Both….
Lynne Swanson does it again. Another fine piece. This time at the U.K Tax News with a global audience.
She frames the story by asking the key question, “What If Other Countries Adopted American Citizenship and Tax Laws?
It is actually a frightening idea, however in this world of copy-cat taxation policies with OECD’s GATCA arising out of the U.S. unilateral global imposition of FATCA, and the U.K ‘Sons of FATCA‘, it is question that needs more attention. And, she got it!
As I understand it, the article was also published as a letter to the editor in Tax News International (subscription only), the most widely read tax publication anywhere, with the largest audience of compliance experts including Treasury and the IRS.
The questions she asks, is also a question posed by the late Andy Sundberg who penned a piece on January 6th that did NOT get as wide distribution as Lynne’s article did. It paints the picture of a dystopian nightmare for a person laboring under the demands from multiple countries all claiming their citizenship taxation rights. It was posted in February of 2012, the early days of IBS existence. What is the Systemic Risk of Citizenship taxation to the World’s Economy?
Later that year, there was Arrow’s excellent article written in June of 2012. The accidental Kenyan: What would happen if the African nation copied U.S. tax policy? by Don Whiteley. He focused on the impacts on Obama, and it got good play in Vancouver and Canada.
And now Blaze has completed the trilogy for even a wider audience, and answers the key “What if” in a manner that anyone should be able to understand, unless, apparently, you are a U.S. Congressman.
With this piece you are now armed with 3 good articles to send to family and friends that “Don’t get it!”
@all-this is the exerpt from a letter I sent Obama and Flaherty 2.5 years ago : “I’m submitting to you a copy of the only document I received at birth. You’ll notice the only pertinent info.to be gleaned from this certificate which is addressed ” to the parents’ is You should preserve this document as it is legal evidence of age and citizenship.This document supplied no information to suggest I must become tax compliant at a given age. Now according to the IRS through divine inspiration I was to return to the motherland completed FBAR in hand or suffer finacial penalty and jail time.
It makes sense to me that when a country uses the tenet of birth to determine citizenship (were CBT is be applied) the birth certificate should read as follows: when the citizen reaches as specified age of maturity they are required to 1)have made their domicile in the said country or 2)sign a statement declaring they choose to accept citizenship with full disclosure as to the rights and obligations required to maintain citizenship.”
I believe I was entered into a contract as a day old infant without benefit of legal counsel or sufficient maturity. I was never aware of the obligations nor the consequences of remaining a US citizen. I believe this to be a failing on the part of the US Government and not my own.
I believe my argument highlights the double standard the US is enforcing. They signed me up for the plan without my consent and at an age that I was clearly not capable of informed consent. I find this to be a shocking contrast when I compare my own situation to Calgary 411’s situation. The US Government seems to be speaking from both sides of their mouth.
@All
Great comments. A couple of thoughts on the comments. Remember this post and comments appear at at time when the U.S. (at least it claims) is considering tax reform (including ensuring Americans abroad are taxed in a way that is “appropriate”). In other words, if there ever were a time that “the audience is listening” it is now.
1. What is clear is that regardless of what people think about CBT in principle, that “CBT US Style” is completely unfair, unworkable, destructive and evil).
2. Many of the problems are NOT related to CBT per se, but result from the following:
A. The attempt to apply the same tax code to U.S. citizens abroad that are applied to Homelanders. The effect of this is to turn normal day-to-day living items (CIBC bank account for example) into FBAR and FATCA problems. Other effects: the taxation of RESPs (and similar things) because they do NOT qualify for exemptions under the U.S. tax code. In other words, we have an attempt to apply laws that were designed for the U.S., in countries that are not the U.S.
(Remember that the law in its majesty prohibits both the rich and the poor from sleeping on the park bench.)
B. And this deserves a separate point – The taxation of Canadian mutual funds as PFICs (because they are foreign to the U.S.) when it is perfectly obvious that they are NOT foreign to people outside the U.S. I could go on, but you get my point.
C. The reporting requirements which are no way related to taxation. The U.S. claims to justify CBT on the basis of Cook v. Tait which was decided almost 100 years ago. The Supreme Court upheld CBT. But at that time the tax code did NOT include all these reporting requirements.
