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.
The work is a bit sloppy and disorganized, however there are two things I would point out:
– The definition of a “Tax Haven” requires very careful examination. Switzerland (the world’s most competitive economy) may be a tax haven (depending on which Canton) for certain high net worth foreigners (tax deals are usually negotiated and customized for such individuals), however this is not the case for wealthy Swiss citizens (who may also have US citizenship) or the bulk of middle to upper class foreigners, whose tax rates in certain cantons could range from 20% to 35%, not including social charges and deductions. Also take note that a lot of services (like health) do not fall within the realms of the public system, hence accounting for the country’s high costs of living. This is hardly a “tax haven”.
– Capital goes to destinations where it is best served and treated. Fiscal competition ensures governments put their revenue and spending affairs in order. Thus if wealthy Americans chose to establish permanent residence abroad, they should be allowed to do so without tax consequences or obligations. Failure to do so will ensure the US government will continue to have a broken fiscal and monetary which is an even greater threat than so called “tax evasion”. No government has a right to collect money, they have to earn that right by showing they have their affairs in order. This is how the Swiss cantonal system works and shows how Switzerland is the most fiscally solid country and democracy on earth (something which the US dislikes).
This looks like a big, juicy read. It will take a bit of time to get through. Once I get the “wee ones” on the school bus I’ll make some time to read through it. Does anyone know if this paper was presented or prepared for the government/legislators???
I read the whole article and actually thought he had some reasonable proposals. He acknowleges that ordinary Expats have burdensone and costly compliance requirements; he suggests that the FEIE could be substantially raised to perhaps $200,000-$300,000 andan additional annual exclusion on passive income of $50,000-$100,000. Furthermore, he suggests simplifying annual filing for ordinary Expats to just a short one -paged self-certification of gross income.
This would mean that the vast majority of US citizens living abroad (and not in a tax haven) should be mostly relieved from ongoing expensive accounting fees and double taxation. The only downside, as I understood it, was if a residence based taxation were introduced, that he is proposing an exit tax whereby I believe there would be no stepped-up basis so that people could be looking at a departure tax equivalent to estate tax rates on the full amount. However, he also points out that it is the super rich they’really mainly concerned about so that therr could still be a possible exemption (perhaps similar to the current $668,000 exemption on the today’s exit tax for covered expatriates ).
Unlike some here, I share his concerns about the uber-rich abandoning America. He’s more concerned about targeting wealthy people worth over $25 million, which is fair enough. It’s when ordinary middle-class and working class people get screwed by the current system which I can’t abide.
Though I resent double taxation, if the annual amounts were low (under $500), I think I could have lived with that as a tribute tax to the US, having been brought up there. But what I can’t live with is the ongoing filing/reporting obligations resulting in burdensome ongoing record-keeping and accounting bills of approximately $3000. His proposals would address these issues.
As for only being able to visit for 45-60 days each year, Britain already has similar restrictions, especially if a UK Expat continues to own British property or bank accounts there. So even a residency-based tax system would come with restrictions and conditions.
I actually liked many of his suggestions, myself. He had plausible arguments and is at least moving in the right direction. Had such measures been implemented, I wouldn’t have seen any real need to renounce.
However, situations that could still pose a major problem include still being subject to substantial taxation on any gains made from selling one’s home (I think of Bubblebustin); selling off a large holding of non-US mutual funds if PFIC taxation still remains; plus, many retirees could have combined passive income from investments and pensions north of $50,000. I’m assuming his range of $50-$100k depends on whether one is filing singly or jointly. But at least a decent step in the right direction!! 🙂
I haven’t read all of it yet. I agree again with you Mona Lisa except for one thing. I’m meeting people here such as a cab driver I met yesterday for whom even 500 dollars would be a burden. He is seventy years old and cannot retire, he is poor and a dual with the U.S. If you are retired with only Old age security and little savings or as this man, have to work well past retirement age then any cost per year for those folks would be very hard. 500 dollars is a lot of groceries for some of these folks.
