From Shadow Raider:
Sorry, folks, the big news didn’t come today. The draft only deals with corporations.
However, the end of the summary says:
“The staff discussion draft does not address the international tax rules addressing individuals, whether for U.S. citizens living overseas or foreign nationals moving to the United States. The Chairman’s staff is considering reforms to simplify the rules in this area while appropriately taxing such individuals. Comments are requested regarding the scope and mechanics of reforms in this area.”
“All comments should be submitted to tax_reform@finance.senate.gov. While comments will be accepted at any time, the staff requests comments by January 17, 2014, in order to be able to give them full consideration.”
Sigh. All right, so they haven’t decided what to do about individuals yet. I suppose we should send the same or similar comments as those sent to the Ways and Means Committee earlier this year. This time it’s to the Senate Finance Committee. I’m planning to send them my latest suggestions, with perhaps some updates.
I know this is frustrating, but at least they mentioned the topic and are looking for detailed ideas.
I think this news should be in a new thread.
Excuse the language, but BFD. They want to the goose to feel better while its feathers are being plucked.
Interesting:
“Modernize and Simplify Other International Tax Rules. The staff discussion draft:
[…]
• Simplifies the rules for taxing passive foreign investment companies”
This could be significant for individuals with foreign mutual funds. Almost any change in the PFIC rules would have to be an improvement over the baroque mess that is there now.
“The Chairman’s staff is considering reforms to simplify the rules in this area while appropriately taxing such individuals.”
RBT or mass renunciations!
They can no longer pretend like they don’t know the injustices faced by longterm ex-pats.
@tdott
Not to be overly optimistic, but “appropriately taxing” individuals could include RBT.
I’ve resubmitted what I initially sent to the Committee on Ways and Means, with this spirited note:
“Americans are renouncing citizenship at least 4X the rate that Canadians are theirs. Due to US policy, Americans living abroad are quickly becoming regarded as pariahs in the world. Renouncing US citizenship for a patriot of the US is like committing suicide, but do it we must in order to preserve our personal and financial security. This is the end of American global migration in an age of globalization.”
@Calgary411, would Patricia consider resending hers to the Senate Finance Committee?
bubblebustin,
I’m glad that you have already resubmitted yours to the US Senate Finance Committee. Atticus, I believe, will be seeing Patricia this coming weekend?? I will send an email to Patricia and have Atticus also ask her to resubmit her powerful words.
While we’re at it, lets ask the Committee: if the mere existence of a citizenship status conferred via accident of birthplace or parentage is a sufficient and just basis to tax and penalize non-resident individuals for life and beyond, then when will the Senate Finance Committee demand that Ted Cruz file and pay back taxes to the CRA in order to pay for the benefits he enjoys based on his Canadian birthplace? And when will the US assist Canada in collecting Canadian taxes plus penalties based on his ‘foreign’ US bank accounts?
@bubblebustin
I would say “appropriately taxing” such individuals means they will still be taxed.
America will NEVER give up CBT! No country in the world would willingly give up tax revenue.
@Polly:
You’re probably right. Actually, I wouldn’t be surprised if they keep CBT but pretend to throw us a bone with some minor presumptive tax break, that actually just serves to make our paperwork even more complicated while not reducing the (already zero in many cases) actual tax owed.
@foo
I think you are very wrong about the “zero tax owed” part. If it were so then they would not be interested in any of us and could give up CBT easily. I think that most expats are doubly taxed and end up paying a lot to America – the revenue is interesting enough to never let go of it. Just seel a house and see what happens. We also have those pensioners who have to pay taxes on their already meager pension. The only rebates offered are for wages, as far as I have understood it- to the tune of 90000$ I also think that saying “zero tax owed” makes the plight of expats appear less serious than it is.
@Polly
By no means do I intend to minimize the plight of expats by talking about zero tax owed. Rather, my point is that the situation is intolerable even without owing any taxes.
I do seem to recall seeing some statistic that 90% of tax returns filed from Americans abroad end up with zero tax owed to the US. My own tax bill is usually zero. And yet, the complexity of trying to understand the filing requirements, the landmines buried in the tax code (like PFIC rules), and the ridiculous fines that can be imposed for innocent mistakes have all led me to seriously consider changing citizenship just to be out from under it. Were I ever to take that step, it would not be because I don’t want to pay taxes (because I already, legally, don’t), but because:
a) primarily, I want to be able to vote where I live
and
b) secondarily, but not insignificantly, I don’t want to keep walking around with that sword of Damocles hanging over my head, never knowing when it will drop. I’m sick and tired of having to worry about what Congress will do next to entrap me. I work very hard to follow the rules, and it honestly feels like they are just always trying to find new ways to trip me up.
Mine was NOT $0 taxes owed. No taxes payable to Canada — only to the IRS for gains in my TFSA and the RDSP that I hold for my son. And, it cost me mucho US tax and accounting dollars these past years (to make sure I would not be set up for US penalties) for the privilege. On top of that, on principle, I still hold the RDSP for my ‘developmentally delayed’ son who is ENTRAPPED into his supposed US citizenship, which I can not renounce on his behalf, even with a court order. He (and any ‘US Person’ like him) should be able to have the benefit of a Registered Disability Savings Plan as any other ‘disabled’ Canadian.