D. The impossibility and prohibitive cost of U.S. tax compliance for U.S. citizens abroad. It’s not possible.
E. The incredibly destructive impact on the family. You can be a U.S. citizen or you can have a non-U.S. citizen spouse, but you can’t have both. Think Atticus.
The simple fact is that unless you have NOTHING or you are very very very WEALTHY, Americans abroad are now FORCED to renounce their citizenship. I have talked to a number of Americans abroad who believe that it would be better to NOT work at all (freeing them of many of the problems) than to attempt to comply with all the rules.
So, to articulate the obvious:
Regardless of what you think about CBT, CBT U.S. style is unworkable.
3. U.S. CBT forces any country, that has U.S. citizens as residents, to pay tribute to the U.S. This is because the U.S. has rules of taxation that are different from the rules in other countries. These rules mean that U.S. citizens in Canada WILL be paying U.S. tax. (The truth is that with Obamacare many many more U.S. citizens abroad will be paying tax to the U.S.) They will be subjected to the expensive filing requirements.
Other examples of paying tax to the U.S. include:
– Subpart F income (applies to many who own Canadian corporations – professionals tax note)
– Sale of principal residence
– Taxation of Mutual funds as PFICs (those who are aware of this are also aware of the extent of the confiscation)
When this tax is paid to the U.S., this is Canadian money, Canadian working capital that is simply extracted from the Canadian economy and taken to the U.S. This is very very bad for Canada and very very good for the U.S. Frankly, it’s out and out theft. It can be EXPLAINED but not justified only on the theory that the U.S. government has a property right in in its citizens. Those wishing to understand the economics of this do a Google search on “multiplier effect of increasing money supply”.
I can see a day when some country will argue that U.S. CBT is a violation of international law. Does one country have the right to levy a tax on another? Does one country have the right to force another country to pay tribute to it?
Therefore, CBT in general, and U.S CBT in particular, is a way of carrying on economic warfare against other countries. Those who doubt this, need look no further than to what is going on Switzerland right now. The reason why ordinary Swiss Banks have entered Category 2 (pleaded guilty to assisting U.S. citizens to evade U.S. taxes) is because they can’t be sure that U.S. citizens resident in Switzerland have paid their U.S. taxes. This is at a huge cost to the economy and psyche of Switzerland. U.S. citizens are the problem.
http://isaacbrocksociety.ca/2013/12/14/most-swiss-banks-considering-ovdp-should-not-consider-wegelin-in-their-decision/
Soon countries will realize that U.S. CBT is a an act of aggression and economic warfare against any country that has U.S. citizen residents. U.S. persons will likely be removed from all other countries! There is NO other option. Again, look no further than what is happening in Switzerland today.
I predict that you will see countries change immigration laws to prohibit the immigration of U.S. citizens. Really, what choice do they have?
4. As countries rid themselves of U.S. citizens, it will become much harder for U.S. citizens to leave the U.S. Who will accept them? So, interestingly, CBT (and of course FATCA) will result in the creation of an “Iron Curtain” which will keep Homelanders locked in the U.S. Most of them won’t care (they are Homelanders living in the greatest country in the history of the world). But, I can see that more and more Homelanders are waking up to this reality. Here is an interesting comment to a Robert Wood blog post.
http://www.forbes.com/sites/robertwood/2013/12/11/swiss-banks-disclosing-americans-many-more-expected-by-123113/
5. US CBT is slavery plain and simple. The reason is that you can’t renounce U.S. citizenship without dealing with tax issues. Now, the truth is that many U.S. citizens who own a house in major cities of the world are covered expats. In Toronto, London, Paris, etc. middle aged people who own a house and have saved for retirement will be “covered expats”. In order to renounce they will be forced to surrender a good part of their wealth to the U.S. as an Exit Tax. If you don’t believe this, you don’t understand how the Exit Tax works.
What this means is that middle aged U.S. citizens abroad who have saved for retirement, accumulated their retirement savings in their country of residence, been financially responsible, paid their taxes in their country of residence must choose between either:
A lifetime of persecution, forms, threats, penalties and generalized “Tax Terrorism” (which comes from the tax professionals as well);
Or surrendering a lifetime of saving, of after tax money, earned in Canada to the U.S. government.
