@CBCAllInADay interviews law Professor Michael Kirsch about his reasons for supporting taxation of #Americansabroad http://t.co/FcVL4QJIXa
— U.S. Citizen Abroad (@USCitizenAbroad) August 16, 2014
Notre Dame law professor Michael Kirsch defended citizenship-based taxation at the May 2, 2014 ACA Conference on citizenship-based taxation.
Here is a very recent interview with him. Listen carefully to his rationale.
@USCitizenAbroad
If he is so brilliant, then why is he wasting his time defending something pathetic? Why doesn’t he use his many talents for change towards justice?
If any country is going to institute CBT in the same way and in addition to the USA it should absolutely be KENYA and I will be glad to personally hand over the tax bill from the Kenyan tax authorities to our president Barack Obama.
Pres. Obamas father was born in Kenya.
@George, Imagine what a boost your proposal for retaliatory CBT would give to the tax compliance industry!
@beth thomas
you wrote “CBT is morally, ethically WRONG.
If your basing your conlusions on “its always been that way” , then why don’t we bring back
slavery and segregation. Those at one time were in the category of “always been that way”.
Your mind is obviously warped and you sound like a pathetic horn for the Treasury.
You rationale is a disgrace and you need to do some soul searching.”
Exactly… and this should be on the democratic plate… They were the ones who fought and still fighting on segregation… They have to be blind, deaf and dumb to ignore CBT.
northernstar, Yes, evidently empires will collapse from internal corruption given enough time, but never in the history of the world has there been an empire that could potentially cause worldwide destruction on the order of the United States with weapons of mass destruction.
My fear is that if the United States fears complete and total economic collapse and the destruction of their nation, who’s to say that the United States won’t adopt a “If we have to suffer the complete destruction of our way of life; we’ll just take the rest of the world with us”.
“When Kirsch speaks of the right to work in the US, well they can pay taxes on the money they earn when working in the US. While on the subject of employment, I would be interested to hear Kirsch’s view on Americans abroad being ineligible to collect unemployment, medicare, medicaid, food stamps etc while living outside the US?”
Mark Mazur, Asst Treasury Secretary, Tax Policy, (and Robert Stack’s supervisor) wrote in his 1985 Stanford doctoral dissertation that the “optimal tax rate is made up of three components: insurance, redistribution, and labor disincentive.” Although he does not define government “insurance”, it is clear that it would include such government programs as general welfare, food stamps, medical benefits, unemployment insurance, etc.
Since Americans abroad are excluded from these government insurance programs, I am curious what the optimal tax rate would be for them, based on only the redistribution and labor disincentive components.
Kirsh is pretty much a fuzzy-thinking and intellectually lazy stuffed shirt. He has very broad and fuzzy ideas about “belonging to a community” justifying tax but never focuses on what tax is, what it is used for and why we have tax in the first place. In the US, despite its in extremis civil war origins, it was in fact unconstitutional and ALL taxes contemplated by the constitution of the Founders could, by their nature, only apply to residents. If, for example, tax were something inherent in citizenship, then why is taxation imposed on non-citizens resident in the US? For a country founded on the collective rejection of taxation without representation, the whole ex-post-facto justification of the system is more than a bit rich. Income tax and the 16th amendment were passed in an era of political reaction to robber barons and extreme DOMESTIC income inequality. None of this had any intellectual foundation in any of Prof. Kirsh’s fuzzy “community” ideas. I guarantee you that not a single moment of thought or debate was directed at non-resident citizens when the 16th Amendment was proposed, debated and ultimately passed by the states. CBT was a simple instance of copying from the civil war antecedent because draftsman like precedents to work from. The civil war antecedent was both unconstitutional and clearly put in place in extremis and in reaction to draft dodging (back then, you could buy your way out of military service – the tax system simply institutionalized that dubious practice).
He is also intellectually inconsistent. He seems to consider CBT to be founded in part on continuing, voluntary membership in the community and then concedes immediately that there are huge costs (“that need to be looked at”) for those trying to un-volunteer (which puts paid to the idea that membership is voluntary) and also noting that unwitting volunteers have been awarded their unwanted and un-shakeable membership in the community because the overseas advocates of inclusive citizenship laws would make it hard to exclude from citizenship those who find the tax oppressive. He favours the principle of CBT but then freely admits it is badly constructed and all kinds of unspecified changes are needed to apply it fairly to people in places like Canada that are already paying more in tax than their similarly situated domestic counterparts..
I would suggest, Prof. Kirsh, that if you constructed an “ideal” system, you would find that it would simply not apply to anyone and would raise zero to no revenue unless it were applied so cynically and capriciously to a handful of whales as to amount to little more than base extortion dressed up in the garb of principle. If your income tax system taxes citizens AND residents in your own country, then you have to admit that all others can (and arguably should) do the same. Since the tax systems of each country are differently constructed and never mesh completely, any bona fide attempt to avoid double taxation would result in either undue complexity or outright exemption to the point where the effort put into designing the system would be meaningless.
The simple and unarguable fact of the matter is that (i) overseas citizens have exactly zero effective input into the laws which affect them – this is not merely being bound by laws that one doesn’t like, this is utter and institutional powerlessness to have ANY influence over them even if 100% of overeseas citizens voted and voted as a bloc; (ii) substantially every US law applied to overseas citizens has been drafted without any material care being taken as to the impact upon them; and (c) the net result of (i) and (ii) is a system which, if applied consistently to 100% of its intended audience, would be crushingly oppressive, bankrupting or financially destroying millions to say nothing of leaving them open to penal and other sanctions despite having, by and large, borne a larger tax burden than comparable homeland Americans.
