The following conversation that took place at Jack Townsend’s blog. Jack Townsend is of the opinion that Canadians can’t simply choose not to obey the IRS. I am of the opinion that the IRS is a criminal organization that is violating the rights of Canadians and it is only good and proper to disobey what are clearly unjust laws. Jack’s view is that Canadians who choose to disobey US tax laws are not going to get any sympathy from him. What he says about jury nullification is particularly interesting in light of my argument that the US tax laws applied in Canada are a violation of the right to trial by jury in the district in which the alleged crime was committed. It is sad to see the law professor with such little sympathy for the our situation, as it is so very much like the causes of US revolution against British rule.
That an RRSP is even considered some kind of delinquent account at all is offensive to Canadians. The IRS could take a much more lenient stand towards RRSPs since they are equivalent to IRAs except in a “foreign” country. Foreign only from the point of view of the IRS, but domestic as far as Canadians are concerned. What’s “foreign” to us is the IRS, which is the External Internal Revenue Service.
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Jack Townsend Peter,
I understand what you are saying, but many countries have deferred compensation plans that are like IRAs. Those plans are not treaty qualified and thus are subject to current income taxation and FBAR reporting.
Thus, since I see a lot of these, I have to ask the question why Canadian RRSPs should get better treatment where the taxpayers have not done what is necessary to get the better treatment? Canadian taxpayers may not think it fair from their perspective, but Canadians subject to the U.S. tax regimes overall get better treatment that U.S. taxpayers in other countries. So what is fair?
I think what the Canadian / U.S. persons are really complaining about is the U.S. tax regime. That is a complaint they are entitled to make and, if they feel strongly enough, withdraw from citizenship. What I think is inappropriate is for them just to ignore their known U.S. tax obligations simply because they think the tax system is unfair. If that were a reason not to pay tax, almost everyone could find something that is unfair in the system (tax protestors do it all the time).
Jack Townsend
gottaloveUStax1 Jack, I understand your ultimate paragraph, although I have to admit, I think the complexity required in for Expats to comply is daunting and the number of necessary forms is overwhelming. In situations where the income should be tax-deferred but for the failure to fill in a form, the IRS could/should be more accommodating. For years, the IRS ignored expats, barely providing any education or outreach and many preparers were unaware of the multiple forms (for another example, see UK ISA’s, which are often considered trusts under US law. The number of people who failed to file 3520’s is quite large). The service has gone from almost zero enforcement to making expats their number one priority.
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Peter W. Dunn (reply to Jack Townsend) I am of the opinion that the IRS is a law unto itself. It does not have the welfare of the people in mind. The reason why RRSPs programs are set up in the first place is so that Canadian people can look after their own retirement, and that their retirements might be invested in solid vehicles which can lead to the prosperity of Canada. It is an unacceptable situation that angers me and gets my blood boiling, that the IRS thinks that it has the right to reach into and steal Canadian RRSPs.These accounts are supposed to be protected by treaty but instead the IRS has decided that their own rules are more important than a treaty with Canada. This is an example of bad faith–and it is an example of how the IRS has no concern for bigger issues, such as Canada-US relations.
But you are right–my anger is with citizenship based taxation. The American system of “citizenship” (as defined by their own laws, not the laws we have made here in Canada) based taxation is a travesty of justice. It is unjust tax by its very nature, since the proceeds of the tax go to benefit not our community here in Canada, but your profligate and immoral society south of our border. You won’t balance your own budget, you borrow over 40 cents on every dollar you spend, and your country is creating disorder and instability everywhere in the world.
I was just in Niagara on the Lake. It was settled by Loyalists who fled the United States. Unwittingly, I’ve been thrust into a new Loyalist movement. I think it was wrong for the United States to destroy Niagara on the Lake in the War of 1812. And I think it is an unmitigated evil that the United States has decided to go after the Canadian tax base in the enforcement of laws passed in Washington DC, where we have no representation.
You were the richest nation in the world. Do you think that it is morally justified to steal from our Canadian tax base? How can you justify that?
US tax laws applied outside the borders of the United States and imposed on other nations are in violation of international law. Take for example the Master Nationality Rule. Canada has no need to have any concern with your so-called citizens here in Canada, if they are Canadian citizens. It’s none of your business. The lawsuit by the Alliance for the Defense of Canadian Sovereignty is exposing the United States as a violator of Canadian sovereignty and rights violater, because the US has no respect for the human rights codes of other countries in the implementation of its own extra-territorial laws.
The US provides no services or protection to Canadians within the borders of Canada. It says so in a US passport. Since the constiutional justification of citizenship based taxation is “protection” then it is completely wrong to apply citizenship based taxation to citizens of Canada living in Canada. There is no justification for the tax.
Jack, there is an age old rule that says that a law which is unjust is no law. Perhaps you heard it. Or said otherwise, “One has a moral responsibility to disobey unjust laws.'” Did you not learn that in law school?
Milan Madhani, CPA I don’t believe it’s okay to bash Jack, by saying, “Did you not learn that in law school.”
