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!”
Dash, thank you for continuing the discussion.
You mentioned that: “My understanding is that IBS is a group trying to achieve something politically in Canada.”
I can’t speak for the IBS, but I believe that its participants (which include you) are a very diverse group (e.g., I am still a voting US citizen and want to change bad US laws) who have equally diverse thoughts and approaches. Its website says simply:
“The Isaac Brock Society consists of individuals who are concerned about the treatment by the United States government of US persons who live in Canada and abroad….So whether you are a US person living in exile, a Canadian or a citizen of any other country, we ask you to join us in this struggle for freedom and justice.”
No one can be forced into CBT against their wishes: all they need to do is renounce.
re: the above statement….. while yes it is true and i would love to renounce tomorrow the truth of the matter is i can not afford to do so. i have spoken to my accountant and he indicated i would be looking at about $45,000 at a minium to become tax compliant and that is before factoring in me being a signitory on a couple of bank accounts for not for profit societys that i sit on on the boards of. my accountant did not even want to guess at what those costs could be given the complexities of figuring it out.
as for the comment “My understanding is that IBS is a group trying to achieve something politically in Canada.”
i find that while yes perhaps the ISB group is trying to achieve something politically here in canada how the heck else do you fight something like FATCA ect. without “trying to achieve something politically”
it is the bureacrats and politicians that make policy and sign the iga’s so yes it is a political battle.
we sure as heck are not going to achieve anything by putting pressure on the janitor in the parliment building in ottowa now are we?
@Dash1729
You don’t walk in our shoes so you can only speculate as to how we feel. Many of us struggle to make the “right” decision. So rather than brow beat us for not seeing things your way, you should be seeking to find out why your suggestions don’t resonate with us. The closest you came to any kind of knowledge was when you said that had your birth country made you a criminal, you would have simply never visited there. If you had empathy and insight, you’d see that is not a practical consideration for a great many of us.
Your clinical view is not helpful to the many who are in a quandary about what to do. You don’t seem to recognize that doing the right thing involves making moral and practical decisions that often conflict with each other. Rather than make justifications for CBT, perhaps you should be thankful that the country you were born in doesn’t exercise it.
@Dash1729
I have been trying to keep up with this conversation along with other ‘real life’ chores. I have to be compliant to my wife’s demands too. 🙂
Thank you for stirring some active conversation, and I can appreciate your POV although in the main, I still think you are missing why the core of the FWhat? problem is CBT, as it relates to an American Diaspora.
In all that you have said, I still haven’t seen you reflect or answer the “What if” question?
What if all the countries in the world copied the U.S. model? Are other countries allowed to assert that CBT claim, or is that only something preserved for exceptional America?
What would that world look like?
Is it your belief than, that global inhabitants should have but ONE passport, and only allowed to switch tax jurisdictions upon renouncing one and taking up the other? Is that your position? Just want to be sure I have clarity…
Finally, to your comment that you don’t get my point.
I agree that FATCA and FBAR (and also the now the new global TIEAs or GATCA as proposed by the OECD, riding on the back of the FATCA model), are not good for many economic reasons.
Not just because of the impacts on U.S. Persons (subject to CBT) living offshore distant from the “shining city on the Hill”. But, also for it is morphing into a global GATCA to impose the will of a global tax bureaucracy from the high cost welfare states to the lower cost so called Tax Havens like Hong Kong and Singapore (as an example) who are economically vibrant.
The plain fact is, without a CBT now being actively enforced via the FWhats? (FATCA/FBAR), the impacts on U.S. Persons living around the world would be negligible. Without a CBT they could be as free as the Chinese or Germans to live and engage in economic activity in other jurisdictions around the world without the chains of the unique U.S. Tax, Form and Penalty Club.
I guess your argument is, that rather than the U.S. cutting the CBT chains (and impacts of the “Form and Penalty” portion of the club), you would rather have the Germans and Chinese shackle up their citizens in similar ‘fairness’ manner?
As to strategy of ISB. There are many voices here, but the main thrust of the Canadian advocacy has NOT been on the CBT but rather the impacts of FATCA. The participants are attempting to stop the capitulation of the Canadian government to the FATCAnatics demands.
