In a new article at CNBC, Mark Mazur, assistant secretary for US tax policy writes:
Governments across the globe are recognizing the growing support for tax fairness, and with the United States at the lead, the world community is making important progress to expose these hidden financial accounts and stop offshore tax evasion.
Over the past few years, FATCA has become the global standard for fighting international tax evasion. The U.S. has partnered with like-minded governments to find efficient ways to implement the statutory reporting requirements. Progress has been substantial: The U.S. has signed intergovernmental agreements with 22 countries, and many more have either reached agreements in substance that are awaiting signature, or are well along in the process.
Read full article here: http://www.cnbc.com/id/101452453
@Publius
GC holders inside & outside the US are caught in this web. Never thought the gov’t would help in our old age… so we hoarded every cent for our next generation & old age. We paid what we owed where we made it. Majority of immigrants have 2 lives… One in the US… One in the old country.. We were never told to list & place a value on stuff that we had prior to or after the GC there. Homes & etc that are not considered inherited but pass through the generations. How does one calculate a value of a home or whatever in the old country that has been in the family for many generations, owned by multiple people, or after a wars… In the US… its all clear cut… it is not in other countries… wills… what the heck is that… to get property back after wars… u just have to figure a way to prove your family owns it by having elders vouching or something… deeds… I am sure all is worried about that when fleeing a war torn country. Heck… we can’t even find some of the relatives that passed because the tomb stones where used to build other things… All this has done is bring forth a deep hate for the US who is stealing what we own… nothing made in the US… what right do they have to it? Sorry about being long winded… but it makes me furious when it assumes its a minor problem… mentioned in passing
Treasury just tweeted abt. this article and nine others retweeted and favoured this. Expect backlash commenters with similar propaganda type remarks.
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My feeling here is that the USA needs all the “obedient” reports such as this one to sell Fatca. The truth seems to be simple. The world is not buying. The USA seems to think the world is stupid and will fall into their trap. I honestly think the world will send a clear message to the USA. No to Fatca. Our own government was overpowered into this forced agreement under “threat”. The world watches and the smart country leaders know what the USA wants. It will be interesting to see this play out as the USA net worth dwindles to nothing and another currency takes the lead. Maybe the next currency will be from a country that is trusted. The USA has lost ALL trust around the world for this action. The Canadian government simply caved under pressure and really felt it had no choice. Our representatives were told to shut up about the IGA and to avoid answering ANY questions by those impacted by the US laws allowed into Canada. For this, we do not trust our own government even more than we did in the past. This is not the first “scandal” as we know. Nobody goes to jail for stealing from us in the Canadian government. The focus in Canada needs to change and fast. We need to force the laws of parliament to change to make our representatives responsible for their actions both morally or criminally. We vote them in based on lies, then they destroy our country and there isn’t a god dam thing you can do to stop them. We are now proving there might be a way to stop them this time…. Thank you for all not being “sheep” Canadians. I don’t care where you came from to be Canadian, I’m glad you are here and doing your part to protect us all from other AND our own government.
TomHunter thinks FATCA is AWESOME. He comments to this article yesterday:
FATCA is one of the greatest things to happen in years.
A large percentage of the richest Americans have been benefitting from living in the United States while externalizing the costs to other taxpayers. The rich like to whine that they pay the most income tax but that is only in theory. In fact, they illegally evade taxes by using secrecy jurisdictions such as the channel islands, crown dependencies and a variety of other places where they can scam out of paying their taxes.
Going back to 1986 when Reagan plugged the gap caused by his huge tax cuts by doubling Social Security withholding, a large portion of the US budget was actually paid by the non wealthy. (Recall the SS withholding cap at $106K.) Added to the reality that vast portions of SS withholding is diverted to pay for the regular budget–and that not a dollar above $106K is taxed for SS–and it becomes clear that the common right-wing nonsense about the bottom 47% not paying for the US budget is a myth.
FATCA is awesome because it is a law with actual teeth, online in July of 2014, that will start to fight back against the tax evasion that occurs in places such as the Caymans, BVI, Bermuda, Jersey/Guernsey/Isle of Man and the worst island of tax evasion–Manhattan.
