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!”
@monalisa1776
I wouldn’t be so worried. If we’re an extremist group then so is Ron Paul’s and thousands of others:
To repeat Ron Paul’s words: REAL PATRIOTISM IS A WILLINGNESS TO CHALLENGE THE GOVERNMENT WHEN IT’S WRONG
…or Mark Twain’s “Patriotism is supporting our country all of the time, and your government when it deserves it”.
John F Kennedy said, “It’s not what your country can do for you, it’s what you can do for your country”, NOT “It’s not what your government can do for you, it’s what you can do for your government”, as some lawmakers and homelanders would like to interpret his words to mean.
Be brave, we are in the right and we are strong in numbers.
@Bubble, thank you for your kind words. I agree that our numbers are growing as more people become aware of the situation; in fact, I could see it snowballing to the point whereby there will be so much pushback that there will ulultimately be reform. I also hope that eventually they will apologize to us and even offer us our citizenship back.
I feel bitter and would probably not take up the offer, but it’s the damn principle of the thing: that we shouldn’t be forced to give up our birthright because of poorly designed tax laws.
It had always been my assumption before any of this happened that I would spend significant time back in the US, especially if I became widowed. I still have a strong connection to the small beach resort town that our family have been linked to all our lives…
To be honest, I feel that my expatriation is mainly a technicality and that I’m still American even if I no longer hold the blue passport. I still have loved one’s over there. Thus, my biggest fear now is no longer the IRS as much as the risk that they might start banning people from even visiting… it would break my heart.
monalisa1776
They won’t ban you, and if they did why would you want to have anything to do with a country that would ban someone like you? The America you knew will have ceased to exist, but at least you will have your memories, as I have mine. In spite of what many people in the US might think, living outside one’s country of birth enriches that citizen’s life and increases the diversity of the nation. If America’s building a wall, give thanks that you’re living on the right side of it!
As far as paying some kind of tribute on an annual basis goes, forget it! I might consider a departure tax as long as it’s reasonable, but that’s it.
@Bubble, of course, I get what you’re saying. But you have to remember that all my relatives are still over there, along with the family friends….I can’t just cut the cord so easily.
It’s come as something of a shock that I’ve recently discovered that I’m 90% certain that I’m directly descended from 17th Century bigwigs in Williamsburg, Virginia. I still have a deep pride in my heritage. I will always love my country, even if I feel alienated from the present government. In fact, I have also found I could join the Daughters of the American Revolution. I may still join, because I still believe in the America that I grew up believing in: a country that valued Freedom.
A few quotes by Nikos Kazantzakis:
“We are not simple people who believe in happiness; nor weaklings who crumple to the ground in distress at the first reverse; nor skeptics observing the bloody effort of marching humanity from the lofty heights of a mocking, sterile wit. Believing in the fight, though we entertain no illusions about it, we are armed against every disappointment.”
“A person needs a little madness, or else they never dare cut the rope and be free.”
Please read this article, it seems relevant:
http://www.bibliotecapleyades.net/sociopolitica/esp_sociopol_rothschild04.htm
@dax
My point is that these are things on which reasonable people can differ. Reasonable people can differ on whether the expat citizen offers more value to their original country than they are getting by virtue of living abroad as an expat. Certainly, however, I would feel quite strongly that–at least before FATCA–there were many, many dual citizens who were benefiting enormously from their dual citizenship. I’ve known huge numbers of dual citizens who benefit enormously from their ability to do business in both countries and to therefore build business connections between two countries. Perhaps the countries benefit too but the individual dual citizens can, at least in the past, also benefit hugely. Should they be taxed on that? I don’t know but it seems to be something on which reasonable people can differ.
Since FATCA, however, such relationships are getting much harder to build unless the US dual citizen keeps their tax home in the USA. That’s why I’m saying FBAR/FATCA and not CBT by itself is the problem.
Now many Brockers in Canada don’t seem to have gained much benefit from their dual citizenship for years even before FATCA. But IMHO Brockers in Canada are the exception, not the rule, when it comes to dual citizens I’ve encountered. Most dual citizens I’ve known can and do benefit HUGELY from being able to keep a foot in both countries–or at least they did before FATCA. The vast majority of dual citizens I’ve known–again, at least before FATCA–seem to see their US dual citizenship as a blessing–not the curse that Brockers seem to see it as.
BTW I’m not trying to defend CBT here. I’m merely saying that CBT by itself is something on which reasonable people can differ. I just don’t see it as viscerally evil in the same way as FBAR/FATCA are–which are assaults on a foreign country’s sovereignty.