This is slavery pure and simple.
6. U.S. CBT dehumanizes U.S. citizens abroad. The reason include:
– it makes marriage between a U.S. citizen and non-U.S. citizen impossible. Any non-U.S. citizen (alien) who really understood that U.S. citizens are not free people but have a primary obligation to the U.S. government would avoid the U.S. person. Here is a post that describes how this works:
http://renounceuscitizenship.wordpress.com/?s=FBAR+marriage
– it makes the employment of U.S. citizens more expensive and difficult. (Think FBAR rules, etc.)
– it makes it difficult for U.S. citizens to share in family businesses outside the U.S. (Think Estate Tax. Can the owners of a small family controlled business afford the risk of having a U.S. owner? That owner dies and a huge estate tax must be paid. (There goes the company.) Think FBAR and CFC (controlled foreign corporation rules too.)
These are some of the reasons why I believe that U.S. CBT is a violation of international human rights.
7. Okay and now finally, the question of CBT in general.
CBT means that when a U.S. citizen leaves the U.S. he must pay the U.S. This is explainable only on the assumption that the citizen is the PROPERTY of the government. Not a free person, but the property of the state. If you don’t believe that citizens are property, then you should NOT support CBT.
In my opinion:
CBT is immoral, abusive, based on assumptions of slavery, dehumanizing and more. The only way it could be even tolerable would be if as (WhiteKat suggests) there were just a membership fee for the purposes of keeping somebody in the database.
Otherwise, CBT must be abolished because CBT is:
– a crime against U.S. citizens abroad
– a crime against the countries where U.S. citizens abroad may live
– subject to far too much potential for abuse.
I also agree with the general “What if everybody did it” arguments. But, CBT is so dangerous that the world must simply agree that income taxation must be based on residence.
And now, the U.S. has created FATCA. FATCA is a tool to enforce CBT. Furthermore, the U.S. absurdly expects that the rest of the world should participate, (at their expense) in engaging in economic warfare against themselves! That’s what countries who sign FATCA IGAs are doing.
@USCitizenAbroad
Thank you for your words of wisdom and clarity of thought. As much as anyone believes that RBT will never happen, there has never been a better time to for it to happen. These are interesting times, when so much hangs in the balance for so many as US lawmakers decide whether they wish to construct walls, or be the open, free nation they claim to be.
@USCitizenAbroad or anyone…
Wait, I’m not sure I understand any more. A person I know plans to have the financial cancer surgery (renounce) early in 2014, withdraw all IRAs (biting the 30 or 40% withholding tax, actually in accordance with the understood agreement with the USG when they were bought) then just walking away from the slave owner and never setting foot in the USA again. With a CLN in hand, little problem is expected to have a normal Canadian banking life (and get their children educated using existing RESPs). Am I missing something? Will this person still have financial cancer in Canada?
@Pierre
If the person has a net worth of 2 million he/she is subject to the 877A exit tax. All covered expats (2 million or more) are subject to the Exit Tax and most covered expats will have to pay the Exit Tax – a significant financial price for their freedom – basically a tax on the increase in value of their assets (whether Cdn, American or wherever). There are also other nasty wrinkles. The person you know really must understand these rules before renouncing.
Google 877A U.S. Exit Tax
Awesome comment, USCitizenAbroad. I’ll be keeping that on hand. The USA declares a FATCA fatwa to enforce its evil CBT and expects all countries to flagellate with a whip they paid for themselves.
@USCitizenAbroad
Thanks so much…..good info. This person has less than the $2million of which you speak (even a bit less than half that). Does this affect the answer? Thanks.
@Pierre
Pierre you should not base these kinds of decisions on information from a blog.
Google:
“S. 877A Exit Tax Expatriation”
Read the things you believe are authoritative and then confirm with a live, in person, adviser you trust.
Here is a link to the statute itself:
http://www.law.cornell.edu/uscode/text/26/877A
@USCitizenAbroad
Great points to ponder.