If all Americans stopped paying taxes–property, gas, social security, sales and income–the many benefits the rich take advantage of would not get funded and they would find it much harder to achieve or maintain their wealth. The people who oppose FATCA are just unpatriotic, tax-evading criminals who want to benefit from living in the US without paying for it. FATCA is awesome.
ANTIDOTE to Levin and Mazur’s claims:
Read this:
http://www.acfcs.org/us-senate-panel-cites-fatca-loopholes-swiss-barriers-to-us-tax-enforcement/
‘US Senate panel cites FATCA ‘loopholes,’ Swiss barriers to US tax enforcement’ Date: March 5, 2014 By: Brian Kindle
“…..FATCA loopholes are minuscule part of US tax evasion, say experts
Some experts on US tax enforcement were skeptical of the PSI concerns over FATCA’s limitations, saying they were minor aspects of a law that introduces sweeping changes in global tax compliance.
“I’m not sure there’s ever been a law passed by Congress that someone didn’t think had loopholes,” said Jeff Neimann, a former Justice Department prosecutor who led the UBS case and is now a partner at Marcus Neiman & Rashbaum, in Fort Lauderdale. “The reality is, FATCA is a very burdensome law.”
Others noted that despite the level of attention offshore tax evasion at Swiss banks had received, the amounts of money at stake were comparatively small, compared to domestic tax evasion.
A former senior official at the IRS, who requested anonymity because he practices before the IRS, noted that small businesses in the US are estimated to evade some $200 billion in taxes per year. This contributed by far the largest portion of the $450 billion US “tax gap” in 2013, or the difference between taxes owed and taxes collected.
“Tax enforcement is always a little bit of smoke and mirrors,” the former official said, noting that IRS lacked the manpower to audit and recommend for prosecution even a fraction of tax evaders……”…..
The 2013 IRS Databook, which covers calendar year 2012, is available. The amount of gross collections for individual “International” taxpayers shows an increase for 2012 versus most previous years while the number of tax returns filed by International taxpayers for 2012 continued its general decline versus previous years:
Year Gross Collections – International Total:
2012: 7.5 billion
2011: 6.8 billion
2010: 6.9 billion
2009: 6.6 billion
2008: 8.5 billion (!)
2007: 7.0 billion
Tax returns filed for individuals – International:
2012: 218’196
2011: 226’531
2010: 238’232
2009: 242’279
2008: 234’733
2007: 124’311 (!)
Meanwhile, US State Department’s statistics indicate that the number of Americans living abroad has been increasing rapidly:
May 2013: 7.6 million
Jan 2013: 6.8 million
2011: 6.3 million
2009: 5.3 million
Please feel free to draw your own conclusions on the data presented above.
To summarize the above IRS data:
1) There was a $700 million increase in IRS gross collections from individual “international” taxpayers for 2012 versus 2011 (and versus roughly flat collections for 2009 and 2010).
2) After peaking at 242,000 international taxpayer tax returns in 2009, there has been a 14,000 decrease in tax returns filed by international taxpayers in 2012.
A possible interpretation:
1) The international taxpayer awareness campaign launched by the IRS several years ago, including information about FATCA, is resulting in higher collections from international taxpayers.
– The $700 million increase is indeed similar to the $680 million in higher annual collections estimated by FATCA proponents (although the amount is likely coincidental when considering the “back of the envelope” approach used for the FATCA estimate).
– Some of this increase could also come from USCs backfiling and amending returns in conjunction with their expatriation.
2) The declining number of international taxpayer returns filed may be related to USC expatriations, which I estimate have been running at 6,000 to 8,000 annually in the past several years (and were few before 2009/ 2010).
– Since the number of “green card” abandonments is relatively flat at around 14,000 per year, per Shadow Raider’s FOIA information, they can be factored out as explaining the tax return filing decrease.
3) I recognize that the decline in international tax returns submitted does not square with the apparent increase in the number of Americans residing abroad. One explanation might be that the level of compliance by international taxpayers is decreasing in spite of the IRS’ awareness campaign!
