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 has been a great thread – 200 comments later, it seems to me that what the debate is really about with respect ONLY to the issue of CBT, is morality vs. law.
Many commenters believe that there is a moral aspect to taxation and that CBT is immoral. Some have used words like financial “rape”, and the like.
@Dash is NOT considering any of the moral aspects of CBT as a “matter of general principle” (although he does acknowledge in his first comment that CBT as practiced by the US is “evil”). With respect to CBT as a “matter of general principle”, he is saying that it is the law and that it is YOUR FAULT for NOT knowing about it (notwithstanding the ridiculousness of this assertion). Furthermore, at no point does he examine what CBT might actually (in terms of requirements) include. (Many of the requirements have nothing to do with taxation but are clearly related to life control.)
The message is: It’s YOUR FAULT that you were raped. Not the fault of the rapist. I have seen this line of reasoning in another context (come to think of it in the context of rape).
That’s what the 200 comments come down to.
I might add that (as you can tell “I agree to disagree with Dash”), his perspective is very very important to understand. Those making submissions to the Senate Finance Committee need to take careful note. I believe that Dash has clearly articulated an important perspective on CBT. For that, we owe him a strong “Thank You”. He has demonstrated how others do/may see this issue.
Much of this comes down to whether one has actually experienced citizenship-based taxation (at least U.S. style) and therefore understand what it really is. It seems to me that:
1. A supporter of CBT is somebody who has heard of it or read about it. (Think of the recent article written by the Notre Dame law prof).
2. An opponent of CBR is somebody who has lived it and therefore understands it!
Question for Dash:
I understand that as a matter of principle you see nothing wrong with CBT. My question is:
If you could make the laws, would YOU personally impose CBT on U.S. citizens abroad?
@Dash, the situation I note re being taxed and penalized from abroad is shared by millions of those deemed to be US citizens abroad. So is my point about the restricted access to registering and voting from abroad. Therefore, my points to you are relevant regarding the US obligation of extraterritorial taxation and reporting being enforced more broadly by the US government and US political representatives than the right to vote is. Whether or not I was able to vote as a specific individual from abroad does not change that. The fact is that all the others born in states with mandatory US residency restrictions on voter registration cannot vote. But all are 100% obliged to be lifelong subjects to US taxation. Minors cannot vote, yet they can be taxed.
The US federal government eagerly enforces the obligation of extraterritorial taxation upon children born abroad who inherited US status from a parent, but does not enforce that child’s recognized constitutional right to vote in US federal elections at adulthood. The only conclusion to draw from that is that it is the US federal government that does not value the constitutionally guaranteed right to vote as it does not enforce 100% extraterritorial access to it. It allows more than half of the US states to effectively deny us that right if we do not establish some varied minimum period of US residency.
The US federal government chose to sink US taxpayer funds into enforcement of tax laws extraterritorially, but not the laws regarding our constitutional right to access the vote.
My personal circumstances are besides the point I am making, but I know from personal experience just how little help I received from the US consulate here, and from the clerk of the district I qualified to vote in while attempting to register and vote from abroad. It appeared from the indifference I encountered that the US consulate and the clerk responsible for registering voters did not value the right to vote as much as I did.
TIME: Swiss Banks Tell American Expats to Empty Their Accounts
“My U.S. passport has been such a liability,” complains one Zurich resident, as Swiss banks crack down on U.S.-owned accounts following new, strict American legislation coming into effect next year”
@dash,
You see, CBT is just peachy for expats. Why don’t you come on overseas and try it out for a while.
@ All
Just want to share a video that sheds light on the background of the Federal Reserve.
“The Creature from Jeckyll Island (G. Edward Griffin)”
I also recommend “The Khazarian Conspiracy (Full Film)The Synagogue of Satan”
and “An Honest Israeli Jew Tells the Real Truth About Israel” The General’s Son-Champion of Palestinians Rights”
http://samuelclemmons.wordpress.com/2013/12/19/mountains-of-irs-paperwork-for-us-expats/
http://samuelclemmons.wordpress.com/2013/12/19/rbt-information-residence-based-taxation/
Congresspersons Michele Bachmann (MN), Robert Pittenger (NC), and Steve King (Iowa) received those in their hand yesterday night, with a 30 second introduction, and a request to call Republicans Overseas. Steve King showed some interest.
@USCitizenAbroad
“If you could make the laws, would YOU personally impose CBT on U.S. citizens abroad?”
You are asking me what I would do if I were a benevolent dictator.