On the subject of slavery, I would add that anyone who continues to invest in the U.S. is willingly forging their own shackles, and for no good reason at all. Perhaps more effective than trying to convince the U.S. to abandon CBT (which they won’t, because they are both terminally stupid AND greedy) we should instead be trying to convince the world to start divesting itself from the U.S. market and its increasingly worthless paper currency. It’s a big, wide world out there and there are plenty more promising investment opportunities around the globe than the toxic waste dump that is today’s American economy. THIS is the message we need to start getting across to the likes of the TD Bank and its sheep-like clientele who continue to invest in the American market like it’s 1999; or is that 1929? FATCA itself will certainly hasten such crucial and inevitable foreign disinvestment, but there’s no harm in deliberately adding more fuel to the fire to awaken people from their dangerous slumber.
Our greatest practical challenge as a movement will soon be in dealing with our own fellow citizens, who will be taught to believe by our Canadian chartered banks through expensive full-page ads that WE are threatening their “Made in the USA” retirement nest-eggs. That is what it will all soon come down to: pitting the retirement plans of the many against those of the few. We must begin to formulate our response now and I believe it must include strongly promoting divestment from the deadly siren call of the U.S.
Ponzi schememarket. Someday, after the crash, they might even thank us.@ Deckard
You just gave me an idea. I don’t knowingly have any U.S. investments. I say that because I honestly don’t know what the banks do with deposits in savings and chequing accounts. So if they question me about whether or not I have a U.S. “connection”, I could throw that right back at them and ask them if they engage financially in anyway with the USA. I could then say I consider the USA to be a failing state and demand to have my deposits returned to me in cash. What do you think?
Speaking of 1929, have you seen this?
http://theresistanceunited.com/2013/12/05/major-stock-market-crash-in-january/
@Em
Considering the awkward commonalities between the US and Eritrea, I think the failed state argument could be easily supported. If you do cash out, you might want to convert a good chunk of it into canned food and hide it well – it might be the best investment you ever make 😉
@ Deckard
I have actually considered that. Canned goods and TP for barter. 🙂
@ Em
Exactly. Even TP will be worth more than paper dollars – and it’s a lot more comfortable.
Back to the topic at-hand.
Here, again, is a relevant short video about CBT by Andrew Henderson of Nomad Capitalist:
America’s bad excuse for citizenship-based taxation
The audio is mediocre due to wind noise but the messaging is dead-on.
Wow. Thanks all of you wonderful and literate people who understand this. How could we possibly go through this all by our individual selves? Why is this happening only here and not in the media that should be informing ALL Canadians of the cost to Canada and the cost to Canadian families and businesses with any kind of US connection?
I really like what bubblebustin saw and posted:
Be proud because that is what we’re doing in our discussions here!
I am forever grateful to USCitizenAbroad for over and over putting all the puzzle pieces together in a way we can more clearly understand what is going on here. Yes, ‘US style’ citizenship-based taxation is wrong and unless changed to RBT as the rest of the world, it is out-and-out theft from countries signing IGAs with the US to allow this to happen. As I see it, countries do this out of short-sighted weakness, taking the easy way out in believing that by waiving of their own privacy laws for US Persons in their countries, they are saving their financial institutions and their economy. They are not looking further into the future. (As bubblebustin pointed out, “the camel’s nose is in the tent, and soon the rest of the camel will be” or something to that effect.) By not making the harder choice now to stand up for the sovereign countries they were elected to lead and provide the same rights for ALL their citizens and residents, our countries leave the door wide open to further US abuse. The US will be emboldened.
To further understand the inequity of US CBT, view the video that Deckard just put in his above comment, America’s bad excuse for citizenship-based taxation. Thanks for that!