I would suggest you read many of the archived posts here. You won’t see CBT on any of the protest signs or the letters, the focus is purely FATCA, here and here for example
The CBT discussion on this thread has been aimed at the U.S, and also a global audience. As one tactic, Blazes article is trying, perhaps futilely, to get government to force America to follow ‘international norms’ if they want to sign up to the FATCA extortion. If you want automatic exchanges (I don’t) then they should be ‘residency based’ not ‘citizenship based’ for one exceptional country, and residency for the other ‘bend over and take it’ country. That is, as they say, and unequal (unfair) playing field. End of story.
@WhiteKat, I second your comments to Calgary, and your observations about the usefulness of IBS in terms of honing skills and exploring arguments. @Calgary, all your comments are entirely warranted. Your efforts help many others, and it is your duty as a parent to do whatever is necessary to protect your child. Through your comments, we have developed a better understanding of another crucial aspect of the CBT burden, and the civil rights issue of the unjust denial of renunciation rights to those deemed incapable – as well as the exercise of those rights on behalf of those dependents by their legal guardians/parents.
On another thread, we heard the experience of a 90 year old who renounced. There are many of us who would have had, or do have elderly parents in that same situation. This is another population who would suffer the confiscation of the funds saved for their care, but who might be challenged re mental/intellectual capacity by the consular and embassy staff. Many of us have had the experience of being named as having power of attorney for personal care, and for finances as part of future planning by seniors and family members. What would our duty be if our elders were here still, facing the US FBAR and FATCA fundraiser – and we had to protect their assets in order to protect their financial security. There are going to be those with dementia or other significant debilitations that will preclude their attendance at a consulate or embassy in Canada, and they will be challenged or turned away by the consular staff if they try to renounce or relinquish.This is evil. Those senior dependents would never be able to move back to the US successfully on their own, or afford US healthcare, yet, they are denied the right to renounce based on some theoretical right of return to the US.
The US would gladly penalize and seize Canadian grandma/grandpa funds under FBAR and FATCA. Even just the compliance costs and the complexity of compliance is too much for many.
Where is the Canadian government in terms of protecting the vulnerable and those who are their guardians?
Don’t expect any help with your IRS compliance ‘homework’;
http://isaacbrocksociety.ca/expat_tax/comment-page-48/#comment-833507
…”In the face of similar trends, last year GAO reported that a dramatic revision in IRS’s taxpayer service strategy was needed and recommended IRS take steps to better balance demand for services with available resources. GAO acknowledged this may require IRS to consider difficult tradeoffs, such as limiting some services. In response, IRS has proposed eliminating or reducing some services for 2014 such as answering basic tax law questions only during the filing season. …”… http://www.gao.gov/products/GAO-14-133 ‘IRS Needs to Do More to Address the Growing Imbalance between the Demand for Services and Resources’
GAO-14-133, Dec 18, 2013
@Badger
You brought up another aspect to consider, that those who have power of attorney for USP’s and are executors to a US person’s estate take on all legal responsibilities for these US persons in Canada. I don’t however think that the US would recognize either designations, as Social Security didn’t recognize the Power of Attorney I held for my mother in Canada. I don’t know how that would play out if the POA or executor didn’t comply with US tax law on behalf of the US person, even if the POA or executor is a US person.
@bubblebustin
“So rather than brow beat us for not seeing things your way, you should be seeking to find out why your suggestions don’t resonate with us.”
Except that I haven’t made any suggestions as to what anyone does regarding their personal decisions. Because I was asked, I shared what I would have done in certain circumstances in my own life. I did NOT ever claim that others should do the same.
I WAS highly critical of the fact that people didn’t seem to have known about CBT until quite recently. Someone said that “I win” but the reality is that I am NOT a winner financially–I’m not the most responsible guy in the world when it comes to how I handle money. That’s why I found and still find it so hard to understand why people didn’t know about CBT. Many people on here–who are clearly in general far more responsible about money than I am–somehow didn’t know about this? I don’t get it and still don’t. Please help me to understand because I truly don’t understand. It’s as though people who are otherwise so careful with their money–much more so than I am–had this huge blind spot when it came to CBT. I’m trying to understand why.
But this criticism is–for obvious reasons–not by the way of making a suggestion, because what is done is done and people need to make their decisions in the present–not based on what they might have done in the past.