@monalisa1776
You have a lot more practical considerations than I do, in the fact that you have family ties in the US. Your life is unimaginable if you were cut off from them. You also cut your citizenship ties for reasons that outweighed those, and were completely justified in doing so. You are a prime example of someone who was forced to give up their US citizenship, as your survival depended on doing so. It’s unfair, but you uphold the ideals of liberty and freedom by your actions, which are supposedly what America was built on. This may eventually be how America will exist one day – in the minds of those who upheld those ideals, because what I see now is becoming unrecognizable.
@bubblebustin
“I’d say that a labour market ten times the size of a country that’s 1/10th the population is a wash.”
If jobs were extremely plentiful everywhere I’d agree with you. However, even in good economic times–let alone the slowdown of the past few years–the job market tends to be extremely competitive.
Someone who is in a position to apply for 1000 jobs has a much better chance of getting that one offer than someone who is only able to apply for 100 jobs. Sometimes it takes applying for 1000 jobs before you get that one offer.
Moreover, even if you do end up with a job in Canada, there’s a good chance that the Canadian company will have an office in the USA. Being able to freely travel between the two offices, and do business in both locations without fear of problems at the border, will give you a competitive advantage over your Canadian-only co-workers.
@Dash1729
I get the feeling that you’re one of those people who feels that people with dual nationality have an advantage over those without, and perhaps taxing them is the only way to make it fair. The fact that you aren’t quite sure whether Americans in other countries are of value to the US speaks volumes to me, like it’s a one way street.
I don’t know how many people you know who take advantage of both citizenships in the way you say they do, but I suspect their numbers are about to dwindle significantly, unless of course they’re all prepared to make the US their permanent residence. Keep in mind that we here at Brock are just the tip of the iceberg.
Question: Do you think that if US citizens living abroad found out about CBT in any way other than FATCA, the impact would be any less profound?
@bubblebustin
“The America you knew will have ceased to exist, but at least you will have your memories, as I have mine.”
When, in calendar years, was this golden age in which the US government was this great champion of human liberty that people seem to nostalgically remember?
The history of American liberty is one of individual Americans fighting for their freedom against a government which has always opposed it. The US government has never been a great champion of human liberty–it has ALWAYS been up to individual Americans to fight for it. For example, in 1776 the USA fought for freedom against the Brits but then promptly established a constitution that institutionalized slavery. That’s the way America has always been and I suspect will always be. This golden age didn’t exist–at least not in the way people prefer to remember it.
@bubblebustin
“I get the feeling that you’re one of those people who feels that people with dual nationality have an advantage over those without, and perhaps taxing them is the only way to make it fair.”
They absolutely have an advantage. Whether this should lead to additional taxation is something I’m not fully decided on but I feel it is something on which reasonable people can differ.
@Dash, I can see your point in how you’re not fully decided on CBT but feel it’s something on which reasonable people can differ. However, I cannot see how it’s reasonable to be in a situation whereby I’d have had to rely on a specialist tax preparer at over $2000 EACH year for the REST of my life. Plus, filing annual tax returns of over 100 pages isn’t good for the trees, especially when they can’t be filed online!!
@Dash1729
I understand the point you are trying to make, but just think you have it backwards.
In many ways, Citizenship taxation is at the core, the Tax Gene DNA mutation from international norms that allows the FATCA and FBAR virus to do so much damage.
Without it, the FWhat?s could not inflect the patient living abroad.
So, while you can say, this CBT has allowed dual citizenship to benefit up until 2010, we now see the disease was lying dormant until Congress Kevorkian decided to unleash a virulent strand of virus with FATCA and FBAR enforcement which is killing off U.S. Expats.
Even if drugs suppressed FATCA/FBAR disease and put it into remission, there is no vaccination against a relapse! So have to reset the DNA back to international norms, or the disease will just come back.
There are new Levin/Schumer/Reed clones being created continually in Congress that can prey on the CBT mutation if you allow it to continue to exist.
1. Yes U.S. citizenship has value. So does, Canadian citizenship, Australian citizenship and the citizenship of almost every other country in the world. In fact the citizenship of each and every country is of value to somebody. Yes, it’s true. Everybody is loved by somebody!
2. The fact that citizenship has value doesn’t mean that one should be subjected to CBT.
3. Clearly what the U.S. employs and describes as CBT is unacceptable, intolerable and impossible to live with. Ask the Monas of the world.
4. It’s because what the U.S. calls CBT is NOT about taxation. (If it were then more U.S. citizens abroad would owe tax.) What the U.S. calls CBT is simply a form of life control/slavery. Example: Canadians don’t do proper retirement planning because they were born in the U.S. You can call this taxation if you want, but it’s not. It’s an attempt to control the day-to-day life and activities of residents of other countries. Of course the effect of controlling the day-to-day life of residents of other countries is a way to extract wealth from other countries.
5. Therefore, I don’t think it’s even worth having a discussion about CBT which includes a discussion of FBAR, FATCA, PFIC, CFC, Foreign Trusts and the like. They are not taxation and not related to taxation.