However, this is one step forward in a way. Although it appears certain issues aren’t that well understood. Being able to visit only 45 to 60 days a year. That’s fine but, what if you have an aging parent that needs help longer than that? Will there be any extensions for cases of family emergencies? I was in the U.S. for one 90 day stretch and again the same year for another two weeks taking care of a family member on hospice. Another year I was there 40 days doing the same for yet another family member. These situations are not all cut and dried so for every rule they make they need to understand they are dealing with some international citizenship issues. I don’t feel restricting visits is fair in some cases. And yet another time I was there for 30 days doing volunteer work after the OKC bombing! I guess I’d be barred from volunteering there for any length of time going by his restrictions. Their loss, I was a damned good and hard worker.
I also do not see what was wrong with ACA’s proposal. Yet, I do admit at least it’s some response. I too do not want ultra wealthy people just expatriating ONLY to escape taxes. I feel they are part of the reason we are being treated the way we are now and the reason this whole issue was handled with a sledge hammer approach. That and the fact the U.S. has CBT at all which is wrong on principle to begin with.
http://www1.villanova.edu/villanova/media/pressreleases/2013/0521.html
The reference above will attest of M. Harvey’s credentials and respect by the Powers to be… His opinion seems to be sought after by the people that count in influencing the issues we care about.
Merci Victoria de nous avoir déniché cette piste et pour le compte rendu d’un document qui semble avoir un potentiel d’influence important.
Last spring I commented on another post:
http://isaacbrocksociety.ca/2013/03/22/when-law-becomes-a-substitute-for-morality/comment-page-1/#comment-241836
You will find the FATCA Switzerland debate with Harvey here:
http://isaacbrocksociety.ca/2012/06/25/acas-jackie-bugnion-and-j-richard-harvey-debate-fatca-for-two-night-this-week/
http://www.youtube.com/watch?v=CRPpsLX7mNI
I have given this new article a quick read and will read it more carefully later.
But, I would like to say that:
This appears to be the most significant contribution to this discussion from anybody who is politically connected in Washington. Although you may quibble with a number of his conclusions and certain of his assumptions, the “range of issues” that he acknowledges is broad and significant.
Last spring I suggested that Harvey “might be an ally”. I now believe that he is most definitely an ally in either abolishing or modifying CBT. It is NOT citizenship-based taxation per se that is the problem. It is the specific characteristics of CBT (making it a form of life control) that is the problem. There are a number of ways that U.S. citizens abroad could be taxed that (although not desirable) could be doable.
Professor Harvey’s article should be understood to be the most significant opportunity for dialogue that we have had to date.
He makes it clear time and time again, that he IS sympathetic to the problems of U.S. citizens abroad. On page 16 he says that he finds it “personally troubling” that U.S. citizens abroad are renouncing because of the compliance burdens.
Put it another way:
This article is extremely significant because it was written at all. The content – some of which is good and some of which is bad – is less relevant for the moment.
Raising the FEIE only helps those who work FOR someone. It doesn’t help those who own their own businesses or who are self-employed.
I do have a problem with the idea of paying any kind of tribute b/c it implies that I was a freeloader when I lived in the US, which was hardly the case. My parents paid plenty of taxes for the infrastructure when I was a child (and REALLY? I owe them for merely being born on the soil and raised up to adulthood?). And, I payed plenty of taxes myself. I started working at 16 and I worked 25 a week through high school and more than that while putting myself through university. No one, including Uncle Sam, gave me shit. So eff ’em and their “you owe us til you die” bs.
Finally, if the US wants to hang on to its wealthy, their are probably better ways than trapping and imprisoning them. But really? If freedom is what the US is all about, they have to accept that people will leave and they will take their toys with them when they go.
Besides, if you are the greatest nation – with the most opportunities, the best standard of living and the most free democracy – who leaves that?
Harvey acknowledges on one hand and then justifies on the other. I guess that is progress but it’s not relief and it’s not acknowledging the fact that people emigrate – even from the USA.
