Cross-posted from The Flophouse. Also, just for fun (and because my mom bugs me about keeping the bloghouse tidy) I updated the page of Flophouse posts, articles, interview and links on the page called The American Diaspora Tax War of 2012-2014: The fight against FATCA and citizenship-based taxation. Anything up there, folks, is all yours if you want to quote or repost.
I think it is fair to say that the face of American emigration/expatriation today is Eduardo Saverin. That is the name that consistently comes up when I talk with homelanders about Americans abroad and our relationship to the U.S. tax system. This is the face, the poster child if you will, that supports the narrative that Americans abroad have all fled the US to escape taxes. That’s right, folks, American emigration is all about criminal behaviour unless we can prove otherwise to the satisfaction of our compatriots.
How powerful is this narrative in the homeland? Powerful enough that two senators tried to get a law passed based on that one highly publicized case. The bill, called the ex-Patriot act, was introduced in reaction to Saverin’s renunciation and had a very clear objective: it was mean to punish past, present, and future expatriation – to prevent (or at least strongly discourage) Americans from leaving the US for other lands and cutting their ties to the American political community.
The first goal seemed to resonate with the homelanders since they are still talking about how ungrateful Saverin was and how he got away with something. The millions he paid to expatriate (yes, Saverin paid the Exit Tax – the tax on emigration) seems to be either forgotten completely or dismissed as a mere token amount that did not sufficiently compensate the US (and US taxpayers) for the benefits he received as a US citizen.
It was the fact that the Exit Tax and all the other ugly aspects of US emigration policy like the Name and Shame list (1996 Reed Amendment) are not turning out to be a sufficient deterrent that three senators decided to up the ante with a law that would, in addition to the stiff Exit Tax, banish these expatriates forever from American soil. Senators Robert Casey (D-Pennsylvania), Jack Reed (D-Rhode Island) and Charles Schumer (D-New York) introduced the act in 2012 and in spite of all the headlines it generated, it didn’t go anywhere. That didn’t stop them, however, it just slowed them down for a few months. According to AngloInfo they reintroduced their proposal hidden inside a 2013 immigration bill which just goes to show that these fellows are deadly serious and if they can’t get what they want openly, they are perfectly happy to do so by stealth.
With all the anger over emigration and expatriation in the US, why didn’t this bill pass? I don’t think it had anything to do with the right to expatriate that is enshrined in international law since the US Congress has never shown that they give two hoots about that. It was the possible impact on Americans living in the U.S. that I’m pretty sure was the deal-breaker.
Homelanders suffer from a two delusions relevant to our discussion. One is that every American is simply a “temporarily embarrassed millionaire.” The other is that Americans living abroad are all living the good life outside the US. “Good life” is a very nebulous concept but if you listen to the homelanders carefully you’ll hear them place so many of their personal yearnings and desires into that term and it can be anything from security, opportunity and better health care to personal growth and adventure. One way to look at it is that it is an expression of all the things that they think they can’t find or can’t have in the United States.
The vast majority of Americans may never ever leave (many Americans don’t even have passports – the esseential document that makes leaving any country possible) but they still dream emigrant dreams. How else to explain their eagerness to buy books about Americans restoring old stone farmhouses in Provence or life on the beach “Down Under” or retirement in Belize/Mexico/Thailand any of the other autobiographical adventure tales that do very well back in the States? And every American who lives vicariously through these stories feels the tug. “That could be me,” he or she thinks before coming to his senses and listing all the reasons why it just isn’t possible “right now.”
But perhaps, once relieved of the “temporary embarrassment” of limited means, it could happen. In any case, the idea that there might be impediments to leaving the United States (whether that means just taking a trip, settling permanently outside the US or renouncing) just doesn’t sit well with Americans. Is not the “freedom to leave” the very essence of freedom? If Americans couldn’t be mobile (and global) – if they could not become citizens of other countries and choose to attach themselves to other political communities elsewhere – then they would join the captive citizens and subjects of other states who are, most agree, not free at all.