A deeper understanding of the causes for the increase in collections and decrease in tax return filings might be possible with detailed rather than consolidated data. This unfortunately is not available in the IRS Databooks.
Incidentally, the Winter Statistics of Income bulletin (just released) shows that the number of 2012 individual returns with Foreign Tax Credits rose by only 3.1% vs. 2011, but the dollar value of FTCs is up by 33%. In other words, there’s either a lot of high income earners taking FTCs for the first time, or existing FTC users have seen large increases in income.
http://www.irs.gov/file_source/pub/irs-soi/14inwinbulincomeprlim12.pdf
By dollar value, 5/6th of FTCs go to returns with AGI greater than US$250k, but even among that group with AGI above US$250k, the average amount of the FTC is only ~US$11k, suggesting that these are mostly Homelanders with a bit of foreign income, rather than emigrants who already paid taxes to the country in which they reside. So this may be a bit of a stretch, but between this and Innocente’s observations, I’d conclude that wealthy Homelanders are busy getting into compliance in preparation for FATCA, while middle-class “U.S. Persons” abroad for the most part have no clue what’s about to hit them.
@Eric – thanks for the FTC data and interpretation. Someone once said that the only Americans abroad fully US tax-compliant are the corporate expats whose companies pay Big 4 accounting firms to prepare their tax returns while they are on temporary foreign assignments. The implication is that even if other Americans abroad try to comply that their less-expensive, non-specialized accountants or TurboTax won’t get it right because the accountants won’t know which questions to ask for the emigrant’s particular country and probably haven’t read the tax treaty anyway.
The IRS Databooks classify gross tax collections from international taxpayers into two categories: 1) Tax Withheld and FICA (social security) and 2) Tax Not-Withheld and SECA (self-employment social security). International employees who have taxes withheld and/ or pay social security would normally be temporarily working abroad and remain on US payroll (or are temporarily on non-US payroll but continue to pay into social security for up to five years). International employees without tax withholding (and possibly pay US self-employment social security tax for those self-employed without a totalization agreement) would likely be the middle-class US emigrants or those temporarily working abroad on local contracts. This second group would be the ones most at risk of non-compliance including non-filing.
Let’s look at relevant data from IRS Databooks:
Gross Collections – No US tax withholding/ SECA (“US Emigrants/ Local Contracts” category):
2012: 3’548’573
2011: 3’102’952
2010: 3’234’400
2009: 3’128’050
2008: 2’868’356
2007: 3’082’107
Gross Collections – US Tax Withheld/ FICA (“Corporate Expats” category):
2012: 3’983’440
2011: 3’723’937
2010: 3’686’019
2009: 3’452’191
2008: 5’614’419 (!)
2007: 3’872’062
An interpretation of the above data is that US emigrants/ Americans on local contracts became more compliant in 2012 as evidenced by their paying in $446 million more in US Federal taxes and SECA than in 2011. Another element could be that their incomes (or declared incomes) increased from 2011 to 2012. Corporate expats also paid in $260 million more but, since they are generally considered to be US tax compliant with their Big 4 support, this increase could be more a function of more expats being sent abroad as the world economy improves.
The thought that US emigrants/ Americans on local contracts became more compliant does not, however, align with the decrease in total number of tax returns filed in 2012 vs. prior years and the DOS reported increases in Americans living abroad. Your comment that middle-class USPs abroad may not know what is about to hit them is well taken.
“middle-class “U.S. Persons” abroad for the most part have no clue what’s about to hit them.”
So true… And they won’t know for another year and half or so, when the first batches of data are going to be sent. They might be ticked off IF their bank notify them that their financial info is going to be transferred or ask them to clarify their US personhood status.
It seems that the rules are not clear about that and depend on the privacy legislation of the foreign country.
I wonder what’s going to happen to those millions of non-compliant people…
Any bets on what the IRS is going to do once they start getting data?
@ noone
What’s the IRS going to do? Well maybe it will arrange for my arrest at the border. Oh wait … not going to work because I’ll never be at the border. If Shelley Ann Clark (FTA whistleblower) is correct that Canada’s fate has already been determined (i.e. absorption into a North American Union) then the border will be a state border and my fate is sealed too — oh, oh. Actually I think that the FATCA monster will get swallowed by a giant GATCA boa constrictor and then we’re all in for a very bumpy ride.