The two concepts of FBAR and PFIC’s demonstrate adequately my point (ii) above. The statute creating FBAR’s (31 USC 53) explicitly orders the Secretary of the Treasury to draft the regulations so as to avoid unduly burdening overseas Americans and to design them to acheive the anti-money laundering anti-crime objectives. Full power to exempt countries wholesale exists as does the power to exempt “same country” reporting by long-term residents. Instead we have a “form and fine” system that costs billions in compliance costs to overseas citizens, opens them to massive and arbitrary penalties and is in no way related to the objectives of the statute. call it negligence or malice- the outcome is still injustice. PFIC’s – designed to deal with a fairly obvious tax loophole in the purely DOMESTIC context were simply imposed en bloc across the globe to all “citizens”. The fact that non-resident citizens can’t buy US mutual funds (and US residents can’t buy foreign ones) should have been obvious. Ten seconds of drafting to exempt mutual funds and ETF’s registered with any of a thousand recognized securities regulators with whom the SEC does business could easily have averted a punitive train wreck of rules unleashed thoughtlessly and with massive negative impact uniquely on non-resident citizens. The list goes on.
I would suggest that overseas victims of CBT need do no more than demonstrate – as any child could do in minutes – that THIS system is so overwhelmingly unfair and negligently if not maliciously designed as to be unable to be defended by any right-minded person hailing from a country that continues to sytle itself as the land of the free. No victim bears the burden of designing a better yoke to be placed under.
Prof Kirsh can’t defend a turd on the basis that its ingredients might be assembled into a croissant in heaven. It’s still a turd.
…which IS slavery and segregation, big time.
CBT is indefensible. I don’t (and didn’t) see evidence of brilliance in the defense of it. That might have been interesting if it had been present.
Taxation based merely on a status conferred via parentage or geography – i.e. inherited citizenship and/or accidental birthplace – with no economic connection is NOT logically or ethically defensible as a basis for taxation. It is not enough for the US to assert that those abroad are for tax purposes ‘US RESIDENTS”. Asserting something does not make it so. Asserting that we are/were in possession of or engaging in a “voluntary continuing relationship” do not make it so.
Kirsch asserts that we abroad have a ‘voluntary continuing relationship’ with the US. He mentions that evidence of that is that those abroad are ‘still holding’ it.
However, he well knows that US citizenship is not VOLUNTARY as for many it was contracted (like a disease some have said)/conferred/inherited via parentage or birthplace:
Neither is a ‘voluntary’ act on behalf of the individual, nor is it evidence of some kind of real relationship – particularly when the individual either has never resided in the US ‘community’ as an adult with legally recognized agency, or, has as an adult has chosen to leave and make a life in all significant respects elsewhere. He makes no distinction between US citizenship chosen proactively by naturalization, and that passively contracted, or that passively contracted by being born there, and CHOOSING to stay.
US law does not allow some individuals to renounce/relinquish – hence the citizenship/membership in the so-called ‘community’ or ‘polity’ (or maybe he means http://en.wikipedia.org/wiki/Politeia) is NOT VOLUNTARY as it cannot be gotten rid of:
To skewer the ‘voluntary’ aspect further, Kirsch did not and STILL does not have a defence for the situation of minors, and of those deemed legally incompetent by the State Department to understand the concept of citizenship enough to renounce/relinquish it – and so by the US own law, are prevented from giving up the US status they inherited/incurred involuntarily. If they are legally deemed incompetent to understand and exercise citizenship, then it should follow that they are unable to understand and make informed choices about some kind of intangible ‘membership’ in the US ‘community’. Community is a two way street. The ‘community’ cannot merely declare that one is a member without the individual themselves agreeing – otherwise it is more like enforced conscription – like the DRAFT – which Kirsch raised as another obligation that ‘membership’ in the US ‘community’ was justified thereby.
Kirsch also does not touch on the issue of the exit tax regime and the onerous ways in which citizenship and taxpayer status have become increasingly entwined, and barriers to expatriation have been deliberately set higher and higher – in order to PREVENT individuals from VOLUNTARILY rescinding/relinquishing their ‘membership’ in the US ‘polity’/’community’ and in fact, one can actually renounce and be recognized as having renounced citizenship by the State department – with a CLN to attest to it, yet be still considered a taxpayer for life if the IRS/Treasury demands are not satisfied. That is inconsistent with any attempt by him to cast US citizenship as one in which those affected are ‘VOLUNTARILY’ “CONTINUING TO HOLD”. For many it “continues” despite their desires and best efforts to the contrary.
Those with greencards who have left the US, and whose ‘right’ to enter and work in the US has expired have demonstrated thereby that they do not consider themselves members of the US community, and chose not to become one, yet the US considers them taxable forever if they don’t surrender the expired and now non-existent privileges in the way which the US prescribes. That is also not VOLUNTARY. It is unambiguous – they have irrefutably demonstrated that they do NOT consider themselves members of the US ‘community’, and have CHOSEN NOT to become one. Thus, the argument that US taxable persons owe a tax duty based on a VOLUNTARY membership is again very weak.
Those born dual US/Other citizens are treated somewhat differently for the exit tax and ‘covered expatriate’ provisions. If US taxation based on citizenship membership is sufficiently justified based on their US status conferred at birth, then what is the rationale for treating those ‘members’ differently?