In Canada, we do not yet have the simple answer that Lynne Swanson has asked Finance Minister Flaherty:
@Dash1729. There is value to an individual in citizenship, but there is also value to a country in having an expatriate. It’s the expatriates in Europe and elsewhere who mitigated the fall-out from Bush’s illegal wars. We’re the ones who said, “I know Americans look like crazy war mongerers, but really they’re just warm and fuzzy and a tad moralistic on the inside.” We were/are the ones, whenever there’s another serial killer, who have to explain that all Americans are not lunatics. We’re the ones who were/are the ones to help spread American culture (whatever that is) abroad, increasing American exports. If the individual is taxable for the citizenship, it would seem fair that the country compensate individuals for their expatriation. Something tells me there is more value to the country in having expatriates than to the individual in being able to return to the country. But if you don’t believe me, just continue the way you are going, because the expatriates who are influential in their new countries (um, like me) will be long gone (um, like me),
I will always resent how I was essentially forced to give up my birthright in order to lead a normal life where I live…I simply couldn’t afford what would have been ongoing compliance costs north of $2000 per year on my low wages, plus having to live with the uncertainty that these costs could have risen far higher; I also wouldn’t have been able to do any affordable retirement planning. This is just plain WRONG to be effectively forced to make such a heartbreaking, irrevocable choice. :/
@All
In my previous comment I described how CBT is the extraction of productive capital from the Cdn economy and bringing it to the U.S. I made this comment in the context of how the U.S. TAX rules interact with Canada.
But, what I neglected to mention was how the draconian U.S. imposed penalties (failure to file forms etc) have the same (and possibly more) deadly effect. (Again look at what is happening in Switzerland as I write this comment.
http://isaacbrocksociety.ca/2013/12/15/americansabroad-in-switzerland-should-not-enter-ovdp-and-join-fbar-fundraiser/
This thought reminded me of a post last May which generated some fantastic insights/comments on the problem of U.S. TAX compliance, penalties and their interaction. The post was written around the theme that the U.S. citizens abroad who are in the worst and most dangerous situations are those who thought they were tax compliant but have made omissions.
http://isaacbrocksociety.ca/2013/05/29/irs-abuse-of-americans-abroad-the-greater-the-effort-the-greater-the-punishment/
The title of the post was:
IRS abuse of Americans abroad: The greater the effort the greater the penalty.
The practical reality is that of the millions of U.S. citizens abroad, those who attempted compliance (which is impossible) are in the worst situation because they no longer have the option of non-compliance.
It’s a good moment to reread the comments to this post – there are some brilliant insights.
I believe that the problem of failing to file information returns is correctable through reasonable cause arguments, etc.
What is possibly not correctable through reasonable cause are TAX problems.
Canadian mutual funds are considered to be PFICs (translating to: confiscation of your assets).
Whats fascinating about this is then when it comes to investing in Canadian mutual funds (which are obviously “foreign” to you even though you bought it at YOUR local bank is this:
It was NOT until 2010 that Canadian mutual funds were deemed to be PFICs. Many Canadians have owned them for periods of 20 years or more. For those Canadians ALL the their gains will be confiscated by the IRS. No I am not kidding.
Now why does this matter (other than to the poor U.S. person abroad. The reason is that in the U.S. will claim that PFIC confiscation is really just about tax owed to the U.S.
It’s like this:
1992 – Responsible U.S. person abroad says: I want to invest for my retirement and invest in mutual funds. By 2010 the funds have grown significantly in value.
2010 – IRS come in ans says, You know, we have JUST decided that those mutual funds are bought are now going to be taxed retroactively in a way that amounts to confiscation of the increase in value. By the way, if the funds were in 1986, the chances are the PFIC tax would exceed 100% of the gains.
In you want a better understanding of this, read MonaLisa1776’s insightful comments on this topic over the years. You could also read:
How citizenship based taxation steals from the treasury of other nations: PFIC edition
http://isaacbrocksociety.ca/2012/06/12/how-citizenship-based-taxation-steals-from-the-treasury-of-other-countries-pfic-edition/
Again the comments to these posts add tremendous insight.
Bottom line: The U.S. is using CBT to force other countries, at their expense to pay tribute.
It is so much worse than people believe.
@MonaLisa1776 comments:
This is a very significant comment for reasons that go beyond the pain (although I feel your pain loud and clear!!).
What MonaLisa is saying is that she was forced to renounce her U.S. citizenship. This is “bank on”. Of course she is forced to renounce. As I suggested in my earlier comment it’s only the poor or the wealthy who can afford U.S. citizenship abroad.
In my previous comment, I suggested that US CBT may (and I belive is) in violation of international law (paying tribute) in general and international human rights law (See Petros old post on violations of International Human Rights statutes).