So how to explain the countervailing desires of homelanders to punish people like Saverin (and the unrelenting characterization of American emigrants as suspected tax evaders) while rejecting anything that would close the door (even partially) on their own right to emigrate or expatriate?
One answer, I believe, can be found if we look at the very different reactions to two well-known expatriations. On one hand we have Saverin who is still being vilified for leaving the US and renouncing his citizenship. In fact the anger was so high that Americans lawmakers are still trying to make political hay out of it. On the other we have another very rich citizen who relocated to Switzerland and gave up her citizenship, Tina Turner. Ms. Turner is not as rich as Mr. Saverin but she’s still up there with 200 million USD in assets (which meant that she most likely had to pay the Exit Tax).
Her renunciation was widely reported but did not generate anything even close to the outrage that followed the news of Saverins’ renunciation. The usual anti-expat suspects in the US Congress like Reed and Schumer were strangely silent about it and the US media bent over backward to say that Ms. Turner had very good reasons to expatriate (renounce) that had nothing whatsoever to do with the US tax system. Nor have I seen (though perhaps I wasn’t looking in the right places) homeland Americans calling Tina Turner a traitorous, ungrateful tax dodger and calling for her permanent banishment from the United States. In a nutshell, Eduardo Saverin was presumed guilty and Tina Turner is presumed innocent. (Or at least that’s the way it looks from where I sit.)
Why?
I will give you my take on it and then I would love to hear your thoughts.
I think Americans at home can more easily identify with Tina Turner. Here is a self-made African-American woman who did not come from great wealth and who succeeded because she is smart, beautiful and talented. She is admired and liked by millions of Americans who grew up (like me) enjoying her music. Her migration to Switzerland is portrayed in the media as something that happened by pure chance (an “Accidental migrant”) and for a wonderful purely positive reason (romance) – both of which resonate with Americans dreaming emigrant dreams. And now she intends to stay permanently and retire in her adopted country with the l’homme de sa vie. All this explains her decision to the satisfaction of homeland Americans.
Tina Turner’s migration story is, well, something Americans can actually identify with. It says that even someone who began life disadvantaged and with modest means can have the American Dream + which consists of succeeding in the US and then moving abroad to do whatever one fancies out there in the world beyond the borders of the US. (And what is even more interesting is that some Americans suspect these days that the only way they can succeed is by leaving America.)
There is just one problem with Turner’s story: it explains her migration but not her renunciation. Tina Turner could have done all of the above as a dual US/Swiss citizen. If those are the reasons Tina Turner emigrated/expatriated then she could have had every single one of them and stayed a US citizen. Clearly there were other considerations that caused her to consider cutting her ties to the US – a process that is not simple and is likely to cost her a great deal of money.
Lex parsimoniae – the downside to living abroad and being a dual US/Swiss citizen is that lifelong relationship to the US IRS that all Americans outside the US are subject to that would have affected not only her but her husband as well. It is simply defies common sense to think that the US tax system didn’t have any effect at all on her decision to renounce.
Homeland Americans seem to genuinely believe her (or her lawyers) when they insist that the US tax system wasn’t a consideration but they don’t find credible Eduardo Saverin when he said of his renunciation: “The decision was strictly based on my interest of living and working in Singapore.”
Two faces of American emigration/expatriation and dare I say it? Deux poids, deux mesures.
It was indeed a bank in Switzerland. But not a big name bank – this is the post office bank (like the one in France). Now I’ve seen other waivers of confidentiality (and this one refers to FATCA) but this case also has a Declaration to Certify Compliance with Tax Obligations which is very open-ended (relevant tax authorities it says and does not cite one country). And in addition to having to sign these two documents the bank proactively froze her accounts (all except her checking) until she could provide the FBARS and proof of submission. She had just a few weeks to gather all the info. I’ve never heard of that happening and I found it very chilling.