One could also argue re Kirsch’s ‘membership’ in a community argument that the membership fees/costs/burdens are NOT PROGRESSIVE, and discriminate between ‘members’ of the ‘US community’ he posits, to the detriment of those living OUTSIDE. The membership fees/cost are not progressive, and are unacceptabley high for all those living outside the US because of the ways that all our banking and life events are treated punitively and presumptively as criminal, suspect and worthy of extra burdensome filing, penalty regimes, double taxation, etc. Due to the strictures and enforcement and penalty regime of the FBAR and other financial reporting form liabilities like the 3520, and the PFIC regime, those abroad with inherited US ‘membership’ can have little or no actual taxable income, yet incur significant liabilities due to the ‘unique’ manner in which the US pretends at once that we are to be subject to the ‘same’ treatment as if we are US residents, yet applies the system in such a way that the RESULT is not at all the ‘same’ for those living outside its borders. We also incur far higher costs in the actual reporting and obtaining assistance with ‘compliance’ when/if we try. This argument casts the US in the role of Club USA – with two tiers of membership fees. It also commodifies US ‘membership’/citizenship as a commercial transaction – which is in conflict with Kirsch’s attempt to cast citizenship as a type of intangible and not merely financial relationship. Bringing it back to the ‘benefits’ argument.
Finally, Kirsch must know of the tortured and often injust evolution of the US citizenship laws – wherein for example, women who married foreign nationals were INVOLUNTARILY stripped of their US ‘membership’/citizenship, DESPITE demonstrating by their continued physical residence in the US and full participation in the US ‘community’ that they themselves considered themselves to be US citizens http://www.ronjohnson.senate.gov/public/index.cfm/2014/3/sens-franken-johnson-bring-attention-to-history-of-women-stripped-of-citizenship-voting-rights . Those ‘members’ of the US ‘polity’ never had their irrefutable US citizenship by birth and parentage re-instated to this day – despite remaining US taxpayers and VOLUNTARY residents. He also knows of the Supreme Court ruling that made it unconstitutional for the US to assume and strip those of citizenship who naturalized or performed some other potentially relinquishing act without VOLUNTARY INTENT. However, many in Canada who understood that they were VOLUNTARILY renouncing/relinquishing their US ‘membership’ are cast into the necessity of confronting whether the US will acknowledge their acts and intent. And the US law insistence that those with US citizenship enter and leave (or even fly over ) the US only with a US passport forced many to INVOLUNTARILY demonstrate a false ‘membership’ in the US ‘community’.
And Kirsch also offers no justification of the double taxation that we are not protected from – or would he assert that is a extra cost we have VOLUNTARILY incurred because we chose to be part of another ‘community’ other than the US – and must therefore pay the price?
Kirsch’s arguments do not admit of the reality that many are BORN OUTSIDE THE US. Many have never set foot there and may never enter it much less live there. He does not admit the interesting yet irrefutable manner in which the US itself officially deprives those it claims as ‘member’ citizens from exercising one of the most essential evidences of being treated by a state as part of the polity – and that is the right to vote. In over half of the US states, those who have never established residency in the US for a minimum period are not allowed to vote from abroad. The US and the majority of US states demonstrate concretely that they do NOT consider those abroad to be ‘members’ of the ‘polity’. The US federal government allows this deprivation of a US citizen’s much touted ‘right’ to vote to endure (States rights are not a justification). A ‘right’ deferred is a right denied.
And as a last aside regarding the red herring of any justification based on history or length of time in which a country has practiced a particular unique custom – the FBAR has only existed since the 1970s, and remained largely unknown even to those living inside the US, and those practicing US tax accounting. There WAS NO PENALTY FOR NON-WILLFULNESS failure to file the FBAR UNTIL 2003. Canadian registered accounts like the TFSA, RESP and RDSP are of relatively recent vintage. The treatment of Canadian mutual funds as PFICs was not handed down by God and brought to the people by Moses on tablets. Slavery as practiced by the US was enshrined in law and practiced formally (and later informally) for a significant part of US history – yet it was abolished. And so was the disenfranchisement of women and black Americans
What the US government has wrought it can unmake. “Because we have always done it this way” is not only false in these justifications of extraterritorial CBT, it is entirely self-referential and skewed worldview – which is not a robust or defensible basis for taxation or for the attendant significant human and civil rights offenses which are the result. Kirsch mentions the practice of CBT going back to the Civil War, but of course the US tax code and FBAR and FATCA, have evolved into a complex morass since then, and though the Civil War was a momentous occasion in US history, a practice developed in one country due to an internal military crisis is not sufficient justification to depart from the GLOBAL NORM OF RESIDENCY BASED TAXATION – developed by ALL other countries (except the “failed state of Eritrea”), and much more aggregated years of time by the rest of the world practicing taxation on a completely different basis. The majority of time and places NOT practicing US extraterritorial CBT dwarfs the ‘history’ that US CBT apologists love to cite. The US has not even existed as a nation for as long as many other countries and ‘communities’ in the rest of the world.
Kirsch also does not account for the fact that the OECD has made a special point of stating that the Common Reporting system that they are pushing into being, WILL USE RESIDENCY AS THE BASIS – IN SPITE OF THE US ‘UNIQUE’ SYSTEM.
VAGUELY AND WEAKLY OFFERING THAT PERHAPS SOMETHING MIGHT BE DONE ABOUT THE “PRACTICAL” ISSUES OF “COMING INTO COMPLIANCE” demonstrates that Kirsch will not admit that the basis of the system itself is fatally flawed as per those who do NOT live in the US, and who do not want or intend to. There are too many fatal contradictions, too many deliberately punitive and draconian aspects. Both are dangerous to us – the ones they pretend are ‘unintended’ consequences, as well as the ones (like the FBAR penalty regime) that are deliberately designed to inflict substantial harm. If he will not admit of the flaws that even the US IRS Taxpayer Advocate has repeatedly reported on, then he offers us nothing. He knows perfectly well that US IRS enforcement has been ratcheting up, not softening. He knows that FATCA is extortion – because the 30% withholding is a tax on FIs and NON-FIs that has no credible basis or justification. It is a weapon, a gun held at their heads. Again, what kind of robust basis for a tax system is that?