I just noticed that T.H. tried to get the last 289 words in on that CNBC article so I upped the ante to 618 words. Poor T.H. the harder he tries, the more we get motivated to write more and more and more. He just doesn’t know how much stamina our tennis shoed Flaherty protesting moms have for instance.
@innocente, eric et al…….
The average tax collected per international return is $30,000 plus. To owe that kind of change as an ex-pat you have to have a good income after the income exclusion, housing exclusion and any local tax paid.
So who are those people? You nailed it my friend, they are ex-pat employees on assignment for less than five years who fully intend to go back “home” and as part of their fringe benefit package have back office accountants who do their returns for free. They are not Brockers……
I believe the State Department of seven million plus ex-pats BUT do those ex-pats consider themselves US American? It is ABSURD for a Canadian in Canada with clinging US nationality to think of themselves as a US Citizen!
Who will be hit the hardest? Yes as you guys state middle class Americans but especially those who have lived overseas for decades, really do not plan on going back BUT have never claimed a new nationality. I run into people like that all the time. They are going to be hung out to dry, especially emotionally.
@Innocente, The number of tax returns that you wrote is not from US citizens abroad, it’s the number of self-employed returns from residents of US territories (see footnote 13). Instead, check the much more detailed data here. The number of returns from “other areas” (outside the states and DC) is about 1 million and has been increasing every year.
I also found this UN report that shows the number of international migrants from and to each country. It shows about 3 million people from the US living in other countries in 2013. It seems that these numbers only include migrants so people such as dual citizens by birth are not counted, but I don’t think that the total number of US citizens abroad can be much higher. I think that the Department of State has been grossly overestimating the population.
@Shadow Raider: I’d hesitate to jump to conclusions from the UN migrant stock estimates (or methodological cousins like the Global Migrant Origin Database). They’re based on a hodgepodge of misinterpreted destination country statistics, in many cases destination countries which have no reliable immigration department statistics at all and have had to extrapolate from vaguely-related census questions.
And even in the cases where the destination country immigration department has very good statistics, the UN numbers do not match them at all. In some cases this looks like the statistics are merely out of date (e.g. Canada says it had a foreign-born population of 6.8 million in 2011, but the UN puts it at 4.5 million), but in other cases the UN simply makes no sense whatsoever. For example, the UN claims there’s 49,507 “migrants” in South Korea (Table 1, Cell G101). This is complete nonsense for any definition of “migrant” no matter how restricted, and the UN definition claims to include any “person living in a country other than that in which he or she was born” (here at p. 4). South Korea already had 1 million foreign residents five years ago, and more recently that number has hit 1.5 million.
Conversely, the U.S. is not the only source country whose diaspora population estimates contradict the UN migrant stock stats. Again I’ll use South Korea as an example because I’m reasonably familiar with their government’s diaspora statistics, and I’m confident in their accuracy at least to within an order of magnitude (because of the administrative ties between parents’ resident/non-resident registration, tax status, and sons’ military service obligation). They plain old don’t agree with the UN stats at all, and again it’s obviously the UN stats that don’t pass the smell test. E.g. if you walk around Manila you can tell from the number of Korean churches & banks and ESL tutorial schools with Korean signs that there’s a huge number of South Korean expats living there, and the South Korean government indeed reported about 88,000 Koreans in the Philippines in 2013 (source, search for “필리핀” in the PDF file). The UN stats say there are 614 South Korean migrants in the Philippines (Table 1, Cell FT109). To put that in perspective, the director of the Instituto Cervantes in Manila says that his school alone has 11 times that many Korean students there learning Spanish (!!!)
Okay I’m an idiot, I was looking at the wrong table, but looking at the right table doesn’t make it much better. E.g. Philippines is claimed to have only 3,257 South Korean residents Table 12, Cell FT 109), and South Korea is claimed to have only 550k foreign residents, again both of which are gross underestimates (by 27 times in the former case if you believe the South Korean government).