First off, I remind you that I am NOT in a position to dictate US law. In fact, I’m not in a position where I’d ever have a chance to even come close, because as a naturalized US citizen, I am not eligible for the presidency.
However, if it were up to me, citizenship would be a factor in determining whether someone pays US taxes, but not the only factor. For example, if someone has absolutely no financial affairs in the USA, and only comes here as a visitor, I would probably excuse such a person from paying US taxes.
For me, the key determining factor would be whether someone travels to the US regularly on business. If they enter the US regularly as a citizen for business reasons, I think they should be paying US taxes. That, IMHO, is true even if their stays in the US are fairly brief and would not trigger US taxation if they were not a citizen. Such a person is gaining financial advantage from their US citizenship and should IMHO be paying taxes.
For example, let’s say someone lives in the USA for many years as a US citizen, building up an extensive network of contacts that they could not possibly have built up had they not been a citizen with the right to live here. Then they expatriate, but continue to travel back regularly, utilizing that network to continue to make money in the USA. Such a person should IMHO be paying at least some US taxes. They are taking advantage of their freedom to come and go from the USA–not just with the limited rights of a visitor but with full privileges to do business in the USA as a citizen.
But an “accidental American” who has always lived abroad or has lived abroad since childhood should not have to pay taxes.
As the more respectful people who have responded to my posts have noted, I’m looking at this through the lens of my own experience. I know many dual citizens. Most fall into the former category–they take full business advantage of their dual citizenship, shuttling back and forth between the USA and the other country, and clearly gaining the advantages of citizenship in both countries. I see no problem with both the USA and the other country taxing them.
OTOH many Brockers may fall into the latter contact–people who have had little contact with the USA for years, since childhood, or perhaps never.
So if were in charge, I’d try to find a way to ensure that the former group pays their fair share while ensuring that the latter group isn’t harassed.
@bubblebustin
“Could your respect for the Canada-US border come from the fact that you required a visa to cross into the US, something anyone born in the US or Canada would not require?”
Huh?
Canadians do not require a visa to enter the US. Still don’t and never have. I’ve been a Canadian citizen since the age of three weeks.
However post-9/11 they DO require a passport or perhaps an enhanced driver’s license. Still no visa requirement.
However pre-9/11, as I did not have a Canadian birth certificate, I found that a Canadian passport was the easiest document to use as proof of citizenship to enter the US. Thus I needed a Canadian passport, in practice, whereas other Canadians did not. However I never needed a visa.
@USCitizenAbroad
Seems to me, though, that the real question–the analogous question to the one that others face–would be whether Canada would have any right to impose CBT on me as a dual citizen who lives in the USA.
I would suggest that, as I travel regularly to Canada on business, I would have no ethical grounds for complaining if Canada imposed CBT on me. If Canada did so, I would have a decision to make. I would need to decide if the benefits of regularly doing business in Canada–with the rights of a citizen and not just a visitor–outweigh the costs of whatever CBT was imposed. And I would make my decision–but I would have no grounds for complaint that Canada would force me to make such a choice.
OTOH if my birth country imposed CBT, I would definitely renounce, as I have no business ties there and no reason to need to work there.
Merry Christmas, Dash! I don’t suppose you could just drop it now. This debate, like the Indian woman debate, has gone on past its best before date. Brockers need to relax, enjoy the Christmas Season and regroup in the New Year to continue the fight against both FATCA and CBT. You may not like how we’re doing it but do it we must for the sake of fairness. I know fairness doesn’t count for too much in your CBT is fine world (granting some exceptions) but it has immense meaning in our CBT is evil world (well mine anyway).
Merry Christmas to all Brockers and Sand Boxers! May everyone who is still seeking a CLN find it in the New Year.
Hasta la vista Uncle Sam, you dirty old tyrant.
Let the renunciation games begin and may 2014 set a new record.
@Em
Merry Christmas to you as well. I will be happy to come back in the new year if I am welcomed back as a friend. I am trying to offer constructive criticism as a friend and hope my comments will be a bit better received when people have had some time to regroup. I agree with 95% of what people say on here and deserve to be treated with respect where I disagree.
See you in the New Year!
We can drop it until after the holidays.
@All
I just finished an interesting article that I think is worthy of Brockers’ consideration
Duff Conacher is looking to the future in politics. Inside Halton.com
Duff Conacher director and co-founder of Democracy Watch made the statement as Keynote speaker at the Canadian Club of Halton Peel.