However regarding the public, political fight–ie NOT people’s personal decisions–I AM making a suggestion. I’m suggesting the focus be on FBAR/FATCA, not CBT because–whether my suggestion resonates with you or not–I believe that a focus on FBAR/FATCA is far more likely to resonate with the average Canadian who doesn’t know about these issues.
@Just Me
“What if all the countries in the world copied the U.S. model?”
Far from not having reflected on this, my answer to this question is core to my position.
If all other countries followed the US model, it would be much more difficult to maintain dual citizenship. People would have to choose which country they are a citizen of, make up their mind regarding their national loyalties, and pay taxes and generally given their loyalty to one country and one country only. People wouldn’t be allowed to remain in a situation where they are a “citizen” of a country and have all the rights and none of the responsibilities.
And I’m suggesting that–despite being a dual citizen myself–there are strong arguments against dual citizenship. Yes there are advantages but a strong case can certainly made that divided loyalties are not a good thing. In the past a lot of countries strongly discouraged dual citizenship because divided loyalties weren’t such a good thing. In more recent years many countries–especially but not just Western countries–have diluted the concept of citizenship by tolerating or encouraging dual citizenship. Maybe that’s not such a good thing and maybe CBT will be something that starts the pendulum swinging back in the other direction–and maybe that’s not such a bad thing.
I’m mean, most people don’t tolerate divided loyalties in their personal relationships. I mean, most women (or men) wouldn’t want their husbands (or wives) becoming a “dual citizen” of some other woman’s/man’s bed.
Nor is it tolerated in the workplace. You can’t normally work for one company and then moonlight for that company’s biggest competitor–usually there are non-compete clauses preventing this.
So why do we tolerate this at the national level?
@Dash1729
Seems to me that you spent many of your adult years not knowing (nor caring) whether your birth country had CBT or not. If your birth country was as negligent as the US in letting their citizens know, you might have never known until you enquired 10 years prior to visiting there. In the meantime, you may have incurred quite a tax liability with your birth country. Then you’d find yourself in the very position of millions of other people who emigrated from your birth country.
“I guess your argument is, that rather than the U.S. cutting the CBT chains (and impacts of the “Form and Penalty” portion of the club), you would rather have the Germans and Chinese shackle up their citizens in similar ‘fairness’ manner?”
I would suggest that part of the reason why both of the countries you’ve named–Germany and China–seem to be gaining in power on the world stage is that neither country is big on dual citizenship. CBT may not be their method of choice for either Germany or China to resist dual citizenship but neither country seems to be enthusiastically jumping on the dual citizenship bandwagon.
Re earlier point about whether those at IBS value the ‘right’ to vote in US elections. Only 21 states plus District of Columbia allow US citizens who have never resided in the US to register and vote from abroad.
On one hand the State Department website says:
…”Twenty-one states and the District of Columbia specifically allow U.S. citizens who have never resided in the United States to register where a parent would be eligible to vote….”
http://www.travel.state.gov/travel/living/overseas_voting/overseas_voting_4754.html#VotingandTaxes
but then makes the specious claim that:
“Voting Eligibility
Almost all U.S. citizens 18 years or older who reside outside the United States are eligible to vote absentee for candidates for federal offices in U.S. primary and general elections. In addition, some states allow overseas citizens to vote for candidates for state and local offices, as well as for state and local referendums.”
“Almost all”?
How can that be if more than half of the US states do not allow those abroad to register and vote without a period of actual US residency?
I am sick of hearing about this ‘right’ to vote in the US as a ‘benefit’ that justifies US extraterritorial citizenship based taxation.
The obligation to report and pay US federal taxes – even if burdensome, confiscatory and double, far exceeds the actual ability of those abroad to exercise the ‘right’ to vote in US elections.
“What if all the countries in the world copied the U.S. model?”
Now–OTOH–if all other countries tried to copy FBAR/FATCA then THAT would, indeed, be completely, totally unworkable. Which is why FBAR/FATCA is just a bad, bad idea.
But if countries simply copied CBT–without using things like FBAR/FATCA to enforce it worldwide–that would simply serve to discourage dual citizenship.
