthermore, the economic harm to the US in terms of lost investment, and just to the world economy as a whole, may far outstrip the minimal “revenues” expected to be collected by the government.
Simply put, it is not properly the responsibility of the entire world to chase down every last potential dollar for US politicians to waste, all the while footing the bill for the pleasure.
Normally a foreign tax credit is acquired when one cannot use all of the foreign tax credit from work which is performed overseas as a tax resident overseas. I can’t remember the statute of limitations, but it can’t be longer than 10 years. Was Barack Obama living overseas (“offshore”) anytime since 2003? Is Illinois an offshore tax haven?
The only significant positive interest on Sch B is Northern Trust Securities US Govt Interest. How did he get foreign interest out of that?
@Mark Twain…
I don’t know, but do they have investments abroad that pay foreign taxes? You raise good questions, but maybe you could pose them over on Forbes, as I am sure someone like Robert Wood, or Tax Girl, or Kim Novak will be writing about it, and could answer them better than some of us here, least of all me.
@Mark Twain…
re ur “Normally a foreign tax credit is acquired when one cannot use all of the foreign tax credit from work which is performed overseas as a tax resident overseas”
I don’t think that is right. I have obtained carry over foreign tax credits from passive income on form 1116 and it is not just from “work” performed overseas as a tax resident overseas.
A large amount appears on his 2008 report as Active income. 148,000
http://www.scribd.com/doc/89109837/President-Obama-s-2008-Tax-Return
I can’t see that he pays himself from his Company for his book—it appears to be business income.
I can’t see that business income is creditable as foreign income. Perhaps a foreign Company could be foreign income, in which case it would have been an “Offshore Shell Company”
Just got this off: Barack Obama tax return offshore deductions
Hello Mr Wood. (& taxgirl)
I live “offshore” as they call it, which I guess makes me a FATCAT as they have labeled us, and a “Global Elite” as Hillary Clinton calls us. So I am quite aware of how and why to fill out forms 1116 and 2555.
I see on Mr. Obamas last tax report,
https://docs.google.com/viewer?url=http://online.wsj.com/public/resources/documents/complete_return_president_obama_2012.pdf&chrome=true
that he takes a foreign tax credit this year on passive income, yet his only significant Sch B interest is Northern Trust Securities Nat Govt Interest. Does that match up?
He has $39 K of foreign income, yet it doesn’t show up on his personal income, rather indicates it comes from business income. To my knowledge, business income cannot be foreign unless from a foreign (offshore) Corporation?
He has a large backload of foreign tax credits, which appear to go back to just Before he got elected in his 2008 return.
http://www.scribd.com/doc/89109837/President-Obama-s-2008-Tax-Return
Now, the only way that I know to amass foreign income tax credit would be if he had more foreign income than could be credited for a particular year. This type of credit on non-passive income only comes from having lived and worked overseas for 183 Days of a particular year, no?
Again, in 2008, no income shown from wages which could be foreign, only $2.4 million in business income.
On an aside, it is quite Amazing that a person would choose to make all investments on Sch B in items which appear to be govt related bonds. That person is clearly intending to prepare for something other than diversified portfolio planning, as would a normal Citizen.
The fundamental point that should be brought to the attention of the public and the politicians in Canada is that FATCA, if it is to be applied at all, should absolutely NOT apply to Canadian citizens. Just as the Obama ‘Budget’ provision requires reporting of US banks to foreign governments for non US citizens, Canada should take the reporting of accounts of Canadian citizens off the table from the get go. That is not to say an IGA should be entered into, but unfortunately, given the recent worldwide fixation on ‘tax havens’ and the ICIJ ‘leak’ and disclosure of millions of records of BVI and other account holders, the momentum at this point is not in our favor. The injustice of the US laws as applied to US Persons living abroad is frankly criminal and perhaps unconstitutional, but that won’t matter. The best place to fight an IGA is in Canada, not in the US courts – we should be preparing for that now.
@bubblebustin….. sorry but you misunderstood my p. o. v. – I should have elaborated on it in more detail but I usually like to keep my posts short here 🙂
Over and over courts have said that there is nothing sinister in so arranging one`s affairs as to keep taxes as low as possible. Everybody does so,rich or poor; and all do right, for nobody owes any public duty to pay more than the law demands; taxes are enforced extractions, not voluntary contributions ! To demand more in the name of morals is mere cant. Obama is paying his LAWFUL share but NOT his FAIR SHARE – he is a hypocrite not just in comparison to Mitt Romney but to how the IRS treats expats ! That is a big difference. He is just taking advantage of laws that were designed to benefit people like him. Of course most people would do the same they would be stupid not to. And yes never ever confuse law with fairness or morality. They are not related. Laws have no moral force whatsoever !