I’m sorry I can’t share the links. My kids help me with cut and paste, and they’re away for Xmas. I’m an old dog struggling to learn new tricks. Just google Duff Conacher and you’ll find the article.
@ Disgusted
Thanks for the tip. I’ll be keeping an eye out for that new Democracy Watch website. I think “first past the post” is also an obstacle to more democratic governance. Anyway should be interesting.
@ Dash
Stirring up our little hornet’s nest is not a bad thing as long as you keep in mind that FATCA and CBT have caused many very good people to have some very bad nightmares. And there are many, many more who have no idea yet what could be coming their way.
@Dash, you bring up some interesting arguments even if I don’t fully agree. The UK actually practises a similar type of taxation to what you describe: though it doesn’t tax its citizens living permanently abroad as such, it will still tax expats who do substantial business in the UK in a manner similar to what you were suggesting would be reasonable.
I don’t fully understand it but believe they have an even less generous amount of days allowed within the UK for its Expats before they once again become fully liable for British income taxes. Factors include whether they still own property or have significant assets, including even savings accounts still in the UK; whether they have a spouse still living there; and, perhaps, most importantly, whether they still conduct business there. The qualifying days range from 180, 90, to even I think just ten business days within the UK!
Another way they can still hit Expat families is by using the additional notion of Tax Domicile which is separate from Tax residence. For example, an Expat could be settled permanently abroad and,thus, no longer an ‘ordinary tax resident’ but still tax-domiciled in the UK, which is typically determined by one’s father’s domicile. This effectively means that upon death, a UK expat’s estate would still be liable to British death duties, with their estate taxes cutting in at a mere £320,000. This death tax is a far lower threshold to the US’s $5 million threshold. Perhaps the US could adopt a similar system to the British, especially as it seems a middle way whereby the wealthy could still be liable to HMRC while enabling less affluent Expats far more freedom of mobility with less headaches; furthermore, tax compliance is far less complicated for the average person thus freeing them from the need to rely on expensive accountants and advisors.
Businesses are taxed as separate entities, based upon where the business is based. The marginal tax rate for business profits in USA is about 39%, and the rate in Sweden is 22%. Selling products and services overseas from a base at home is called exporting. More often, someone sets up a local business inside the country and pays local corporate tax. If dividends are paid, they are taxed by the tax home of the receiver.
Perhaps there is a case for a government following a person around the world on his business trips. A large government that loves paperwork could likely find a way to change national norms and existing tax treaties to enable it to happen.
Other examples are possible. Those that live in Windsor and work in Detroit, and vice versa, make their money in one country but are taxed in the country where they live, correct? The exemption is that Detroit taxes 2.5% of the income of people that work in Detroit (or that’s the way it was in 1988 anyways). Detroit is a similar model to the one Dash suggested.
Norway is more like Detroit. Anyone working in Norway will be taxed in Norway, with very few exceptions. And Norwegians who retire in cheaper housing on the Swedish side are taxed by Norway (and have a difficult time getting tax credits from Sweden).
So, if a country is hungry, there are lots of possibilities for getting more revenue.
Dash, a minor point on US CBT compliance and a comment on dual citizenship:
—USCitizenAbroad suggests that you might be one of the few who are capable of preparing a US return. I don’t believe that this is an accurate statement if, for example, you live overseas, are subject to the Obamacare surtax on investment income and wonder simply whether foreign tax credits can be used to offset this tax:
Last week, as part of doing my weekly IRS compliance homework for overseas US persons, I had a long conversation with the IRS International tax branch on this question in which we read together the final regulations on the surtax issue. IRS confirmed that the definitive answer will not be provided to US persons overseas as it now depends on the interpretation of the US tax treaty with each foreign country. I explained to IRS that I do not have the expertise to interpret the tax treaty and anyway it is only the IRS interpretation that counts (the fellow was sympathetic to my argument). IRS however refuses to interpret the US treaty with Canada and provide me with a straight answer and suggested only that I could take a chance in using foreign tax credits to offset the income– but I would have to somehow defend my position on treaty grounds if IRS challenged me and pay penalties etc if I were incorrect.
I am going to “appeal” to IRS in writing this lack of “guidance”, but my minor point here is only that the US does not make it easy to comply with CBT as the rules are often not even disclosed.
—You suggest that dual citizenship is/can be part of the problem. I agree. A practical issue however as others have mentioned is that terminating toxic US citizenship is difficult or practically impossible because of IRS penalties involved and the Reed Amendment nonsense. My recent submissions to the House W&M committee have mentioned RBT but are much more focused on changing US laws to let us leave the country humanely.