But, what I want to add is this:
I believe that US CBT violates U.S. law – The 14th amendment of the U.S. constitution as well.
One of the reasons is that the Supreme Court of the United States has ruled that citizenship belongs to the citizen and the government can’t take it without the consent of the citizen. (As recently as 35 years the U.S. was trying to take people’s U.S. citizenship rather than impose it on them). This principle comes from a decision by the U.S. supreme court that also says that: the forcible destruction of one’s citizenship violates the 14th amendment. Those who have the time, energy or interest to read this technical argument will find it laid out here:
http://isaacbrocksociety.ca/2013/07/10/the-taxation-of-americansabroad-and-the-14th-amendment-guarantees/
Again note the comments which are so spectacular.
Dash started the comments off with the thought that:
1. Citizenship based taxation is okay; but
2. Its US citizenship-based taxation that is the problem.
Whether you agree with Dash (CBT is okay) or with others (no version of CBT is okay) the point is that US CBT is NOT okay.
The extent of U.S. CBT and the punitive nature of it force U.S. citizens to renounce. This is what makes it violate even the U.S constitution.
Now, I realize that this is a kind of academic argument, etc. But, my point is that:
Now is the time organize all of these thoughts. It’s the combined effect of all of these arguments that I believe can and will force Congress to rethink this issue.
I would also like to draw your attention to the comments of lawyer/academic Andrew Grossman. I blogged on one here:
http://renounceuscitizenship.wordpress.com/2013/11/06/americansabroad-beware-of-global-irs-reach-and-very-long-memory/
In fact Mr. Grossman’s comment is so important and insightful that I will reproduce it:
I see his comment as strengthening the argument that U.S. CBT violates international law.
@Deckard
Agree totally. But,I think that to compare US CBT to Eritrea CBT is a GROSS insult to Eritrea. After all, Eritrea wants only 2%. The U.S. wants far more.
Put it this way:
The United States is the number one tax terrorist the world has even known!
Come to think of it, it would be interesting to know what people in Pakistan think of the Obama drones. Hm….
But to address your comment that people should avoid investing in the U.S.
Absolutely, 100% right. To hold U.S. investments is to expose yourself to the U.S. Estate and Gift tax regime. There is almost no return on investment that could justify the perils of this.
It’s wide world out there. Why not go where your money and you are treated with kindness.
Dax says:
Right on and this is a point that Roger Conklin has been making for years and years. To put it simply U.S. CBT actually does tremendous damage to the U.S. It makes it much harder for the U.S. to export its own products – assuming there is competition for the product. That’s why the U.S. has run a trade deficit since 1976.
This point is discussed here:
http://renounceuscitizenship.wordpress.com/2012/11/21/roger-conklin-on-the-stupidity-of-us-tax-law/
Roger’s comments apply to products where consumers have a choice. The U.S. will always lose if consumers have a choice. But,what if there is no choice? If there is NO choice the U.S. will still be a world leader. Two areas come to mind:
1. The U.S. is an exporter of forms and bureaucracy. Think of the costs of FATCA compliance. Think of the costs of OVDP for Swiss banks.
2. The U.S. is an exporter of lowering international standards of human rights. Think of the Obama NSA Prism program. Think of the lowering of privacy standards via FATCA IGA, etc.
The problem is that the U.S. tax system makes it difficult for the U.S. to export anything the worlds wants.
The problem with the U.S. tax system is that it is used to export things the world does not want.
@Mona Lisa, I whole heartedly agree with you. I resent it too. Anyone saying it was not a forced choice has not sat in our shoes.
@Dash, you mention people should have to “make a choice” and that dual citizenship shouldn’t be allowed? That leaves out those who married a person from a foreign country. Am I to look at my spouse as the reason I need to give up my citizenship of birth? In certain cases dual should absolutely be allowed. There are legitimate reasons one might have two loyalties and yes you can have two loyalties. Except in instances such as this where you are forced into such a decision. Who should force such a thing on anyone? What right does any congress or anyone else have to tell me I can’t have my citizenship of BIRTH. No other nation on earth does things the way the U.S. is doing them.