BUT I was so bold in comparing my situation to His – me with 2x the AGI – living and working in a low tax country but still my effective federal income tax rate is 40.1% for 2012 not 18.4%!!!! My point was that as an expat many of the useful “creative“ options are not available to me as they are available to Mr. Obama and I am not just talking about donating $500K to 200 charities for the heck of it. What I find is that the United States proclaims its so-called “exceptionality” at every possible opportunity. There is no benefit to being an American citizen any longer. And with the current “entitlement attitude” of American homelanders to expatriates’ legally earned income without compensatory representation, one starts to feel that a repeat of the “Boston Tea Party” is well-considered a great idea
@Mike
I think I do understand your point of view and I might even be inclined to agree with it, but it worries me that the media and American public alike are embarking on a moral crusade against anyone they seem to arbitrarily portray as not paying their “fair share”. It’s legal to tax US persons while living abroad and some would even argue that it’s moral to do so, but it’s also clear to us that the same laws considered moral when applied to taxpayers in the US are morally corrupt when applied to its citizens extraterritorially. As long as we’re viewed solely as a revenue source with all the rights of any American, any efforts to either switch to territorial taxation or even to continue allowing us the various means by which we already AVOID paying taxes will be viewed as immoral in this climate.
Renunciations will be viewed as a loss any way you look at it, probably one that should be stopped, but with the USG’s known preference for clubs vs carrots, I worry.
@bubblebustin, there will be no switch to territorial taxation in the next 100+ years. If anything, there will be a switch to no FEIE. With high spending, high debt and a reasonable economy, any change will be a response to disaster avoidance like with Cyprus.
@SwissPinoy
Perhaps so. I wonder how ACA will react when they realize that all of their effort with the Ways and Means Committee on Tax Reform has been a colossal waste of time. Or will this just be a warm up for what they’ll need to do when FATCA brings the screaming, wailing, and gnashing of teeth of just about every USP abroad?
Mike, bubblebustin, this was an interesting statement regarding change of definitions:
http://opinion.financialpost.com/2013/04/09/terence-corcoran-cbc-tax-haven-story-feeds-its-left-wing-ideology/
@Calgary411
I like the tone of the article. I had a hunch Linda McQuaig’s name would show up there and it made my day how she’s portrayed there. Didn’t I ask you something to this effect the other day: wouldn’t be interesting if this treasure trove of offshore bank accounts was just a tempest in a teapot? Things that seem too good to be true, usually are.
Now for Diane Francis, she’s quick to define avoidance as legal but supports FATCA.
@bubblebustin,
Indeed you did. Similary, this refers to “hype over substance”.
Would be interesting to have Diane Francis to address the collateral damages of FATCA — her being a USP in Canada and all.
The media is making a gross oversimplification by stating that Obama’s tax rate is 18.4%. This is incorrect. I read Obama’s tax return, and any way you look at it, his total income tax rate is significantly higher. Here are the numbers:
US federal income tax, including alternative minimum tax and self-employment tax: $112,214
foreign income tax: $3,402
Illinois income tax: $29,450
additional US federal income tax Obama would have paid if he had not donated to charity, or if his donations were not deductible (in other words, he had to give this money away anyway, to the government or to charity): $45,612
social security tax: $4,624
Medicare tax: $5,725
property tax: $26,751
sales tax: ? (I have no information on this one so I’ll disregard it)
To figure his total tax on income, I think it’s correct to add all these numbers except property and sales taxes. This total is $201,027. Obama’s adjusted gross income (which is his total income minus losses, part of self-employment tax and tax-deferred pension contributions) is $608,611. Therefore, I say that his total income tax rate is 33.0%. If you want to add property tax, the total is $227,778, or 37.4%. This is certainly comparable to other developed countries. Remember, in most countries there is only one income tax (national), and in a few countries the social taxes are already included in it, and a few countries have wealth tax, so you have to add all these components to make a reasonable comparison of total tax burden on income and wealth.
If you don’t agree with my analysis, you can play with the numbers, but in any case the result is considerably higher than 18.4%.