No one in their right minds that has a VOLUNTARY CHOICE would agree to be subjected to the liabilities and jeopardy of the US tax system as applied and enforced on those living outside the US.
Kirsch either does not know of the jeopardy that even the non-willful outside the US face (he was witness to the firsthand testimony and concerns raised at the ACA Foundation debate in Toronto) and his worldview does not allow it to penetrate, or he has convinced himself that he serves a much greater good that trumps the paltry concerns of individuals, families, children and other ordinary people living ordinary lives in Canada and the rest of the globe outside the US. The system as it stands is working for him and his cohort.
(BTW @Johnson, your points don’t hold if all the rest of the world – the majority, (much of which is far older than the US as a nation) manages just fine without CBT imposed on non-resident citizens and non-resident expired permit holders (greencard equivalents) – so what would make the US so special that it cannot? The rest of the world continues to function fine even if their former residents emigrate or citizens are born abroad. Witness Canada, Scandinavian countries, Europe, (everywhere except Eritrea) etc.
@Johnson: Thanks for playing the devil’s advocate role. It is helpful for all to sharpen their arguments and ripostes by reference to those arguments, good, bad or indifferent, that they will face.
A few comments:
“1. When you go on a long vacation, you may pay someone to feed your pets, water your plants etc. while you are away. Similarly, when you leave the USA, you should pay to make sure it’s still in good shape when you get back.”
Tax policy can and does distinguish between temporary and permanent non-residence. UK, for example, has a concept of “domicile” (also present, to a lesser degree in Canadian tax law). All OECD tax treaties have detailed rules governing who is a “resident” of what state for the purpose of determining who gets to tax what. The US can reasonably tax temporarily absent people and negotiate the means of doing so in tax treaties as it and all other major economies have long done. CBT is a sledgehammer aimed at a tack and can’t justify taxing, among others, foreign-born, never-resident citizens or long term non-resident dual citizens who have clearly acquired another domicile and permanent home.
“2. The USA may have paid to educate you and provide you with opportunities to enrich yourself. If you leave, you still have a debt to repay.”
Not a very persuasive argument if applied to those who have earned all of their income outside the US with no connection to the US nor to those educated entirely abroad (or educated privately for that matter since a great many are privately educated these days given the often pathetic state of public education in much of the United States). If public education is a deferred cost to be repaid through income tax, then put a number on it and only apply the tax to the handful who actually used it until that number is repaid.
This is pretty much an ex post facto justification that only applies to a fraction of the people impacted by the CBT regime in any event. See my post above re actual antecedents of CBT via the 16th Amendment: no such justification was made then nor was any actual thought or debate wasted on the impact of CBT on citizens outside the country. Citizenship laws were then quite restrictive and citizenship was easily lost when living abroad evolved to the point of domicile abroad. We now have a situation of fairly liberal laws conferring citizenship, often with neither knowledge nor consent coupled with a complez and largely unknown body of tax law applied to people who have no suspicion it is even there. If departing citizens are to be hit with an exit tax to pay for public education, then pass THAT law if you can, don’t call it CBT or a justification for PFIC’s, FBAR’s and the Reed Amendment.
“3. Some people will claim residence in a tax haven but spend most of their time in the US and other countries where people actually want to live. CBT frustrates these freeloaders.”
See (1) above. That is a problem easily addressed by design of a properly functioning RBT system. If these “freeloarders” are “actually” living in the US, the existing system which taxes both citizens AND residents, will catch them anyway. Every country in the world has this issue and every single one of them has found a way to address it without bleeding their diaspora unjustly in consequence. Grow up American and do a bit of research and then copy best practices of countries like Canada, Britain and others who have studied and dealt with the issue. Not a principled objection to RT, just a simple design question.
“4. The US military maintains a Pax Americana that you benefit from even though you do not live in the USA. You should pay for this.”
And so? Tax France, Germany and Japan directly then. Why would dual US citizens living in France or Germany bear the brunt and not other residents of France or Germany? There are seven million non-resident potential US citizens in the world and about seven billion non-Americans in the world. Unless all seven billion are to be enlisted in the effort equally, this bit of nonsense will not provide an intellectual foundation for taxing the seven million.
If Pax Americana is to be paid for abroad then expect the beneficiaries to ask for a role in its implementation. He who pays the piper calls the tune and I don’t see the US handing control of its Armed Forces to Germany, France and Japan any time soon. Better still, why not have the Treasury and Federal Reserve work together to print unimaginable quantities of money and then use the US’s post-war Bretton Woods reserve currency status to shove those worthless dollars abroad to pay for forty years of mutlti-billion trade deficits. Oh wait, that’s what the US already does.
I repeat my central point that THIS CBT system is so badly and even maliciously designed and unjustly applied as to be unworthy of any support by any fair minded person anywhere with full knowledge of the facts.
If the US wants to justify it based on continuing voluntary membership in the “US citizen club”, then they better (i) create a simple system for involuntary members to get out without penalty or facing personal ruin; and (ii) pay for the traffic police to control the lineups outside ever consulate and Embassy as soon as they do because the line-ups will be around the block. While they are at it, they should have a bold faced warning on every overseas passport application warning that applying for or holding a US passport could result in financial ruin for the holder and his or her family and should only be done after the holder has certified that they have sought and obtained independent legal and accounting advice. US courts routinely disallow contracts entered into by those who were not aware of the consequences (example: spousal guarantees of business debts given without independent legal advice). US passports should only be issued to those who have the same level of independent advice!
As noted above, the CBT system evolved in an era of restrictive citizenship rules (including easy loss thereof) and is now being applied in an era of liberal citizenship rules. The two don’t co-exist well together and for as long as they co-exist, there will be large numbers of people unfairly surprised by the “gift” of US citizenship and the curse of CBT who will not have been able to plan for it. RBT is the only way to go in a world of RBT.
