UPDATE: September 7, 2013:
Interestingly, Mr. Harvey’s paper has been removed so the original link that Victoria provided no longer gets you to his proposal. You also must now register for the site, which I did. Luckily, Em has come to the rescue as she saved it before it was removed.
May I draw your attention to this interesting article by J. Richard Harvey called:
World Wide Taxation of U.S. Citizens Living Abroad – Impact of FATCA and Two Proposals.
In a nutshell Mr. Harvey has seen that there are “issues” with the perfect world of citizenship-based taxation. He admits that many Americans and Green Card holders abroad are adversely impacted by the marriage of CBT and FATCA. However, he is not willing to let us off the hook and he has a few criticisms of ACA’s Residence-based taxation proposal.
He has two proposals of his own that are worth examining – not because I think they are good solutions but because I think they represent a kind of counter-offer. “You folks want X? Will you settle for Y?”
Here they are:
He is also suggesting some relief for certain categories of Americans abroad. This doesn’t go far enough in my opinion. I would like to see a definition of “significant percentage of their lives” spent abroad. What does that mean exactly? His opinion is that only in a few very sympathetic cases (accidental Americans) all others (people who have lived abroad for 20 years, for example) should NOT be entitled to any relief at all.
What is encouraging about the paper is that he acknowledges the problems (a kind of progress). However, he is still in the mind-set of punishing those “rich tax evaders” and does not take into account the high price the US will pay if it continues along this path of trying to enforce CBT. And though he admits that there is a high percentage of middle-income expats that are being harmed because of government actions to demotivate the 1% from expatriating, he still feels these measures are justified. Mitigation, he says, is the key but I don’t think he goes far enough and I think he completely misses a very important motivation for middle-class expatriates – getting out from under all that paperwork and the associated costs for cross-border experts.
Where to put this regarding “COST EFFECTIVENESS” : http://www.aaro.org/fatca/457-fatca-cost-effective-hmmm (and posted on Republicans Overseas today : https://www.facebook.com/republicansoverseas?hc_location=timeline
I’m uncomfortable with Posey’s proposal. We shouldn’t be opposing FATCA because it isn’t cost effective. Even though, in fact, it is extremely cost ineffective, that isn’t the reason we should be opposing it. We should be opposing it because it, quite simply, is wrong.
Just reporting it. I agree. It was good to see in that announcement:
AARO has voiced its objections to FATCA in successive meetings with the IRS, Treasury, and the Joint Committee on Taxation since it first came up in 2009 and passed in 2010. We have supported the concept of Residence-Based Taxation, and until that objective is attained, support the “same country exemption” as a compromise short of repeal, which we believe will not succeed in the current Congressional dynamic.
RE: same country exception. @calgary411 | I am trying to think how this may be implemented. In regards to FATCA, the Canadian “FFI” have already spent $700 million implementing the requirements. However, there does not appear to be a question such as “are you tax resident in Canada” that IF THEN the whole reporting gets sidelined.
Even if the question were in there it would be a bit more tricky as, for example, in three different years one may be tax resident in three different countries (and then the tax resident status of the account changes every year), yet changing citizenship in three different years is really not likely.
So I envisage it to work like this, perhaps as part of exchanging CBT with RBT: There is a simple form to the IRS every year certifying that one is tax resident in a country. This form may be sent to the IRS and the CRA/ATO etc. CRA/ATO etc verifies this tax resident status, communicates this verification to the IRS but then does not send on the FATCA information (I think the IRS is going to want this information), but also there is a signalling/flag that those identified accounts are exempt from 30% penalties, closures etc.
Any other ideas? Based on my thoughts, it would be best to contribute to ADCS to derail the reporting in the first place.
“My amendment transfers $1 million from the Internal Revenue Service enforcement division to the IRS office of the Inspector General.” ?????The IRS is doing an impact study on itself???? Might not an independant group be a better idea?
JC, your last thought is the best!!!