6. If we want to engage in a discussion of “is CBT justified” we need to begin by recognizing what is NOT CBT and what is nothing but an attempt at slavery/life control.
My two cents on the CBT issue. From the beginning I have maintained that CBT in principle is NOT really the issue (although I would vote to make it a violation of international law). If CBT is to exist, one must begin by considering what should the principles of CBT be.
I would suggest the principles must include recognition of the following:
1. Must be about taxation
2. Recognize that taxation is about paying for government services
3. Must be simple, possible to comply with and inexpensive to comply with.
4. Recognizes that all countries have a right to ask their residents to pay for services (it’s time those 50% of Americans in the Homeland who don’t pay their fair share – start paying up!)
5. Cannot make living a life outside the U.S. impossible
6. Cannot wage war on the economies of other countries.
Can those principles be achieved? Yes, with a modest annual fee to the U.S. and I mean very modest. If U.S. citizenship is some kind of exclusive club then must charge dues.
Question to all:
Is there any from of citizenship TAXATION that would be acceptable to you. If so, what would it look like?
Perhaps this question would be worth a separate post.
@Dash
“BTW I’m not trying to defend CBT here (yes you are). I’m merely saying that CBT by itself is something on which reasonable people can differ. I just don’t see it as viscerally evil in the same way as FBAR/FATCA are–which are assaults on a foreign country’s sovereignty.”
Can you please explain how levying income tax (CBT) on expats to pay for public goods and services they don’t/can’t receive, but Homelanders do receive is not evil?
Can you please explain how taxing expats who have no representation in the Homeland legislature, which means, no senators or congressmen representing and voting for the interests of expats who live in East Bumfuk Africa or some other Banana Republic, is not evil?
There are many BS fallacies out there used by ivy tower academics to justify punishing expats with CBT such as “horizontal equity” which don’t hold a drop of water when examined from the “lack of horizontal benefit” point of view. There are plenty of expats who live in countries with very poor to non-existent infrastructure and government institutions that don’t work and/or are rife with corruption.
PS. Can you please explain why “No Taxation Without Representation” was the slogan of the American Revolution? And what do you think America’s signers of the Declaration of Independence would have to say about the application of CBT to American expats today?
@monalisa1776
But you don’t have to pay a $2000 fee to a tax preparer. You can prepare the return yourself and pay $0 in tax preparation fees.
Of course–I hear your response: if you did it on your own, you’d be risking penalties if you made the slightest mistake that would greatly exceed the $2000 fee. But that is exactly my point–it is the enforcement penalties (FBAR, FATCA, and other penalties) that are the problem here–not CBT itself. The penalties for the slightest mistake by an expat vastly, vastly exceed the similar penalties that apply for a taxpayer with tax affairs solely in the “homeland”. The problem is the enforcement madness–not CBT by itself.
Typically when filing domestically, there is no penalty unless you actually owe taxes. If a similar rule were applied abroad, very few people would pay $2000 in tax preparer fees. Taxpayers would either do it on their own or they’d be able to find a preparer willing to do it for a much more modest fee. Even if a small mistake were made, it is unlikely that the IRS would audit the return, because there would be no chance of collecting a penalty.
Again–it’s the penalties that are being imposed that are problematic–not CBT itself.
Dash:
With the greatest respect to you (and I really mean that), the vast majority of people are NOT capable of preparing a U.S. tax return, much less one with the complications attendant to living abroad.
You may be able to. The simple fact is that very very few people have this capability.
This is the compliance reality. I don’t know anybody who as a U.S. tax return of under 50 pages and most of the people I know have returns that exceed 100 pages and a significant number exceed 150 pages.
The only way to have a simple return that anybody can prepare is if you have no financial life of any kind at all.
If I am not mistaken you are a U.S. resident. Therefore (although my guess is that you personally are capable of doing an Expat return), you are NOT seeing this through the eyes of an American abroad.)
@Just Me
Sorry but I’m just not seeing your point. The threat of FBAR / FATCA would still exist even if there were no CBT. There would still be US tax residents with foreign bank accounts and the US government would still be trying to get foreign banks/governments to reveal that information. Someone with a US birthplace would still be under the gun to prove that they’d severed their tax ties with the US and they’d still be at risk of having their bank accounts closed if they couldn’t do so. They wouldn’t have to give up US citizenship but most of the problems would still exist.
To me CBT is an almost completely separate issue from FBAR / FATCA. Either could exist without the other.
@Dash1729
Generally speaking, what is the benefit of having 10X as many job opportunities if you’re competing against 10X as many people for the same job?