@ Dash,
That’s exactly what we are doing in Canada, addressing to our government the issue of keeping this foreign law, FATCA, out of Canada, and pointing out to the public in our flyers the damage that FATCA would inflict on the people of our country.
I personally have nothing to do with the US govt, not my country, so I’m not involved in trying to get the US to change its law, but focus my political activity in my own jurisdiction.
However, the Brock community is made up of a lot more than just citizens-of-Canada-only. This website is here for everybody, in any country, who is affected by FATCA/FBAR and its root cause CBT. It seems logical to me that people would and should fight the root of the problem and not only the symptoms of the problem.
@Dash: First, full disclosure. I am the author of the Unique or Outrageous article. You seem unaware that this is one of several articles I have had published. Some were co-authored with a woman in France. Others I wrote myself.
Nearly all of those focused on FATCA. This one deals with FATCA as part of the overall attack of CBT on the lives of millions of honest people around the world.
In terms of your suggestion that we concentrate our efforts on our own governments, I can assure you that is exactly what I and other Canadians have been doing for over two years. We are insisting our rights under Canada’s laws and constitution are respected and upheld. I don’t know how you missed that.
I can also answer your question about how responsible intelligent people could not have researched the laws of the United States. In my own situation, I was told clearly, firmly and directly by U.S. Consulate in 1973 that I was “permanently and irrevocably” relinquishing U.S. citizenship when I became a Canadian citizen. Other grounds for loss of US citizenship were voting in foreign elections and working for a foreign government. Those all applied to me.
The U.S. Consulate never told me I needed a CLN when I advised them I was becoming a Canadian citizen 40 years ago. They should have provided me with one.
It may seem irresponsible to you, but I was not following your country’s Supreme Court decisions. So, I had no idea the U.S. Supreme Court reinstated my citizenship without my knowledge or consent in 1986. If I had known that and had known that I required a Certificate of Loss of nationality, I would have gone to the U.S. Consulate then to request one. The Consulate was just a few blocks from where I worked at the time, so I would have simply gone there and applied for a back dated one then.
Now, that I am 62 and retired for medical reasons, the US wants to reclaim me and demands information about all of my finances just because I was born in US. Travel to a US Consulate is now impractical for me. In addition, I am determined to never go any where near a US Consulate or give them information about my name and address to pass on to the |IRS. Why? Past experience has shown me clearly they can’t be trusted.
For others, I know one stay at home mother who frequently checked with IRS to ask if she needed to file returns. They repeatedly told her she did not. They never mentioned FBARs to her. Another woman with multiple sclerosis was also told her disability income from Canada was too low to require filing. Again, no mention from IRS of the need for FBARs on joint accounts with her husband.
Other “accidental Americans” had no idea they were considered US citizens or had tax obligations to a foreign country. Some don`t speak English because they have spent their entire lives outside United States since infancy.
Two prominent Canadian politicians, like me, believed they had relinquished US citizenship decades ago. One is the leader of the Green Party of Canada. Another is the Premier of New Brunswick.
How could that be you may ask. You may want to ask that question of Ted Cruz. He insists he did not know he was a Canadian citizen because he was born here until a Texas newspaper brought it to his attention. He`s a Harvard educated lawyer.
There are as many reasons for people not knowing as there are people affected by this. As strange as it may seem to you, we have been too busy leading responsible, productive lives in our countries of choice and citizenship to begin researching your country`s bizarre tax laws and Supreme Court decisions.
one pager CBT
http://samuelclemmons.wordpress.com/2013/12/19/rbt-information-residence-based-taxation/
Great points, Blaze.
We should ask Cruz why he didn’t know he was a Canadian. We should also ask his parents if they checked to see in their permanent residency in Canada required further tax obligations to Canada when they left.
but @Dash,….
In our copy cat world, they are doing both!
So, I would rather have the world force the U.S. to practice ‘international norms,’ rather than the other way around, where the U.S. demands its exceptional CBT practice be enforced with its FBAR and FATCA forms and reporting.
Now, if the US or other countries want to force those types of forms onto their residents, (there is an argument that it is still a bad idea), but that is their right, as long as the reach of them ends at the border and only impacts their residents, IMHO.
@Dash: In addition to my above comment, I note you conveniently ignored Just Me’s point about what would happen if all countries adopted CBT. My conclusion in the article was it would create global financial chaos.