You are correct, Polly — neither do I want a Damocles sword hanging over my family’s head. Either Canada protect my son’s rights or the US let his supposed US citizenship be renounced on his behalf so everyone in my family can be officially GONE. One or the other — to get me and family out from under the absurdity of ongoing years with US FATCA.
@Polly
CBT has survived only because the US wasn’t enforcing it. Now that they are, it’s going to get ugly here in Canada where 3% of its population, their families and business partners actually have something to lose.
Sure, there may be a spike in revenue for the US in the extraction of taxes and penalties, but the revenue stream will turn to a trickle or even dry up as there will be fewer people left as US taxpayers, or those who remain restructure their lives to have no tax exposure to the US. Take my husband and me for example. We paid capital gain tax on the sale of our home in Canada only because we had sold it prior to knowing we had a tax obligation to the US. Knowledge will modify behaviour and the IRS will no longer be able to take advantage of the element of surprise in the extraction of tax and penalties.
@Calgary
Even if your son could renounce US citizenship, would you go through the procedure to have his US citizenship established in order for him to renounce it? My son in in exactly the same situation but he isn’t disabled. I’d like the IRS to try and say they have a stake in him as a US taxpayer! If he’s been contaminated at the bank because of me, let them try to close his bank accounts. If it happens to him, it will be happening to thousands like him around the world. What then?
@Polly –
I am totally convinced that getting rid of CBT would be revenue-positive for the United States, especially now that it’s actually being enforced to some extent. Processing thousands and thousands of zero-tax-due returns from abroad is a vast money-suck, as is keeping track of all those FBARs declaring people’s Canadian joint chequing accounts that they use for grocery shopping.
bubblebustin,
You’re right — that ‘accidental Americans’ have no CHOICE in claiming that US citizenship and all that goes with it, especially CBT (with no actual connections to the US), is more bad US law. And, in my eyes, immoral.
At this point, I will NOT do anything to register my son with the USA. There is no point with those who are ‘mentally incompetent’ being ENTRAPPED into their supposed US citizenship forever. Every time I think of the absurdity, it brings me back to the same point as my OMG moment.
My preference is something done that makes sense to remove the term ‘accidental American’ and replace it with ‘persons who have a choice to claim US citizenship only if they deem that a best option for them’. An opt in — not an opt out.
@broken man:
More than that, if I were taxed the same as a non-resident alien, the US would actually get more tax out of me than they do now, due to withholding taxes on US-sourced dividends. So I would be paying higher taxes to the US under RBT — and yet I would be happier, because I would not have to file complicated tax forms and worry about crippling penalties for innocent mistakes.
@Calgary411
Yes, the powers that be should make it clear that those who have the option to claim US citizenship won’t be negatively billed for it later if they choose not to ever claim it.
@A broken man on Halifax a pier
Because of all the negative effects of CBT on the economy I agree with you too. But there is going to be a total money grab BEFORE they might possibly relent. Let`s say we have 2020, and FATCA has gotten them the revenue they want (via penalties most of all) and this whole thing is all wrung out…..then they might say “Now is the time for RBT because we need people out there for our exports, and we dont want our coorporations to be unfairly burdonned comapred with other coorporations.”
But give up low hanging fruit? Nope. Never.
@Polly –
There will be a temptation to turn a cost centre into a revenue centre through penalties, yes, but the penalties may be uncollectable. Someone without US assets who is willing to not cross the border is pretty safe.
@all
Go to Truthdig
Interesting article on America trying to make trade agreements with other countries overriding their sovereignity and leading to nobody belonging to any country anymore, as US laws will be universal. One person even commented “Why pay taxes then- it would be taxation without representation”
@ A broken man at Halifax Pier
I have been told that one day in the future, there might be a possibility of a financial “demand” or request- that must be honored by foreign countries. (Sorry- but sometimes my english is rusty.) In other words- it is possible that down the road a tax order might be taken seriously by foreign country.
Thanks, Polly.
Here’s the link to the Truthdig article you mentioned:
http://www.truthdig.com/report/item/us_pushing_new_treaties_at_expense_of_national_sovereignty_20131119
@ A broken man ….
“Someone without US assets who is willing to not cross the border is pretty safe.”
I don’t think so. I have no US assets and not only will I never cross the border, I haven’t done so for over 15 years. BUT, I do NOT feel safe. If I get classified as a recalcitrant (i. e. refuse to sign away my privacy rights) then the bank will either close my account or flag my account and report that to the CRA (i.e. tag me as being a suspected USP). This gets into unknown territory. Then what? I really don’t know. I could be vulnerable to identity theft with all the expense and energy-sapping hassle involved with that. I could be vulnerable to looting or extortion by the CRA or the IRS or both. I could be vulnerable to robbery as I try to keep a stockpile of cash safe. Worrying about what lies ahead is exhausting and I do not feel safe at all.
Sen. Baucus’s proposals for tax reform revive the proposal that a US citizen’s passport could be revoked (so that he could only travel back to the United States) in the event that a lien of $50,000 or more for a “tax debt” was outstanding against him. So, Canadian Brockers without Canadian or other citizenship, if, for example, on the basis of FATCA disclosure by your bank or pension plan, the US could file a lien for unpaid FBAR penalties against you, what would you do? Seek asylum in Canada? This is proof that the US Congress has zero understanding of the situation of US citizens who live outside the Homeland, and that the core value of US citizenship is one’s liability to tax.