The reason that the global standard is RBT is because it is the only standard that has any chance of working and gaining international co-operation. No country will allow its tax base to be plundered by its neighbour and stand by. If American immigrants to Canada proved to be a fiscal trojan horse, they would either be barred at the frontier or the tax treaty would be re-negotiated to stop the bleeding. If Mexican immigrants to the US were a fiscal trojan horse, the US would react as well. CBT – applied globally – would raise no net revenue anywhere or create chaos until tax treaties reformed it to the point that it is de facto RBT. At the limit, CBT might raise a few dollars from residents of a handful of tax havens until they renounced. Hardly worth turning millions of lives inside out to satisfy some misplaced sense of outrage (making pure envy in most cases).
The only thing CBT has had going for it is the fact that no one knew about it. A lot of these proponents of CBT are really people just opposed to dual citizenship, or suspicious and resentful of the many have it – that in some way, those who have it are advantaged over those who don’t. Why should we be allowed to come and go as we please, be given any advantages of an additional citizenship elsewhere without paying some kind of fee for that advantage? The perception here is that US citizens who don’t have other citizenships are disadvantaged or second-class citizens to those who do. Instead of celebrating American global migration as an emblem of the American values of freedom and liberty, the US through CBT seeks to keep us on the plantation.
Great comments. They should be put in a pamplet and on line. and sent to every MSM and blog we know of.. These comments are very educational to homelanders and also those expats….
Bravo my friends who know your stuff and are willing to confront those who do not.
Perhaps every college and high school US history dept and Economic Geography should be sent this info. No American child is taught these things.
The USA has very ignorant politicians who only do things for political gain and for their oligarchy masters.
@Anne Frank “The statute creating FBAR’s (31 USC 53) explicitly orders the Secretary of the Treasury to draft the regulations so as to avoid unduly burdening overseas Americans and to design them to acheive the anti-money laundering anti-crime objectives. ”
And the US has a President who on a wholesale basis is rewriting laws without the Congress YET will not till his Secretary of the Treasury to draft regulations that Congress provided for!!
Come next month by Executive Branch he is likely to grant amnesty out of thin air to millions of illegal migrant but former-pats?
@Anne Frank, greatly appreciate your posts. Particularly enjoyed that last summative statement. Reminded me of something my late father might have said.
Made me laugh out loud after my angry and dismal mood listening to a US homelander CBT apologist defend the current oppressive and unjust state of affairs – while deigning to admit to a non-US audience that some small ‘tweaking’ of “practical” issues might be possible or desirable re US extraterritorial demands and enforcement (but not application, terms or basis for the system in the main). Which I felt was meaningless given the recent track record of the IRS and Treasury regarding FATCA, FBARs, and the treatment of those from abroad in the OVD and ‘Streamlined’ programs and even those ‘transitioning’ http://federaltaxcrimes.blogspot.ca/2014/07/rumors-on-workings-of-streamlined.html .
There was no acknowledgement of the privacy, data protection, discrimination and other Charter and Constitutional or sovereignty issues. His bio says he; “…While at the Treasury Department, he was a member of numerous U.S. delegations to international tax treaty negotiations.”, I am certain that he must have knowledge that sovereignty and extraterritoriality is of course a big issue between nations in terms of taxing ‘rights’, enforcement and practice. And he would of course be aware of the US deliberate universal inclusion of the ‘savings clause’ and ‘last in time’ rule in all of its treaties. And would understand what that means for the pitiful and skewed ‘protections’ the Canada US treaty purports to offer us re FATCA (and the already detailed gaps and draconian treatment of our legal local assets – our Canadian homes, wages, savings and investments). He may even have been part of a tax delegation to negotiations with Canada in the past. Or advise currently.
Caveat though, I do want to acknowledge that at the ACA debate and on CBC at least he didn’t call us tax evaders, tax cheats, terrorfunders, money launderers, druglordkingpins, organized crime lords or imply the same – that was pretty restrained for someone with his US background and connections to the US Treasury and IRS http://law.nd.edu/directory/michael-kirsch/ who is fully informed of the design, purposes and intended application of the FBAR and FATCA. And he was I thought patient and respectful in answering the questions/receiving criticism from the layperson audience even under very pointed questioning – even as I did think he quite obviously ducked addressing valid points which directly challenged his worldview and rationale, and he mostly refrained from underscoring that the sheer US might and dominance allows it to dictate whatever terms it pleases, no matter what Canada or the rest of the world thinks or suffers as a result – perhaps a conscious polite concession to the etiquette of the non-US venue. The other debater http://www.law.qmul.ac.uk/staff/schneider.html also accepted questions from laypersons in the audience, and they both sacrificed their opportunity to eat and take a break in order to receive comments and questions even between the formal portions of the proceedings. For that I feel they were deserving of thanks.
Here we were though, on Canadian sovereign soil, in a major Canadian city and seat of provincial government, listening to those either residing, working for or enjoying/having enjoyed the fruits of a foreign nation’s system (or in the case of the financial advisers, enjoying the byproduct of US created demand for specialty services) tell us how to abide by or work around the demands of the US and its ability to enforce it extraterritorially via might – and see two academics debate in theory what has such deep and lasting negative impact and painful effect on so many, without the resources and power sufficient to force our compelling concerns onto centre stage for due consideration and redress – or even sufficient robust justification. At that time, the legal and human rights challenge had not taken their current palpable shape.