Thanks for posting this, Victoria –
I’m frustrated with him at p.17 – the corollary to his main argument is that processing tax returns from abroad mostly just means endless administrative burdens for the IRS, with no tax due. CBT is a cost centre for the Treasury Department, and the more compliance there is, the more of a cost centre it’s likely to become.
p. 23-4:
Golly, Professor, what would those be?
@USCitizenabroad, That’s my take too. Does anyone remember some of the rhetoric a year or two ago? We were just a bunch of over-privileged whiny tax evaders creating a tempest in a teapot. As I recall there was even one statement about how all the stories of banks accounts being closed were “apocryphal.” I don’t see any of that in Harvey’s piece. Instead he justifies the system while offering solutions for what he admits are real problems. I think it shows progress. Not sure I like some of his solutions but it’s a basis for negotiation.
Question is – Who is the USG government going to negotiate with? 🙂
Victoria, thanks so much for providing this.
My first reaction and wholehearted reaction was FTUS.
Obviously we can look forward to exponentially more of the same insanity and application of force and ‘might makes right’ that we are already seeing. They are obviously busy scheming to make life even more difficult – even when like Harvey, they acknowledge even a smidgen of the problems they have created.
Congress, FATCANATICS, and US residents will read this and only take in and use Harvey’s statements and “personal” opinions in order to rationalize imposing even more restrictions on renouncing US citizenship. He has very subjective and obvious prejudices against even those who have lived almost their entire lives outside the US – if they have a US birthplace.
He contradicts himself in numerous places – acknowledging that the numbers filing from abroad who would owe US taxes seems low due to the application of the FEIE and FTC, while at the same time implying that this means that non-filers have somehow gained substantially from years of non-filing.
He notes that any changes might come later or never. Should we be expected to accept the broken system and the punishment just in case they might agree to tweak it a bit?
Harvey criticizes others for using what he calls ‘back of the envelope’ estimates, yet the IRS, Treasury, and Fatcanatic Senators toss figures around like confetti to justify their persecution of those abroad – and have admitted they have NO robust statistical basis for their assertions.
And just how many of the ‘ultra-wealthy’ does he think are currently living outside the US, or are plotting to leave? Where are his figures?
How many ordinary US citizens living abroad are a justifiable sacrifice in his holy quest for these semi-mythical creatures?
How would the US ever attract anyone with wealth if they know what the US plans to do to those like Saverin? The ultra-wealthy can go elsewhere and avoid the US entirely. They can choose not to pursue US citizenship at all, and to leave before it becomes too onerous to surrender their greencards. And when it is expedient, the US will give expats like those of the Karzai clan bags of US cash delivered right to their doorstep http://www.cnn.com/2013/05/04/world/asia/afghanistan-cia-money http://en.wikipedia.org/wiki/Mahmud_Karzai . Who of us living abroad in Canada and elsewhere should pay double taxes and penalties to the IRS so that the US can maintain its insane domestic debt, as well as bribing and invading even more of the globe?
Harvey notably does NOT address the many serious double taxation or burdensome reporting problems with ALL the tax treaties that the US enters into – which do NOT resolve the very common and wellknown problems when the US so narrowly defines what is credited as a foreign ‘income’ tax, and what is an allowable ‘foreign’ savings vehicle.
Ex. the lack of US tax credits for HST or VAT taxes. And he very notably omits any mention of the very problematic 3520 and 3520A reporting forms and penalties imposed on anything the US broadly defines as a ‘foreign trust’ – like our ordinary Canadian TFSA, RESP, RDSP, savings accounts etc.
He does NOT address the ‘fairness’ of the US taxing non-wage income such as unemployment and disability income and grants provided to those living abroad via the non-US taxes they pay to the country where they live. Taxing our disabled dependents. Taxing our children’s education savings via RESPs. Or the significant problems with the US taxes on what they deem to be PFICs.
He does NOT address any of the other very obvious and common problems we face IN addition to the problem with obtaining banking services abroad. We face the burden of incredible reporting and compliance costs. I got quotes in the hundreds of dollars for professional help with just a single form like the 3520-A for a single dissolved TFSA. Several professionals who do US returns stated that they refuse to do them anymore, or say they have never ever done them. How can we be US compliant when many professionals here find it too complex, and too fraught with risk to assist us?