Please keep contributing to this site.
Thanks for this comment, IRSCF, and
That is all I, for one, ask. No one in the IRS or DOS seems able or willing to give straight answers to our questions. US tax and accounting professionals give conflicting advice. I think most of us do not have the expertise, spare dollars to hire professionals for advice, the strength to deal with the stress this bring us and our families.
Is this lack of effective communication and concrete answers just for fear that their answer to us will come back to somehow bite them or do they not know the answers, cannot get the answers, the clear answers do not actually exist? This is inexcusable. Many of us and our children are not in our experiences US Persons, only by some fluke of incomprehensible US law. Give us a humane way out. Let us go. Quit criminalizing very innocent people and then adding to it US obfuscation.
My concern right now is mainly for so-called ‘US Persons Abroad’ who are in such denial and will be hit with all this in the new year.
@all Last nights local news featured a PR stunt featuring PM Harper mingling with the residents of a Calgary Seniors home. It is shameful that our leader continues to offer the cold shoulder to individuals with serious concerns who are seeking answers.
-Duff Conacher (Democracy Watch) was quoted in the Oakville Beaver: “If eight per cent of the population got involved in politics, it would be enough to shake up governments and opposition parties.”….
….”The No.1 way for people to create change in politics is to write letters to MPs and MPPs Conacher said. He encourages everyone to learn an issue and “sit down and write a letter” at least once a month.
“Always include at the bottom. ‘I’m determining my vote in the next election based on your response.’ Please don’t give up on contacting the people who actually have the power to make the rules.” said Conacher ” “If they don’t hear from enough people they will ignore it until a crisis happens.”
Most of us would argue Duff on this last point . There is no doubt we have been persistent in sending a message to the Harper Government requesting clarity on the FATCA matter.
I appeal to those of you in “Brock Nation” who are movers and shakers to take the next step and enter the Political arena.
Merry Christmas to all, and to all a good night.
I’m just killing time while on hold for my telephone call with US, about the form 4368 Extension to File form that they lost, and the payment which they had already cashed prior to the date of the notice they sent me that they had not received payment. Waiting time is estimated to be more than 15 minutes.
We shared our beach umbrella today with a couple who also happened to be Canadian. We got to chatting, and I learned he is a real estate broker. Of course I used that fact to let him know about CBT and FATCA! Both their jaws dropped when I told them how our principal residence was taxed by the USG and how USP’s with signing authority over a real estate brokerage’s trust account and a condominium’s accounts must report those accounts to the US Treasury and IRS. He also wasn’t aware of the substantial presence test and believed people are ok if they spend <185 days a year in the US, and had never heard of a form 8840. At one point I had to apologize for sounding like a conspiracy theorist, it all sounded so insane to them.
Pingback: Comment about #Americansabroad and #Obamacare that deserves its own post | U.S. Persons Abroad - Members of a Unique Tax, Form and Penalty Club
@Dash
“For me, the key determining factor would be whether someone travels to the US regularly on business. If they enter the US regularly as a citizen for business reasons, I think they should be paying US taxes. That, IMHO, is true even if their stays in the US are fairly brief and would not trigger US taxation if they were not a citizen. Such a person is gaining financial advantage from their US citizenship and should IMHO be paying taxes.”
– Taxes on US source income: YES.
– Taxes on non-US source income: YES, they should be punished for doing business with non-US persons and non-US companies, particularly where they live or anywhere else for that matter.
How dare they choose to be born in the US and then have the audacity to leave? Shame on them, such people should be hunted down and made to pay their “fair share” for not staying in the US where they belong.
Congratulations Dash, you’re a real Homelander now!
@Joe, I detect sarcasm here. What makes it even harder for American citizens living abroad is that it’s almost impossible to have a US-based account. How the Hell are expats supposed to manage if they’re going to be thrown out of their local banks but not even have one in America? I suppose in a worst case scenario, they’ll have to find a way to get married to a local, even if for the convenience of banking through their foreign spouse…that’s if they’ll even be able to find someone willing to marry them…
I’ve been getting so depressed reading all this plus it’s Christmas Eve…I really need to give this site at least a few days and try to get into the spirit of Christmas but must admit it’s been passing me by this year with so much still on my mind…though I am optimistic for my own situation, I feel horror about what other expats may be facing in 2014….
The Audacity of Expats: Pursuing the American Dream Elsewhere
Such heresy must be stopped!