I greatly enjoyed the day, and am very grateful to the ACA and those here in Canada and at IBS, who sacrificed their time, energy and financial resouces to organize that historic event http://citizenshipsolutions.ca/2014/07/11/americansabroad-thoughts-on-the-may-214-toronto-conference-on-cbt-vs-rbt-fatca-fbar/#more-736 , but couldn’t help feeling despair that our fates and lives were hanging on the enforcement of theoretical and academic justifications for what has no acceptable ethical and just rationale – the rationalization of the very real and outsized harm, pain, stress, fear and loss of mental, physical and financial wellbeing of ourselves and our families outside the US – at US hands – who are lawabiding taxpayers in our own home countries of residence. The despair was only offset by being in an audience full of people who understood what was at issue for real, and that such an event had been brought to fruition outside the US. I also will never forget the active participation of NDP MP Murray Rankin who stayed throughout and proactively sought out our comments and concerns. I feel that he truly understood and was sincerely interested in learning and witnessing what is at stake for us AND for Canada itself.
Now I am thinking that the CBC should arrange such a debate, but invite also Canadians like Allison Christians, Arthur Cockfield, and perhaps others that they may suggest. There were other academics other than Kirsch who have interesting things to say about aspects of this intersection of citizenship and US extraterritorial taxation, like:
Schneider, Bernard, The End of Taxation without End: A New Tax Regime for U.S. Expatriates (October 1, 2012). Virginia Tax Review, Vol. 32, No. 1, 2012. Available at SSRN: http://ssrn.com/abstract=2186076
Worster, William Thomas, The Constitutionality of the Taxation Consequences for Renouncing U.S. Citizenship (June 22, 2010). Florida Tax Review, Vol. 9, No. 11, 2010. Available at SSRN: http://ssrn.com/abstract=1628568
Behrens, Frederic Alain, Using a Sledgehammer to Crack a Nut: Why FATCA Will Not Stand (April 9, 2013). Wisconsin Law Review, Vol. 2013, No. 1, pp. 205-236. Available at SSRN: http://ssrn.com/abstract=2247615
Avi-Yonah, Reuven S., The Case Against Taxing Citizens (March 25, 2010). U of Michigan Law & Econ, Empirical Legal Studies Center Paper No. 10-009; U of Michigan Public Law Working Paper No. 190. Available at SSRN: http://ssrn.com/abstract=1578272 or http://dx.doi.org/10.2139/ssrn.1578272
Following my last point re CBC arranging for a debate. My thinking was that someone should arrange the public debate on FATCA and US CBT as implemented in Canada (via the IGA) and the COSTS and consequences, the analysis that the Harper Conservatives actively conspired via secret negotiations, lack of public and Parliamentary consultation, embedding and secreting in the Omnibus Bill C-31 – to deprive the Canadian citizen voters and all Canadian taxpayers and accountholders of.
We need to have this aired in public, shine a bright light on it and thwart those who conspired and collaborated to keep it from CANADIANS.
Oh, and I forgot, we need CBC to invite the US Ambassador to attend and participate – as he was too busy to provide comment when the CBC contacted his office for the CBC In a Day series of interviews http://www.cbc.ca/allinaday/2014/08/15/fighting-fatca/ http://www.cbc.ca/player/AudioMobile/All+in+a+Day/ID/2489358007/ http://www.cbc.ca/player/AudioMobile/All+in+a+Day/ID/2472658073/?page=6 .
Badger…
YES!!!! We should all write CBC on this. Excellent idea and who to invite. The US ambassador should be present to express his views…
What I find most amusing is the statement “It’s always been that way” or “American’s have always been required to abide by the CBT Law.” Things change do they not? Gay marriage was unheard of a few years ago. Equal rights for women was unheard of a few years ago. I remember fighting for equal pay on a job. It’s a fight for change but it can be done. It is a strong voice and a bunch of committed people who have had enough and the naysayers are left dragging in the dust. It’s a global world now and the good jobs are offshore. America needs to get with the future and CBT is as old as slavery. Enough is enough!
@johnson
How do other nations manage to provide those things without CBT?
Annefrank Badger etc-you guys dismantled Kirsh`s arguments with ease – so who is actually “brilliant” here? Certainly not Kirsh.
And that leaves the following question to debate: who is paying for Kirsh to say what he does?
I would pay for the opportunity to hear the US Ambassador to Canada Bruce Heyman express his views on US citizenship-based taxation for *US Persons in Canada*, how Treasury rather than Congress was able to foist the IGA signed with the US and implemented in stealth by the Conservative government and his views on its constitutionality — a debate would be even more interesting to me. As far as I can tell, our well being is the last thing on a US Ambassador’s mind. I’m sure the present Ambassador would not want to walk into the minefield that Former US Ambassador to Canada David Jacobson did with his speaking out of turn.
Anne Frank and Badger, the depth of your analysis always amazes me. Thanks for taking on so well all you did this morning.
I sure hope we are to be able to view the video of the ACA Global Foundation’s symposium very soon. Interesting comments from those were fortunate enough to attend the Toronto Symposium, which would be good to have in other countries around the world.
Well said, Ann, re “it’s always been that way”. Look at the things that have changed in our lifetimes. We should always strive to make change in principles proven immoral, unfair and oppressive. CBT will be on that fine list one day and we will have been part of the change. For one country’s tax law to be exceptional to all others of the world (and we have to keep saying – except Eritrea) is unjust, unfair, immoral and oppressive.
@ Polly
I agree. Brockers are brilliant. Kirsch not so much. Oh he’s clever enough but unfortunately he is indoctrinated with the many myths of America and unable to grasp the reality that some of of us regard US personhood as the bane of our existence. I have a special file labeled “Kirsch Krap” which includes a pdf titled: REVISITING THE TAX TREATMENT OF CITIZENS ABROAD: RECONCILING PRINCIPLE AND PRACTICE. I too would love to see a CBC CBT vs. RBT debate since ACA GF hasn’t released its video yet. Now’s the time CBC. Do it!
http://thefranco-americanflophouse.blogspot.ca/2013/11/defending-citizenship-based-taxation.html
In 2013, Victoria also analyzed one of Kirsch’s papers which is basically what he presented in the ACA debate, and in the CBC interview
@bubblebustin, and @ northerstar, I too would really enjoy hearing the current US Ambassador address this issue on CBC. And then we can compare it to Jacobson’s remarks in 2011 http://canada.usembassy.gov/ambassador/news-and-speeches/18-october-2011-ambassador-jacobsons-remarks-to-the-canadian-club.html And do a retrospective – that was then, and here we are now comparison.