There are a great many Americans who’d be entitled to a second, (or third, or fourth) citizenship (look at Michele Bachman) and any American can acquire another if they made the effort to do so. It’s not an unfair advantage if the opportunity is available to all Americans, and it is.
@USCitizenAbroad
Thank you for your thoughts on what a perfect CBT would look like. Sounds like Eritrea’s!
For expats, CBT, FATCA and FBAR are a toxic triangle with the exit tax being the final kick in the groin on the way out the door.
@FromTheWilderness
I am not sure that Dash is attempting to defend CBT. I think he is trying to defend the principle that:
There should not be a presumption that CBT is wrong.
Question for Dash:
Dash have you ever been in a situation where you personally have been subjected to U.S. CBT while NOT being a U.S. resident?
@Dash, again, I see your point but don’t fully agree. As ‘From the Wilderness’ points out, we don’t have effective representation, so are effectively suffering similar issues to the colonists’ gripes about No Taxation Without Representation against King George III. The PFIC taxation treatment against locally owned mutual funds is essentially extortion.
In Britain, I can safely file my UK tax return online for about $25 and easily complete it myself. I don’t have to rely on an accountant. It seems absurd when I haven’t lived in the States for over 25 years to have to pay thousands each year to a tax preparer to them. I will have had to pay out almost $30,000 in professional fees to become compliant and clean up this mess. I only earn $25,000-30,000 each year which is peanuts in London, and London ain’t cheap.
To me, it seems like an artificially contrived situation whereby the compliance industry directly benefits by maintaining the status quo. I’m sure that they have lobbied Congress to keep the tax laws so complex that we have to rely on them not only to do our tax returns correctly but to avoid the risk of huge penalties.
As an aside, I wouldn’t be surprised if a higher percentage of expats will find out that they actually owe substantial US tax though, especially when considering that many hold mutual funds (PFICs) and have inevitably made capital gains on real estate. I suspect that many who believe they don’t owe US tax haven’t been filing their tax returns correctly!
@USCitizenAbroad
Again–these are enforcement issues, not an issue with CBT itself. Tax returns in the past before the present enforcement madness–including expat returns–were not nearly as complex as they are now. If your financial affairs were simple you filed a simple return. Returns have grown to 50, 100, and 150 pages because people (or their preparers) have grown afraid that if they fail to file the most minor form they will be hit with devastating penalties. That fear didn’t exist in the past. In the past, if you honestly declared your income, you could feel reasonably confident that if the IRS needed more information they would ask for it without hugely disproportionate threats.
The problem is the enforcement not the CBT itself.
@Bubblebustin
Obviously my vote would be for NO CBT of any kind. But if one has to exist, you are quite right that the Eritrea model is less unfair than the U.S. model. No doubt about it. As I have said many times, it is an insult to Eritrea to compare it to the U.S.
What I was suggesting (if one were to exist) would NOT be an Eritran percentage thing. I had proposed:
“Yes, with a modest annual fee to the U.S. and I mean very modest. If U.S. citizenship is some kind of exclusive club then must charge dues.”
Would $50 a year (although not desirable) be too much? In return you would receive a guarantee of your right to resume residence in the U.S. at any time. See it as something like the annual fee your would pay for a credit card. In fact, why not make it a credit card. In order to keep costs down the US Gov could hire American Express to administer the program.
AMEX could introduce a new credit card available to U.S. citizens only. It would carry a $50 annual fee. Card holders would have the right to have a U.S. passport. You could pay extra for a lounge membership. If you want to upgrade to a An American Citizen Platinum card” you could also get 1.25 points per dollar spend and access to airport lounges.
Frankly, I think this would be perfect. You could actually get points for being a U.S. citizen. This would provide a tangible benefit to U.S. citizenship!
Your thoughts.
@all
Just found this Link This is an excerpt. Today in International Migrants day. Most are RBT people.
http://www.ufcw.ca/index.php?option=com_content&view=article&id=3801%3Aby-the-numbers-international-migration&catid=6%3Adirections-newsletter&Itemid=6&lang=en
Toronto – December 14, 2013 – On December 18, on International Migrants Day, the world recognizes and celebrates the rights of migrants. The day annually commemorates the December 8, 1990 adoption of the United Nations International Convention on the Protection of the Rights of All Migrant Workers and Members of their Families, which affirms the human rights of all migrants, regardless of citizenship or immigration status, and recognizes that migrants are men, women, children, and families – not just economic commodities.
In 2013, the number of international migrants worldwide reached 232 million, up from 175 million in 2000.
49 per cent of all migrants are women.
136 million international migrants live in developed countries while 96 million resided in developing countries; the increase of migrants in developing countries (2.5%) is growing at a higher rate than in developed ones (2.3%). (2013)
International migrants account for a small share (3.2%) of the world’s total population.
Europe and Asia combined host nearly two-thirds of all international migrants