Harvey proposes to ‘simplify’ by rolling the FBAR and FATCA form into one – while retaining all the usefulness of forcing us to prove annually that we are not criminals, and while sharing all that collected information widely without any restrictions or notice – even though the FBAR information contains the personal financial information of NON-US spouses, employers and others with NO US obligation or relationship.
Overall, I think this signals that the US will move further in the direction of punishment, and of preventing us from renouncing and relinquishing – even though at this time, even Harvey admits that significant numbers of us could not possibly have moved to live ‘abroad’ for the purposes of ‘avoiding’ US taxes. An infant or minor cannot possibly have done so, despite having been born in the US, or of US parentage. And, as far as I know, there is no Higher Power which issued a holy decree that those the US expansively chooses to define as ‘US taxable persons’ have an immutable duty to be taxable by the US until death and beyond. We have no immutable duty to remain US serfs and subjects for life. We have no immutable duty to turn over our foreign born children as sacrifices to the gaping maw of US debt.
I note that overall, Harvey applies the term and concept of “fairness” only when reiterating his most salient concern; that the undefined ‘wealthy’ and ‘ultra-wealthy’ US citizen wherever located pay the US substantial sums one way or the other. He does not apply the term or concept of fairness when describing our burden and plight as ordinary modest families and individuals already paying one set of taxes in full to the non-US country where we live and often are also citizens.
Harvey dismisses whatever hardships millions of us ordinary individuals have and will experience over our lifetimes with the mounting oppressive appurtenances and extraterritorial application of US CBT. Basically, he says that the many who he acknowledges would owe no US tax, must suffer in order for the US to maximize taxation of the wealthy few. The many modest individuals and families abroad must suffer incredibly complex and costly reporting, and growing restrictions on expatriation in order for the US to prevent the wealthy few from leaving the orbit of the US.
Strange that Harvey is able to inject and apply his ‘personal’ values and beliefs into the urgent question of how millions of us and our families will be treated by the US.
So convenient for him to assert that
– the issue of whether those living and/or born ‘abroad’ receive any actual ‘benefit’ from US citizenship has been entirely settled and need not be taken into consideration. He doesn’t even provide sufficient footnoted references to back up that claim – as would be required of a significant and fundamental assumption and foundational claim made in an academic paper.
100 years of ‘custom’ is not a sufficient or objective or logical basis for claiming that a system is fair or just or reasonable. It was long established ‘custom’ that European countries could use might and arms to claim colonies in North America and sovereign lands elsewhere – and that the Kings of England reigned by virtue of divine right, and yet the founders of the United States rejected and resisted that centuries old ‘custom’. Is Harvey claiming an equivalent ‘divine right’ on behalf of the US?
– He repeatedly dismisses the situation of those with a US birthplace, but who ‘left’ as infants and as minors when their parents/guardians moved ‘abroad’ – an inherently involuntary event for those individuals. An infant or minor cannot form the intent required to move abroad, much less implement such an intent. Why then should they be excluded from the relief that he would offer those born in the US to foreign parents? Why then should expatriation be made so difficult for them? They have already lived their lives for decades abroad, at no cost to the US, and with no benefit.
– Since 9/11, we have been forced by the US to obtain and use a US passport in order to travel to the US to visit family there – whereas the > 1 million of us in Canada previously could use only a birth certificate or other ID. Thus, owning a US passport is only a fairly recent development for many US citizens – for both those resident inside AND outside the US. Owning a US passport is NOT a BENEFIT of US citizenship, it has become a burden and a restriction imposed on us – since many of us already have another perfectly good passport from Canada or the other countries where we are citizens.
He cavalierly proposes that those who expatriate – for whatever reason, should be restricted from entering or visiting the US – thus punishing our US resident family as well as those who renounce. Talk about cutting off one’s nose to spite one’s face. Will he explain that in order to prevent a few of the ‘ultrawealthy’ from leaving the US, countless ordinary ex-Americans will be prevented from attending at the bedside of a dying relative because our alloted visiting days are up?