Last night I was at an AARO event and I asked one of their lawyers about it and he said there was NOTHING in the agreement between the US gov and Swiss banks that calls for that kind of behaviour on the part of the bank. So why did the bank do it? No idea.
Yes, if this were the EU I can’t see it happening. I don’t know enough about Swiss law to know if she has a case and under what law.
Moving to France, I’m hearing from duals (Franco-Americans). Lot of duals are sitting tight and not doing anything (not filing, not bringing any attention to themselves). One fellow I spoke to said, “I’m French and I’m only French in France” so he wasn’t worried at all. Others are concerned but have a lot of faith in the French Republic – France is known for protecting its citizens. A letter I was sent from one Flophouse reader from his/her bank seems to indicate that some banks are indeed taking that path. The person asked the bank directly if he/she fell under FATCA and the bank answered, “This is only for Americans and French living in the US” and therefore none of this applies to you. This person is French/American.
I’m watching this very closely. The signs (the tea leaves I’m reading) seem to point toward dual nationality having a protective effect in some places. That would make sense. So does that mean that the best First Step for any American living abroad right now is to apply for citizenship ASAP in the host country? And then sit back and watch what happens. Is this already the strategy of choice for those who aren’t quite ready to renounce? Looks like it.
@Victoria, “So does that mean that the best First Step for any American living abroad right now is to apply for citizenship ASAP in the host country? ”
First, thank you for your great blog. It helps with my own “therapy” and detox from the USofA.
I have said for the last decade in the EU, that its foolish to be a permanent resident you need citizenship.
From the day of my landing (already an EU national), I buried my USness as it was no longer relevent.
@Lake Superior ” If 98% of their business is local, they should be FATCA free right?”
I spent a whole lot of time growing up in WaWa.
Your theory is right by law but it will depend who they hire for compliance work.
You need to get Canadian Citizenship…..yesterday. Or any other non US citizenship, do you have an Irish grandparent?
@Victoria: “The signs (the tea leaves I’m reading) seem to point toward dual nationality having a protective effect in some places. That would make sense. So does that mean that the best First Step for any American living abroad right now is to apply for citizenship ASAP in the host country?”
I agree that taking out your host country’s citizenship should help to offer resident USCs protection against FATCA and their bank. The situation for duals with US citizenship in Switzerland is schizophrenic. The Swiss government views a dual as being a Swiss citizen only. The banks see duals the same way, except for USC duals, which they consider as being first and foremost a USC.
The Swiss nationalists sometimes use a derogatory term for naturalized citizens, “Papierschweizer” (literally, “paper Swiss”). This term fits the second-class status of USC duals here regarding their relationship with banks.
There was a post on an expats’ blog of a Belgium bank freezing bank account until proof of compliance.
We have a disease.
@Victoria
“…. So why did the bank do it? No idea.” I can tell you why.
I’m the OP of the thread on the englishforum called “PostFinance demands past FBAR’s”.
The reason they are asking for proof of filing past FBARs has NOTHING to do with FATCA. The DOJ has offered the Swiss Banks a special deal in which they can “Buy” their freedom, if you so will. Swiss banks will have to pay a fine for EVERY US person that they have as a customer unless the bank can prove to the DOJ that the US person is tax AND FBAR compliant. They even get of the hook if they can prove that they persueded the US person to take part in the OVDI or is it OVDP not sure anymore 🙂
For more info google “Joint Statement between the U.S. Department of Justice and the Swiss Federal Department of Finance”
Here are two nice links to the “Joint Statement….” that I previously mentioned.
http://www.justice.gov/iso/opa/resources/7532013829164644664074.pdf
http://www.deloitte.com/assets/Dcom-Switzerland/Local%20Assets/Documents/EN/FSI/ch_en_US_Programme_September_2013.pdf
@Victoria ” “This is only for Americans and French living in the US”
That is how it should work and there would be far less complaints.