Correction 3: I’m still an idiot, the right right table is table 10, but it still underestimates the South Korean diaspora population in the Philippines by an order of magnitude, and like I said earlier I’m far more inclined to trust the South Korean government statistics. I’ll shut up before I make any more mistakes.
@Eric, Thanks for the information. I found other errors. The UN report says there are only ~2,800 Americans in India, while the Indian government itself says that ~42,000 Americans registered as residents there just in 2009, and not even counting those of Indian origin. Compare with the number of Americans shown in the report for Bangladesh, ~45,000. Also, the report says there are ~600,000 migrants in Brazil, but the Brazilian government itself says there are ~939,000 foreigners with permanent visas, not even counting naturalized citizens. So yes, the UN report is definitely wrong.
According to the Department of State, there were ~13.5 million US passports (and passport cards) issued in fiscal year 2013, but if you add the numbers issued per state (plus DC and territories), the total is 12.1 million (for the same year). I conclude that the remaining 1.4 million were issued abroad. Since US passports are valid for 10 years, that would imply a population of Americans abroad of 14 million. And that’s just those who get US passports abroad. Or maybe I’m extrapolating too much.
Anyway, whatever the real number of Americans abroad (even considering the low estimates), their compliance rate with the US tax system is ridiculouly low. I estimate about 15%. And what amazes me even more is that the number of people writing in these websites, sending comments to Congress, or members of diaspora organizations, is not more than a few thousand. I understand that most people don’t want to engage in such activities, but the disparity is just too great. Even the number of renunciations, from the IRS or FBI, is way too low. It will be a real change of course if FATCA finally wakes them up and increases the numbers dramatically, but I’m not expecting much.
I think it is safe to say that most long-term expats will try to duck and cover rather than renounce or relinquish out of fear of potentially opening themselves up to compliance problems and/or the exit tax.
Without such fears, the numbers of renunciants and relinquishers would most likely already be on a much higher trajectory. Many expats are not necessarily keeping US citizenship because they want it, they just haven’t figured out yet how to get rid of it without creating more problems than they already have.
For many expats, solving the problem of US citizenship is like the dilemma of having cancer. Which is more dangerous, the cancer or the chemotherapy?
> It will be a real change of course if FATCA finally wakes them up and increases the numbers dramatically, but I’m not expecting much.
It’s all going to depend if their banks shuts them out, and how many renunciations the US is going to allow per year (either knowingly, or by limiting resources at consulates).
Either way, it’s not looking good for Americans Abroad. Most of them don’t know about their requirements.
Let’s wait and see how the IRS informs them once their name is transferred.
A recent article says that the IRS doesn’t have the resources to do much about the data they expect to receive.
http://www.bna.com/no-reprieve-upcoming-n17179889057/
Koskinen says “it is a learning curve for the IRS as well, and it will take time for the IRS to explore ways to effectively use the information.”
@Shadow Raider
Thanks for critically reviewing my analyses and determining that the definition of “International” used in IRS Databook, Table 9a: “[13] Includes Forms 1040–PR (self-employment income tax return for Puerto Rico residents) and 1040–SS (self-employment income tax return for U.S. Virgin Islands, Guam, American Samoa, and the Northern Mariana Islands residents). Table 9a data was incorrectly described as “Tax returns filed for individuals – International” in the above analysis.
Table 5 data, which is also used in the above analysis for the values, lists three types of “International” taxpayers:
“U.S. Armed Service members overseas and Territories other than Puerto Rico
Puerto Rico
International”
I continue to assume that “International” in Table 5 (mostly) includes USPs filing from abroad and that this data is meaningful for the analysis.
The link you provided for “Individual Income and Tax Data, by State and Size of Adjusted Gross Income” shows Foreign Tax Credit returns filing as increasing for “Other Areas” (see definition below):
2011: 162,173
2010: 148,825
2009: 131,881
This trend possibly indicates that USPs abroad have increased compliance with the diaspora tax filing requirements in view of the IRS information campaign and threats.
Table 4: Other Areas definition: “[18] Includes, for example, returns filed from Army Post Office and Fleet Post Office addresses by members of the armed forces stationed overseas; returns filed by other U.S. citizens abroad; and returns filed by residents of Puerto Rico with income from sources outside Puerto Rico or with income earned as U.S. government mployees.”