The CBC can use Jacobson’s remarks and other public statements by Shulman and Geithner as jumping off points to interview Bruce Heyman with.
Looking back to then, what would ‘sitting tight’ and believing ambassadorial assurances that the US was neither ‘unreasonable’ nor ‘unsympathetic’ have gotten us? Those stuck in the OVD programs and denied transition to Streamlined though they would have qualifed certainly are still waiting for the evidence re reason to prevail. Those who have renounced/relinquished see that they were in the main correct in gauging the level of threat from the US. Those who thought Flaherty’s word and honour and the Charter/Constitution were sufficient guarantees that Canada wouldn’t cave were shocked. There is no longer any reason to believe that this is all ‘unintended’ or that the US will remedy the situation once it sees that it is getting minnows and those abroad, and not the criminal targets it says it is hunting down.
Better make a PDF of Jacobson’s remarks in case they disappear like Lerner’s emails.
Here they are:
http://canada.usembassy.gov/ambassador/news-and-speeches/18-october-2011-ambassador-jacobsons-remarks-to-the-canadian-club.html
“U.S.-Canada Relations: Issues and Opportunities
Ottawa, October 18, 2011
As prepared for delivery.
As I was thinking about what to say here this afternoon, I was reminded of a comment by H.L. Mencken, the great American journalist of the early 20th Century. He said: “A cynic is a man who — when he smells flowers — looks for a coffin.”
There are some people who look at the relationship between the United States and Canada and walk past the flowers searching for the coffin.
The relationship between our two countries is probably the strongest it has been in generations, perhaps ever.
We have the largest trading relationship between two countries in the history of the world. Last year our two-way trade was $526 billion dollars. That’s more than $1 million each minute. That means that during this speech, depending on how long-winded I am, $20 or $30 million in trade will cross our borders.
That’s great for both of our economies…So I plan to go on for as long as possible.
When you add in foreign direct investment we have a $1 trillion a year economic relationship.
Based on current projections, by year end the trade between the United States and Canada will have increased since the beginning of 2010 by $150 billion. That increase is about the same as our total trade last year with India and Brazil and Russia and South Africa combined.
I’ll give you another one. If Ontario were an independent country, it would displace Japan as our 4th largest trading partner behind Canada, Mexico and China.
There are more than 100 million people who cross our border every year. In the first half of 2011 that number was up by 9%.
As a result of the February 4 Beyond the Border and Regulatory Cooperation initiatives launched by President Obama and Prime Minister Harper, we are in the midst of rethinking the border — making North America safer for all of us and making the border more efficient for trade.
We help each other around the world — in Afghanistan and Libya, at NATO and at NORAD.
We are about to celebrate 200 years of continuous peace following the war of 1812. A peace which should serve as a model of hope to people around the world, people who believe they will never be able to get along peacefully with their neighbors.
I am here to tell you that the United States is unbelievably lucky to have Canada as our neighbor.
But in the last few weeks three unrelated events have gotten a lot of attention. And some among us on both sides of the border have tried to draw the conclusion — sometimes without resort to the facts — that somehow there’s a funeral in our future.
I’d like to address each of these issues head on. I want to try to bring some perspective into the discussion.
First, a few weeks ago, the Chairman of the Federal Maritime Commission, Richard Lidinsky, was in Montreal to participate in a conference. Among the things he discussed was that he had been asked by two U.S. Senators from Washington State to look into the fact that the United States was charging a Harbor Maintenance Fee in Seattle that was not being charged in Vancouver.
As a result — perhaps not shockingly — a lot of shipping was being diverted from Seattle to Vancouver. Was there something he could do to level the playing field?
Now…the rather obvious solution to the fact that the United States was shooting itself in the foot by charging too much was to reduce those charges. Nonetheless, we heard a hue and cry that the United States was contemplating imposing duties or taxes or some sort of fees on goods that were shipped through Canada and into the United States.
In response to the uproar the Federal Maritime Commission Chairman issued a statement. He hoped to put the issue to an early rest. He said the Commission was going to look into the issue of the Harbor Maintenance Fee in Seattle. But (and I am quoting him): “…contrary to some overheated claims … no one at the FMC or in the U.S. government has raised the prospect of levies, sanctions, or tariffs. I am simply talking about a study of the facts.”
I kind of figured that would be the end of it. I was wrong. People continued to say the US was about to impose tariffs on goods that had arrived in Vancouver. I thought maybe I had misread Chairman Lidinsky’s statement. Maybe what seemed pretty clear to me wasn’t.
So I called him. I asked: Was he contemplating imposing fees, or tariffs, or taxes on goods entering the US from Canada? The Commissioner assured me categorically that he was not. Nor was anyone else.
What he was going to do was study the issue. And he was going to give everyone an opportunity to weigh in. He said he hopes to complete the study some time in the spring. And while he was not going to prejudge what–if any–solutions he might recommend after he heard from all interested parties and after he completed his study, there was one thing he was quite sure of. He would not propose taxes, or fees, or tariffs on good entering Canada.
Among other reasons, the Federal Maritime Commission has no authority to impose duties, or taxes, or fees on goods entering the United States from Canada. So I’m here to give all of you — and all Canadians — comfort. We don’t plan to divert traffic to Seattle from Vancouver by imposing tariffs or taxes or fees on goods crossing into the United States from Canada.