Regarding “fair share”, I would appreciate if someone would please define what it means. I define it as whatever share of free government services a person is using. Currently, the combined federal, state and local governments in the US spend about $6 trillion dollars per year, or about $19,100 per inhabitant. So, in my opinion the “fair share” is $19,100 per inhabitant. Of course the actual share of government services used varies by person, but I suppose it’s not too far from this average.
Obama’s family is 4 people, so their “fair share” would be about $76,400. From the numbers above, they are obviously paying more than this amount in taxes. I don’t like Obama’s policies, but I cannot complain that he is not paying his “fair share” of taxes. In fact, it’s the same thing for Mitt Romney, almost any other wealthy person, and the upper middle class. They are all paying for government services for the poor and the lower middle class.
Moreover, notice how simple the US state income tax returns are. Obama’s state of Illinois, for example, only has a basic exemption and a flat rate of 5%. In most cases the state tax return is just two pages, and additional pages are optional, if the person qualifies and wants more deductions or credits. There are no “information forms” or ridiculous penalties. In my state I can do everything in the state government website itself, which is easy to use and automatically does all the calculations. I just have to input a few numbers, the whole process takes only a few minutes and is free. I find my state tax rate too high, but I can’t complain about the filing process. And of course, all US states that tax income have a system based on residence, not citizenship. Why can’t the federal government make something similar, with just different rates?
Shadow Raider, DEFINE FAIR SHARE? Do you think it is paying our “fair share” if we don’t use the ‘benefits that only US homelanders can access, yet we get stuck with the bill. Is it fair that we pay 3.8% off our investments to the United States to fund healthcare for those who aren’t willing to work and subsidize themselves in terms of healthcare? Despite the fact that even if we go to the United States, we would be uninsurable? Define Fair Share. That’s what’s going to determine whether it’s in my family’s best interests to pay taxes or not. I pay my fair share, so does my wife to the CRA. If we don’t use the “benefits” in the United States, we don’t need to pay for them.
The definition of “fair share” changes from region to region. In America, “fair share” means paying for services used by others from which one does not benefit.
The following suggests that anyone with an “offshore account” is “super wealthy”
http://communities.washingtontimes.com/neighborhood/ad-lib/2013/apr/12/you-pay-taxes-why-not-fat-cats/
My response:
@shadow raider /// fair share :……….I define it as whatever share of free government services a person is using…….sorry but woops for most expats living and working abroad that would be zero, zilch,zip,nil,didly squat,nada or bupkis but we still keep paying anyway – I think we all deserve a medal .
Btw. why don`t you run your definition with this $ 19,100 per inhabitant by those 46% of US households that pay no federal income tax this year ????
I guess that numbered Swiss bank account doesn’t seem like such a good idea when your tax adviser disappears……That’s why they say: “Never open an account in Italian part of Switzerland.” 🙂
http://m.smh.com.au/entertainment/movies/hogan-chases-his-financial-adviser-and-stolen-millions-20130414-2htu0.html
@Mike Tarrantes, when I worked in the US, I earned between $620 to $35’067 per year. On this, I was always taxed around 15%. I had loans and credit card debts to cover the expenses not covered with what remained after taxes.
One pay stub shows that the US government deducted 25% from my base pay when I was earning $14472 per year.
If those who earned $19,100 or so did no pay any taxes, then I must have done something wrong!
@The_Animal, @Mike Tarrantes, Exactly, I was referring to people who live in the US, that’s why I wrote per inhabitant. Americans abroad are not inhabitants of the US. They don’t use any free US government services, so their “fair share” to the US is zero. Their “fair share” of taxes is due to the country where they live, according to how much that country spends per inhabitant.
Where Did Your Tax Dollar Go?
Too much taxing and spending is bad for the nation!
http://herit.ag/11gjwbE
@ShadowRaider
I guess the next time that I’m told that as an American I should pay my fair share, I should respond with “only if I RECEIVE it!”. What should I say then, when I’m told that it’s my choice not to live in the US?
@bubblebustin, You should answer that their argument is backwards, people don’t have a “fair share” of taxes to pay just because they exist and then they can use government services, they incur a “fair share” of taxes precisely because they are using these services. I say that a share of taxes is fair if it is proportional to the share of services used or benefits received. In your case, zero to the US, and something to Canada.
If they think that you have to pay taxes to the US just because you are American, they are basically saying that US citizenship is like membership in a club. Well, memberships are completely voluntary, you can start and end them at any time, and many clubs and associations allow you to suspend your membership if you’re going away for a while and won’t be using it. Maybe the US should allow not only renunciation but also reacquisition of citizenship by request.