In addition, as I reported in the article 82% of American abroad who do file owe nothing. Yet, it costs them huge sums of money to file and IRS applies significant resources to process. Those resources would be much better sent chasing the real tax cheats–like the billions they send in fraudulent refunds to prisons or Shanghai every year. Or, they could pursue the money owed by IRS employees, US Treasury employees and White House staff. Even better, start at the top.
Jack Lew, Secretary of Treasury had no idea he had $56,000 in investments in the building in Cayman Islands which Obama calls the largest tax scam in the world. Or Penny Pritzker, Secretary of Commerce, neglected to report $80 million in income due to a “clerical error” which she revealed the day before her confirmation hearing. She was confirmed in her new position with support of Republicans and Demoncats.
Yet, you want a Canadian stay-at-home mother who followed advice of IRS and a retired 70 year old Israeli professor who left the US when she was 14 to understand and conform to your country’s constantly changing laws.
Similar to CBT, dual citizens could be required to perform compulsory military service in all countries of which they are citizens. A number of countries signed agreements whereby their dual citizens only have to serve in the military of one country. Switzerland has such an agreement with Germany, France, Colombia, Argentina and, hard to believe, the USA:
http://www.vtg.admin.ch/internet/vtg/de/home/militaerdienst/rekrut/wehrpflicht/doppelb.html
For IBS linguists, Doppelbürger is the German word for dual citizen. Doppelburger is the German word for an item on a McDonald’s menu. 🙂
Taxation without representation and without the benefit of using public goods and services is just plain tyranny — full stop.
The only representation that would have any meaning at all would be if the American Diaspora had two senators and a proportionate number of congressmen elected by the estimated 7 million plus Americans living outside the Homeland to represent the interests of the American Diaspora as a block. Anything short of that is only the colour of representation (ie. bullshit) and amounts to de facto “disenfranchisement.”
https://www.vocabulary.com/dictionary/disenfranchised
That would solve the problem of representation, but it doesn’t address the injustice of “horizontal inequity of benefits,” which can only be resolved by abolishing CBT and adopting RBT or TT like the rest of the world, except of course Uncle Sam’s other partner in crime, Eritrea.
@Blaze
Just to summarize my own conclusion: your article talks both about CBT and about the enforcement mechanisms: FBAR/FATCA. Your conclusion–global financial chaos–is reached only after considering the efffects of both CBT and FBAR/FATCA.
So my own conclusion remains: if FBAR/FATCA were practiced by all nations, yes, I agree there would be global financial chaos. But CBT–by itself–would not result in global financial chaos, even if practiced by all nations.
What WOULD happen if all nations practiced CBT–by itself–is that it would result in far fewer dual/multiple citizens. So most of the famous people you mentioned would be required to make a choice and formally renounce any citizenships except their primary citizenship. Indeed I believe that some public figures have already done so anyways: President Obama, former Governor General Jean, former Australian PM Gillard.
BTW–I agree with everything about the article except one thing–the title. I would have suggested the title focus on FBAR and/or FATCA because–as I’ve said a number of times–I believe those to be the bigger problems. All of the content I 100% agree with.
@Blaze
“The U.S. Consulate never told me I needed a CLN when I advised them I was becoming a Canadian citizen 40 years ago. They should have provided me with one. It may seem irresponsible to you, but I was not following your country’s Supreme Court decisions. ”
I said it was irresponsible for dual citizens not to track their responsibilities in their other country of citizenship if they intend to visit. That doesn’t apply to you because you are solely a citizen of Canada–you did in fact give up US citizenship in 1973. You are not a dual citizen.
What are the circumstances in which you need a CLN? I don’t recall ever, while in Canada domestically, being asked for my birthplace or to show a document (eg passport) that lists birthplace. A driver’s license ordinarily suffices as ID–and it doesn’t list birthplace. You can quite truthfully assert that you are not a US person because you aren’t.
Well, there you go, Blaze!
dash,
If you think forcing American expats/emigrants to pay for stuff they don’t use or receive (the consequence of CBT) is okay, your moral compass is seriously out of whack.
CBT was first introduced by during the American civil war to punish people who left the USA as refugees. The US is still punishing people for leaving even though the civil war ended over 150 years ago.