Certainly, the numbers of Canadians visiting, vacationing, and buying or renting US properties will be drastically curtailed. If one spouse is only a Canadian, and the other is a renunciant, that family will NOT be spending time and toonies in Florida anymore. But, I guess that according to Harvey, Florida will just have to suck it up – for the greater good of preventing even one renunciant from exercising their international human right NOT to remain an unwilling US citizen and doubletaxed US person.
Restricting those who expatriate from re-entering the US, or from visiting for any extended period – specific to prior US citizens – while allowing all other ‘foreigners’ to stay for longer is spiteful and short-sighted. What of academic scholars, or others who might be invited to the US for a reason which would inherently benefit the US?
Taxing the gifts and inheritances left to US residents by expatriates just simply restricts the flow of assets into the US. And you can’t make those abroad CHOOSE to invest in US sited property and US assets.
Just like his ‘remedy’ for foreign banks who refuse US taxable person’s accounts is for the US to apply MORE FORCE in order to punish and compel them to – even though their actions are entirely logical outcomes and reactions to the unilateral and deliberately punitive provisions of FATCA. If applying the stick isn’t sufficiently motivating, the answer is more stick?
We should send this paper to our MPs and Departments of Finance where-ever we live. The grandiose and bellicose belief in US extraterritorial entitlement to our entirely non-US assets will not abate even a jot – and neither will the aggressive ‘enforcement’. We need the protection of our home governments – where we are also citizens and permanent residents.
Grr…. I now have to back out a lengthy post on this, because I simply agree wholeheartedly with Badger, who has, as far as I am concerned, said all I would have and more, and better than I would have too. ‘Cavalier’ sums it up perfectly.
Mr Harvey is the person who started this whole FATCA mess. That it interacts poorly with existing laws is entirely his fault. He failed to think it through properly, and now offers a sort-of half-assed remedy to problems that his law created. Pfft. More lipstick on a pig. The time for negotiation passed long ago. Justice delayed is justice denied.
I see the article as confirmation that the US govt (in the sense that Harvey is at the center of that current establishment) is mainly concerned about the loss of tax revenue from very wealthy Americans moving funds overseas. There is no organized campaign against ordinary expats – we are just collateral damage. Mostly US govt officials don’t seem to care about us at all so it’s nice to see Harvey acknowledge our problems.
Given that allowing RBT for individuals would be difficult to do without losing much tax revenue from the super rich, I think the best that can be hoped for is some less onerous form of CBT. Given that Harvey appears to have influence over the content of tax laws, perhaps this really might happen. It would make a pleasant change from the usual bad news.
@all
If one focuses on Mr. Harvey’s content, I would agree that there is room for significant improvement.
The problems experienced by U.S. persons abroad have been:
1. The laws that apply to them;
2. The inability to get anybody’s attention about the unfairness of those laws.
There is no way for there to be political change without “getting the attention” of those who can influence the law. This issue has gotten Mr. Harvey’s attention.
The job now is to take advantage of the fact that there is, for the first time, an acknowledgement of the problems. Our job is to leverage this into change.
Although, I find plenty of fault with the content and I find many of the assumptions to be upsetting, I get the feeling that he is trying to think the problems through. From time to time he acknowledges that reasonable people can differ on the characterization of the issues and how to deal with those issues.
I suggest that this should be viewed as an opportunity to dialogue with him. Perhaps he can be persuaded to adopt some of our perspectives. He is a “homelander”. How can much can you expect of him without understanding the perspective of U.S. persons abroad. I think it is worth the effort. In terms of people with influence, he is “all we have” at the moment.
Clearly the content of his paper has upset some. Clearly some U.S. persons abroad see him as an enemy.
Fair enough, but remember that great scene from “The Godfather” movie:
“You keep your friends close and your enemies closer”.
Somebody or some group (perhaps including but not limited to ACA) should open a discussion with him.