If this Other Areas data indicates that USPs abroad have increased their compliance, my conclusion could be tentatively updated as:
An interpretation of the above data is that US emigrants/ Americans on local contracts became more compliant in 2012 as evidenced by their paying in $446 million more in US Federal taxes and SECA than in 2011. Another explanatory element could be that their incomes (or declared incomes) increased from 2011 to 2012. Corporate expats also paid in $260 million more but, since they are generally considered to be US tax compliant with their Big 4 support, this increase could be more a function of more expats being sent abroad as the world economy improves.
The expectation that US emigrants/ Americans on local contracts became more compliant appears to align with the increasing number of Foreign Tax Credit forms filed for the period 2009 to 2011.
Eric also pointed out that IRS data for 2012 shows an increase in number of FTC forms filed of “3.1% vs. 2011, but the dollar value of FTCs is up by 33%”. This increase is based on ALL FTC forms filed, including taxpayers residing in the US, and is not restricted to Other Areas (or only USPs). Still, this increase would align with my expectation of improved diaspora tax compliance.
@Shadow Raider, Eric:
The AARO breaks down the number of Americans abroad into geographic areas, indicating that 1.6 million Americans live in Europe, based on late 2011 DOS data.
To test this figure, I used 2013 Eurostat population data listing Country of Birth: United States. The total, which excludes several important European countries such as Germany and France was 518,722 for 2013. I then obtained citizenship information for residents of Germany and France from another Eurostat population database, showing Americans in Germany at 115,058 (2013) and France at 31,251 (2005, most recent available). This results in a calculated total of 665,031. If Americans in other non-reporting countries such as Portugal, Greece and various small countries were included, perhaps we could get to 700,000, which would be 900,000 less than DOS statistics provide.
http://www.aaro.org/about-aaro/6m-americans-abroad
Eurostat tables:
“Population by sex, age group and country of birth”
“Population by sex, age group and citizenship”
http://epp.eurostat.ec.europa.eu/statistics_explained/index.php/Migration_and_migrant_population_statistics
Reasons for the large difference are welcome.
Another source of migration data I recently ran into while wasting time on Reddit:
http://www.global-migration.info/
http://www.global-migration.info/Data%20on%20the%20global%20flow%20of%20people_Version%20March2014.csv
FWIW it says that a total of about 1.9 million people changed their residence from the US to another country from 2005 to 2010, vs. ~1.6 million in 2000 to 2005. This includes immigrants & expats returning home, as well as natives emigrating to other countries. The top 10 destination countries for 2005–2010 were Italy (260k), Mexico (190k), Spain (190k), the UK (140k), Germany (110k), Canada (96k), Israel (65k), Switzerland (48k), Turkey (47k), and Kazakhstan (41k).
I havne’t had time to do a full sanity check on this data, but from basic eyeballing, some things look mildly ridiculous (like the claim of zero movement from the US to Puerto Rico in the past 10 years, or only 130 to HK in that same period when we were granting 3,000 work visas per year to Americans).
There is a German crowd-sourcing organization, VroniPlag, that reviews dissertations for evidence of plagiarism (http://www.vroniplag.de/startseite.html). It has been successful in detecting plagiarism in dissertations written by several German politicians who then resigned including:
Karl-Theodor zu Guttenberg, former Minister of Defense
Annette Schavan, former Minister of Education
Silvana Koch-Mehrin, former chairperson of the FDP in the European Parliament
News medis are reporting today that the dissertation of Gerd Müller, the German development minister, is under review:
http://www.thelocal.de/20140409/german-development-minister-gerdmueller-faces-plagiarism-allegations
Mark J. Mazur, Asst Treasury Secretary for Tax Policy, wrote a dissertation “Three essays on income tax progressivity” for his PhD at Stanford, published in 1985. It is apparently available at the Stanford University library only. I would like to obtain a copy of it to submit to VroniPlag for their review. Is there anyone who would be willing to go to the Stanford library to obtain a copy and forward it to me?
http://searchworks.stanford.edu/view/10022917