When I look at the IGA (UK and Canada), with the carve out for local client base it appears that at least “one mind” who penned the document was thinking just that.
Any idea if the French bank referrred to was a local bank or a transnational?
@Innocente, The Swiss nationalists sometimes use a derogatory term for naturalized citizens, “Papierschweizer” (literally, “paper Swiss”). This term fits the second-class status of USC duals here regarding their relationship with banks.
Thanks for that lesson! We can quote that in our letters to politicians in our home countries to show just how racist this matter of “indica” is.
“Ich bin nicht Papier_________”
@Victoria – OMG, this IRS and Justice Department is totally narcissistic and on steroids. Thanks for keeping us aware of what is going on across the pond!
@Brockers…..OMG OMG>….. the links posted by Uncle Tell give me the heebee jeebies….
@Georgethank you sooo much for the concept of “papier Schweizer”. how would that translate in British English-
“oh, so sorry , do excuse me writing to you, but really I would just like to draw to your attention the racist and illegal matter of US indicia for banking discrimination by national origin.
please find links to documentation (albet anecdotal) XXXX banks inUK who are currently indulging in this behaviour (where the Sep 2012 IGA subseuqnetly enacted in S 202 of FA 201X direclty contradicts the ECHR to whic hUK is a signatory (even if Uk constantly tries to abrogate/derogate some of the provisions)))
I sure you would be kind enough to write to my ex congresscritter , (since I have renounced since becoming UK citizen) witthout revealing my details, making very very clear your personal and the UK coalition commitment tothe principals of RBT fairness.
as even the Tory mayor of London migth be subject ot FATCA, I very much hope that the Hon Mr Cameron’s govt would feel able to support the 100s of thousands of ordinary British people who have clinging US nationality ”
maybe…. the above is a fantasy document but hey-we all need ways of venting!!!
all-stay well, stay strong, stay sane….. we are in for the long haul and I will support ADCS to my last free penny that I can save from my wages.
@crystal london:
“Papierschweizer” might also translate as a “Passport Swiss”. So, in Canada, dual USCs, even if born there, might just be “Passport Canadians”. Or “Canadians of convenience”:
https://en.wikipedia.org/wiki/Canadians_of_convenience
@ George, Thank you. I’m glad the blog helps. It’s been good therapy for me too. I’m brushing up on my language skills here – before I can apply for citizenship I have to take a language test. The spoken part is no problem – it’s the spelling. Thank God for my French spellchecker or I would never write anything in French.
@UncleTell: I am speechless. What a load of horse s@#$.
“Congresscritter”? What a wonderful wonderful word. Can I steal it? 🙂
@Victoria, I will be praying for your written language skills and that you will soon be a citizen of the French Republic.
@All, yes thats another term we can deny, “I am not a Canadian of Convenience.”
@Victoria-like George ……. I too am beseeching the Great Person upstairs for your French language test results……. I am sure you will do FAB..my UK citizenship exam in 2012 was the most difficult thing i did since my finance exams in the 1990s!!!
re: “congresscritter” we cant claim credit for this…. have seen this term in some of the more passionate posts on IBS in last 2 years
stay well, stay sane…. brockers (like your family but very distant to them) need you…..
@George
“From the day of my landing (already an EU national), I buried my USness as it was no longer relevant”
I wonder if you also find it amusing the attitude of some homelanders have regarding the blue book, as if it is some universal advantage. I was only able to even apply for my current and last jobs by being British. Fully assimilating into British life and being a full citizen of my adopted country is what has always helped me. Anyway, with my kids born to a British-born mother and brought up here it makes it loads easier to just assume a British identity and think of ourselves as a solely British family. And as far as I am concerned, that is what we are. It is my understanding that I relinquished years ago when I made my Affirmation of Allegiance to Elizabeth, Queen of Scots, in front of the Union flag and Saltire (one of the happiest days of my life)