@Badger, I hadn’t realized that he actually wanted to effectively ban former citizens to visit. But as for discriminating against renunciants, I don’t expect that other countries can really do much about that. While I may be a full British citizen now, I don’t think the UK really has much say on what the US does. It’s not the UK itself doing the discrimination; the US, as I understand it, can be a law into itself about who it allows within it’s borders.
I’ve read it now and disagree with him on several major issues including restrictions on visiting unless it was something like 120 days. Secondly, what good will this do now? How is this going to help those already in the eye of this storm? How long will it be before any of his recommendations good or bad became amendments to FATCA or law? It’s all well and good for him to see the error of the U.S. ways now, but, FATCA is harming people today and has been for two years.
A reasonable nation would have noticed the harm a long time ago and made moves to stop it in better ways than this. Quickly.
ACA’s proposal was far more fair. I like the idea of being allowed to file one last form after having lived abroad for an extensive period and be done with CBT after that if you have no U.S. holdings. If you do then be taxed on them as a foreign citizen. It’s simple. It’s easy and reasonable.
Why must every damned thing the U.S. does with regard to tax issues be so complicated and short sighted? All to keep CBT because at the heart of it they believe CBT for being born there is right and godly. If they wanted to fix this situation fairly they could. It is good there is a paper on this now but, the author is twisting into pretzels to keep CBT. Why?
If I had anything to do with the General Accounting Office, which I certainly don’t, I’d organize an unsentimental cost-benefit analysis of CBT as a use of Treasury Department resources.
Nina Olsen said that only 9% of overseas returns show any tax due. How much of that tax was due on U.S.-source income? From taxfilers with no U.S.-source income, how many returns had tax due? From filers with no tax due, what countries were those returns from? Would it be cost-effective for Treasury to have a radically simplified return system for filers with no US income living in countries with a broadly similar tax system to the US, but higher rates (ie. most of Europe, Japan, Australia, New Zealand, Canada)?
Having answered these questions, it would be possible to cost CBT, or aspects of CBT. In effect you can say to Congress: “Historically, we’ve continued this practice basically for symbolic reasons. It costs $xM to run, allowing for revenue raised. Do you still feel that strongly about the symbolism, or would you rather free up revenue resources for the collection of actual revenue?”
Let’s put this into a practical kind of perspective as to how Harvey’s theories, beliefs, statements and opinions in this paper would play out in actuality – by using his comments as applied to those in Canada – as a test case – to measure what a best case scenario might be like for what he proposes.
I think it should be re-read that way because Canada is a significant source of active anti-FATCA and anti-CBT pushback, and resistance – with public concerns expressed by individuals and even a few groups. Flaherty initially made strong public anti-FATCA statements in the press, Canada would be an important country to sign on to a FATCA IGA as an inducement to others, the US-Canada relationship is an important one in economic, regional and immigration terms, and the numbers of individuals seriously impacted by FATCA in Canada is very high. We have had some useful media coverage.
Harvey must certainly know that the 3 largest groups of those who are US taxable persons abroad are in Mexico, Canada and England. He knows that there are > 1 million duals/US taxable persons in Canada, and that Canada is not a tax haven. He knows that Canada has high personal income taxes which we can apply towards a US tax credit. He certainly knows that the US/Canadian tax treaty is more extensive in terms of a reciprocal tax agreement than the US has with any other country. He knows that Canada could not be accused of having lax banking laws. He knows that Canadian registered savings accounts like RRSPs are very dear to the heart and policy of the Canadian federal government – and this includes the TFSA and RESP which are direct creations of the current Minister of Finance. He knows that the new Obamacare adjunct tax is not covered by the current US – Canada tax treaty, and that it will be imposed on those in Canada who will derive no possible benefit from US healthcare. This is a new US tax to be imposed on US expats in a country where we already pay high taxes to support our own domestic system of national healthcare.
Harvey knows that the US – particularly border states and Florida – rely on Canadians to visit and buy goods as tourists and as consumers. He must be aware of efforts by the US to induce Canadians to stay in the US for longer, and thus create more snowbirds. He knows that Canadians are courted to buy property or retire part-time in the US.