If that — somehow — changes, I promise that I’ll personally come back here to the Canadian Club — with egg on my face — and explain how I got it wrong.
The second issue that is making some folks see coffins among the flowers of the Canada/US relationship is the “Buy America” provision in the President’s Jobs Bill he proposed to Congress last month.
The Jobs Act is a $445 billion bill to help get the US economy back on track. The vast bulk of the bill consists of proposals for payroll tax cuts for the middle class, extensions of unemployment benefits, and education investment.
A small part of the bill relates to repairs of infrastructure and rebuilding of schools. It was to these parts — and these parts alone — to which Buy America applied. And — of course — most of these expenditures on infrastructure and schools would be for things like land and labor which Canada couldn’t supply anyway.
I want to make four points about the President’s Jobs Bill.
First, the single most important thing the United States can do to help the Canadian economy is to get our own economy back on track. That’s what the President is trying to do with his Jobs Bill.
And in case you haven’t noticed, it’s not so easy for him to get things through Congress. So he had to make a tough call. He had to introduce a bill that had some chance of passing. Hence the Buy America Provision.
If the bill doesn’t pass, the US economy — and the Canadian economy with it — continue to suffer.
And when you contrast the consequences of the Buy America provision on Canadian commerce — probably a few hours of that annual trade I talked about earlier — with the benefits to the Canadian economy of the bill as a whole I suspect the vast majority of economists in Canada would say they’d take the bad with the good.
Second, the Jobs Bill itself says the Buy America provisions will be interpreted in accordance with our international trade obligations. That includes our NAFTA and our WTO obligations to Canada. I’m here to assure you, we will live up to our commitments.
Third, no two countries on earth have a better track record of working out our trade differences than the United States and Canada.
And fourth — Buy America or no Buy America — last week the American Jobs Act was rejected by the United States Senate in the face of one of the hundreds of Republican filibusters since President Obama took office. The President has said he will try to get parts of the Jobs Bill through Congress as separate measures. And for the sake of the United States economy — and for the sake of the Canadian economy — we should all hope he is successful.
The third coffin sighting arises from recent media coverage of an issue that has been around for about 100 years, since the United States imposed an income tax in 1913. From the beginning, my country has taxed the incomes of American Citizens no matter where they live, no matter where they earn their livings.
This is different from the way Canada — and some other countries — do it.
The good news, however, for US and dual citizens living here in Canada, is that you get a credit for taxes paid to a foreign country. And because tax rates in Canada are typically higher than the rates in the United States, most US and dual citizens living in Canada who pay their taxes to Canada don’t owe any tax to the United States though they do have to file a US return as all other American citizens do. (I might add for the record that someone some place might have an anomalous tax situation where they pay tax in Canada yet still owe tax in the United States. And I’m certainly not here to give anyone tax advice.)
The situation, however, is different for American citizens living in some other countries, particularly the so-called tax havens. In those places with little or no income tax, Americans will owe tax to the US since their deduction for taxes owed to the Cayman Islands, for example, will be much lower than the taxes owed to the US.
And given our budgetary problems, the United States wants to make sure we are paid all the taxes we are owed. American citizens shouldn’t be able to avoid their tax obligations by establishing a residence in a tax haven.
There are two particular problems with the operation of these rules here in Canada. First, there are so many dual citizens, typically by birth, probably more than a million. So this issue is much more common here than in any other country in the world.
Second, the penalties — at least in a theoretical sense — can be quite severe.
So you could have a situation where some 70-year-old grandma:
was born in the US;
moved back to Canada as a young child;
never earned any money in the US;
has no assets in the US; and
dutifully paid all of her taxes in Canada.
She didn’t file a US return because she didn’t think she had to. And because she didn’t owe any US taxes. Nonetheless, grandma could be theoretically subject to serious penalties. To my knowledge we have never gone after a grandma in those circumstances.
But there has been a lot of press about this lately and people are worried that we will come after them.
When I read all of this I was concerned. So last week I called the Commissioner of the United States Internal Revenue Service to see what we could do. I explained the problem to him.
The result is that both he and I are sympathetic to the concerns. We are going to work together to see if we can’t find a way to accommodate grandma — and others — here in Canada. But we have to figure out a way to do it without letting the person who is trying to evade taxes in the Cayman Islands off the hook.
My message on this one is to sit tight. We are not unreasonable. We are not unsympathetic. We are not irresponsible.
So what’s the point of all this?
Well, unlike Mencken, sometimes when you smell the flowers you are actually in a garden and not at a funeral. And this is one of those times. The relationship between our two countries is in full bloom.
And with the continued efforts of people like you on both sides of the border we will be able to make the best relationship on earth even better.
Thank you very much.”
Ann and Calgary 411
Change is happening…. It is a silly for some but I believe since we are in the midst of the changing from Pisces to Aquarius is causing these changes. They do not happen over night, The elimination of slavery and civil rights is in this time space. We are having a Paradigm shift. I believe it. I read this book AQUARIAN CONSPIRACY in the 80s and today I came across this.
http://www.opednews.com/articles/Shifting-from-a-Patriarcha-by-Anthony-J-Gerst-Earth-Policy-Institute_Existentialism_Gaia_Paradigm-Shifts-140816-107.html My synchronicity is in over drive lately.
What we on Brock are doing is participating positively in making good changes happen. We must press on. Keep that bus rolling.
@Embee
I don’t think Kirsh can use indoctrination as an excuse. He is a scholar of law. This is something he has studied, and as a professor- in depth. I believe if somebody paid him to argue the other side of the fence- he could do that too. And he`d make more sense in the process.