Also, if the U.S. is going to go down this path then it needs to make renunciation easy and pleasant. All this threatening language as was mentioned in another article here on this blog needs to stop asap. You cannot force people into a position to lose their citizenship and then demonize them for having lost it. That’s what the U.S. is currently doing.
Bottom line is CBT does not work. It is in no way “fair” and there’s nothing about it that any other nations see as fair which is why they do not do it.
Frankly, the fact that people are being forced into a position to lose their citizenship is a travesty. When you go to relinquish or renounce you are asked if anyone is causing you or forcing you to do this. I wanted to say “Yes, YOU are!” but, of course you can’t say that because if you do then you’re not going to be allowed to relinquish. Everything to do with expats these days is a catch 22. ALL of it with intent to demonize us all. Underneath all of this is the fact that the U.S. simply hates people for moving away and wishes to punish them. It’s infantile at best and very damaging at worst to the most vulnerable.
In any talk about taxes and renunciation, the Reed Amendment always dangles like a guillotine, threatening us with permanent banishment should tax be established as our motive for renouncing US citizenship. RBT is just another type of taxation, one of a couple that the US doesn’t happen to apply against its citizens. US citizens in general would not object to taxation by the US, just the type that the US chooses to exercise. I don’t really know where I’m going here, but could it almost be said that US citizens are renouncing in support of a type of taxation the US doesn’t exercise? After all, these citizens are making the choice to remain in a country and support a system that the US does not use (RBT) as evidence that they support taxation.
@USCitizenshipabroad, I completely agree. Furthermore, PFIC taxation directly attacks the middle classes because those of more modest means tend to invest in mutual funds as an affordable way of spreading risk; the rich can more easily afford to invest in a portfolio of individual stocks rather than pooled funds. Thus this form of taxation.appears to be punishing the more modest investor.
@Bubblebustin, I share your fear that openly attacking PFIC taxation could raise the risks of the US applying the Reed Amendment against me because it would look as though I renounced mainly to avoid tax.
The fact is, I can actually see Dash’s point about being willing to pay a degree of tribute had I’d chosen to keep both passports; I don’t completely mind a small degree of double taxation if we were talking of perhaps two percent of my gross income or one percent of the value of my assets; but, like UScitizenshipabroad says, it’s the way the US tax system is so impossible to affordably comply with.
The whole system is set up to benefit the super rich and the compliance industry. It’s a racket.
I just want to emphasize why I’m too scared to come out in the open instead of behind an alias: that I was an anomaly in that I’d already been filing and had believed I was compliant, having been oblivious to PFIC issues or FBAR. I feel that the classic non-filer, while technically at more risk because of completely open statutes of limitations, could more easily argue reasonable cause, especially as so many haven’t known they had to file; however, for someone to have already been filing, I believe the IRS might be more quick to assume that someone like myself could have been deliberately under-reporting income.
I was damn lucky to find a specialist who understands nuance. I am frightened to come out into the open though, especially as I was told at the recent ACA meeting in London that the IRS and other US authorities are very aware of Isaac Brock; rather than feeling sheepish, they are evidently outraged with all our criticisms and consider this an extremist group. I genuinely fear that there could be reprisals, especially against those they consider ringleaders…. to be frank, I’m still scared sh*tless. :/
@ All
Thank you to all of you for your insight. I’m getting a crash course in American tax law thanks to your efforts. However, I’m still not knowledgeable enough to apply this information and make an intelligent decision regarding compliance vs non-compliance. Please appreciate that I will only understand this at its most basic level and that in itself suggests American tax law is a bad law. It should be easy to interpret and understand for even the most unsophisticated of those among us.
Question: Would I protect my spouse and children if I seek a divorce?
All so, in response to press conference yesterday, Flaherty reported he will not increase CPP pay outs as a solution to the fact that Canadians failed to save enough to retire. I thought I planned wisely by maxing out my RRSP, RESP, TFSA, and investing in mutual funds.To the best of my ability I planned and saved for retirement and now the Harper Gov’t seems to be complicit in allowing in the US to harvest the fruits of my labour. I fear at this stage of life I will have difficulty in recovering from this loss. I left an occupation for which I am no longer certified to practice. I envision my future as a Wallmart Greeter till I drop dead. An outrageous sacrifice to make for the privelege of American Citizenship.