Yet Harvey says of potential expatriates in general (of which many will be Canadians);
……” In effect, they could retain their U.S.citizenship and visit the United States for 121 to 182 days, but effectively avoid ever paying another dime of U.S.tax…”
Compare that to the length of time that other Canadian visitors to the US can stay. And NOT pay a dime of US tax (if they pay proper attention to the rules about substantial presence etc.) http://canada.usembassy.gov/visas/information-for-canadians.html
But he also says that currently many expatriates would never owe the US a ‘dime of US tax’ under existing US tax treaties due to the FEIE and FTC.
Harvey says;
“…my strong suspicion is that Congress will not adopt a
residence-based tax system for individuals because of fairness and tax revenue concerns…”
What is the Harvey and Congress definition of ‘fairness’? And to whom do they think fairness should apply?
Let him justify what he is saying by using Canada as a specific test case for that ‘fairness’. If FATCA and his tweaks to CBT it don’t result in ‘fairness’ to dual Canadian-US expats and renunciants, then how can it work for all those in other countries around the globe where the US CBT tax system is even more in conflict with resident ones?
Can Harvey and the US Congress justify ramping up the current extraterritorial jihad and war against those living ‘abroad’ as it applies to Canada?
Is Harvey prepared to state, and to prove that US millionaires and billionaires are either all preparing to light out to Canada, or are duals living in Canada plotting to expatriate in order to avoid US double taxation?
Renunciation is the only way for expats to end the “modern day form of slavery” commonly referred to as as citizenship-based taxation (CBT). Mr. Harvey represents mainstream HOMELANDERISM — screw the expats forever, how dare they leave the “land of the free” for pastures elsewhere.
Does anyone find it kind of interesting that Harvey felt the need to state publicly in a formal paper that …..”…Personally, it is troubling to see previously proud U.S. citizens surrendering their citizenship to avoid the administrative and financial burdens of being a U.S.citizen…”
But then he goes on to detail all the ways in which the US can pursue us and assess US taxes during a lifetime and beyond?
I am reminded of the interview with former IRS counsel Bill Yates;
http://blogs.angloinfo.com/us-tax/2013/07/22/residence-based-taxation-interview-with-bill-yates-former-attorney-office-of-associate-chief-counsel-international-irs-2/
“…Let’s talk about US tax: The RBT Proposal also talks about FATCA’s onerous compliance requirement resulting in foreign banks either refusing US customers, dropping current account holder and even causing many Americans and green cardholders to expatriate. Did you know about that?
Yates: Oh, yes. We knew. We even received a letter from a U.S. taxpayer who’s foreign bank account had been closed without an explanation from the bank. The taxpayer wanted to know why. Eventually, a response went out to the effect that we simply didn’t know why the bank closed the individual’s account. Politically, that’s all we could say.
As for expatriations, I received lots of calls from practitioner friends of mine all over the world telling me that Americans are getting out. We even heard that the wait list to make an appointment to expatriate at some U.S. consulates was over one-year long.
Let’s talk about US tax: This may be a little premature, but what did you think about FATCA from a policy standpoint at that time?
Yates: I thought it was bad policy. We shouldn’t be pushing U.S. citizens towards expatriation…..” from
‘Residence Based Taxation? Interview with Bill Yates – Former Attorney, Office of Associate Chief Counsel (International), IRS’
Mr. Harvey, too bad you didn’t become as good a study to the effects FATCA before you sold it to Congress. The damage has been done, Mr Harvey. You’re actions have ruined lot of lives and your credibility is shot as far as I’m concerned. It’s interesting that the two suggestions you make that would allow FATCA to work, IGA’s and GATCA, are both afterthoughts to the FATCA legislation. Now you’re just being creepy.
Mr Harvey and the NTA keep trying to find ways to make CBT work. It never will. Don’t put it past Congress to be “fooled twice” by Mr Harvey. His proposals either keep us on the plantation or partially ban us from it. I’m not convinced it’s a starting point, because if he hasn’t gotten it by now, he never will.
A lot of what he wrote is far-fetched, but he must have been smoking a particularly potent strain when he wrote: “Given FATCA has created some practical problems, the United States Treasury should continue pressuring foreign countries and foreign financial institutions to ensure U.S. citizens living abroad have suitable access to routine financial services”??? This is the US’s problem! As far as I read, he didn’t make any suggestions that the US government expend resources of any kind to help make US citizens aware of their tax filing obligations. Maybe he believes FATCA is sufficient.
“U.S. citizens living abroad that have met their prior U.S. tax obligations are very unlikely to have moved overseas for tax reasons”. It could be said the same for those who didn’t meet their tax obligations.
Heaven forbid that through the adoption of ACA’s proposals that US persons living abroad would “hit a home run”! Doesn’t he really mean that it would let us off the hook too easy?
Mr. Harvey should instead just say what he means:
If it had anything to do with fairness, the US would adopt residence-based taxation as the rest of the world. The US government is deathly afraid that its wealthy will decide to reside in other countries, even that more US citizens with wealth, like Eduardo Saverin, will follow all the rules of US citizenship-based taxation to be able to expatriate and effectively be able to conduct business in other countries without the encumbrance of former US citizenship. Mr. Saverin and anyone like him who has properly expatriated should no longer owe the US alms. It is unfair to “change the rules” to indefinitely capture them or, rather, their wealth.
And, yes he does imply that we aren’t worth the second glance; it’s really not about us but the US will enforce their control, their dominance, their punishment. Pity about the collateral damage, which Mr. Harvey does at least now acknowledge we are.
Firstly, while I understand America going after residents who hide money offshore, I think that whether an expat is rich or poor, America does not have the right to fleece him. Let us not forget that many people worked hard for their money and also not treat them as if they had committed some crime to earn it. So saying that its Ok as of a certain number on a bank account is kicking the principle of the whole matter in the face. America should go after the Wall Street types who lied to the public and sold derivatives which they knew were worthless and get those monies back if they are looking for fraudulent behaviors.
Secondly, CBT was brought into law during the civil war- against those who wanted to leave the battelfield. So already back then, one was a “traitor” for leaving, and even if one had some other reason for doing so one was lumped into this “guilty” population. What would we say today if somebody imposed such a form of punshment on the Syrians who are fleeing their own civil war? Why aren`t people allowed to leave a war torn country in the first place? Looks like everybody is doing it if they can. It reminds me of that old phrase “What if there was war and nobody came”. Gandhi got it right.
Now if I have the time I`ll go look at the article. But from what I have read here, it seems like a straw that is being offered- without truly understanding that CBT is outdated, and IF the idea behind FATCA is a good one, it should not pertain to expats. “Tax cheats” should be a term used only for american residents who banked offshore. Just my opinion.
The FEIE is a total illusion. It is not carved in stone and congress can take it away whenever it sees fit. There is hardly a session of congress when one of the legislators doesn’t introduce legislation to abolish it. The FEIE was abolished and totally disappeared in the 1978 tax legislation but was brought back again in 1981. It was subsequently reduced and the readjustment for inflation enacted at that time was repealed, only to be reinstated again in even later legislation. Like a rubber ball it bounces up and down. I have lost track of the number of times Senator Grassley, who as a first time Congressman from Iowa was one of the sponsors of the Tax Reform Act of 1976. His hatred for any FEIE is legend. And leopards do not change their spots. There are plenty of fellow legislators on both sides of aisle who agree with Senator Grassley
When first enacted in 1962 the FEIE for persons abroad 3 years or longer was fixed at $35,000 which is equivalent to the CPI adjusted value in 2013 dollars of $269,559. You could also claim a foreign tax credit for all foreign income taxes on both excluded as well as non-excluded income, That is nearly three times what it actually is today and you no longer can even use foreign tax credits on earned income to offset the US tax on capital gains or any other passive foreign income..
The on-again, off-again come again Finnegan FEIE is but an illusion as far as a realistic solution is concerned Do not be deceived into thinking otherwise.
CBT won’t change any time soon. To believe otherwise is just wishful thinking. As someone said sauve qui peut.