Most professionals know of the inequities of the US tax code. But doing nothing is not the same as doing something, no matter how you attempt to comply. For e.g., you might just choose to give up your US citizenship, or try, at least to file the right forms, no matter how late they are, whether or not they are in any sort of disclosure programs. Hint, hint buddy.
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Peter W. Dunn @Milan, Since you are CPA, perhaps you are not well-versed in law theory. I approach the matter not as a lawyer but as an historian and theologian. Theology has much to say about law, and the morality thereof. I am critical of the IRS implementation of unjust laws in ways that would destroy the lives of my fellow Canadian citizens and I regularly recommend civil disobedience.
If laws are not just, then civil disobedience is morally acceptable. We are living in an age when politicians are so corrupt that they pass laws which result in implementations that destroy basic fundamental human rights.
Since I’ve never gone to law school, I actually wonder if Jack did learn that disobedience to unjust laws is justifiable. But it seems to me that forcing unjust laws on clients instead of helping them to realize their basic and fundamental rights is not providing a service.
For your information, I have expatriated. I have also chosen civil disobedience with regard to certain Form crimes. And there you have it. Form crimes are actually an assault to the civil liberties of the citizen–including the right to privacy (4th Amendment), the right not to incriminate oneself (5th Amendment), the excessive fines clause (8th Amendment). To disobey them is proper, and the only proper means by which I can refuse to waive my Constitutional rights. I have to protect my family from the financial crimes of the USA. The assault against my family by Congress and the IRS, I was forced to give up my Right of Return, and now the US may penalize me via the Reed Amendment for having expatriated for tax reasons (if it so choses). So your “hint” is quite besides the point. My fundamental rights as a native born American have been destroyed by acts of Congress, because I have to pay for my continued citizenship via accounting fees and time wasted filling out forms, and by the destruction of my liberty to live my life as a free person in my country of choice (Canada)–RRSPs are just one significant issue–What about TFSAs, RESP, PFICs, RDSP, capital gains on primary residence, etc.?
Finally, withdrawing from citizenship, as you and Jack have suggested, is not always a good solution. Some of the people I speak with only wish to see their loved ones in the USA, but they cannot come into tax compliance, as it would mean for them financial ruin. This means that the USA, with the threat of the Reed Amendment, of the Ex Patriot Act (proposed) and the tax enforcement at the border, is effectively using family as hostage to collect unjust taxation. And the USA has condemned Eritrea for its extortionate tax collection techniques. I just see too much hypocrisy in my former nation, which is now bankrupt morally and financially.
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Mr. Dunn,
I understand the concept of civil disobedience, but that does not mean that we are entitled to only obey laws of our liking and disobey the rest. All of society would be in shambles if that were the case -‘- we may not like tax laws, hence we don’t report or pay, we may not like laws that say we cannot have nuclear weapons, hence we stock up on nuclear weapons, and so on. That is pure anarchy.
Specifically, in a tax context, in your imagination, every tax protestor in the world would be honorable to disobey the law. Yet, tax protestors routinely suffer society’s civil and criminal consequences of disobeying the law. All you are saying is that you and others with similar views are just tax protestors. I do not see any honor in that.
If you don’t like the system the U.S. has, then do what you did — expatriate and surrender your U.S. citizenship and then go somewhere else that has laws that you are willing to honor. (Although, I guess your theory is that, you can pick and choose which laws of Canada you will obey, as well; maybe at some point the citizens of Canada through their government representatives may have something to say about that).
And, to close the loop, I do know about civil disobedience. Depending on context, conduct which you call civil disobedience can be honorable or not honorable. I think you know where I stand on someone making the unilateral choice not to report and pay U.S. tax. The U.S. tax systems gives U.S. taxpayers plenty of opportunity to vet their complaints to Congress (the proper focus) or even in the Courts where in a civil or criminal case the jury could be asked to exercise its power of jury nullification to bless such civil disobedience. My experience with juries is that no jury — let me repeat, no jury — of U.S. citizens would find the sympathy required to exercise its inherent power of jury nullification.
So, if you are looking for sympathy or support for such notions, you won’t find it from me. There are any number of other blogs where you can get the echo feedback chamber you seek, but I hope the bulk of my readers do not sympathize with these notions.
Jack Townsend
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My next response, which we will see if Jack Townsend also approves it:
On a final note, since this is not an echo chamber and you will soon dismiss my contrarian views as kooky: may I please remind you that Canadian citizens tried in an American court for alleged form crimes committed in Canada would be travesty of the sovereignty of Canada, not to mention a violation of Constitutional rights. Please consider my post on this subject from 2012. A kangaroo court it would be, and it would be against the fundamental principles of justice which the Founders of the United States shed their blood to protect.
Of course US citizen juries would find me guilty. But no jury of my peers would find me guilty for illegal accounts at my local Ontario branch.
Oh man. 🙁
I am wondering if these same arguments were used in the third Reich to rationalise the extortion/confiscation of jews and their property as “just”. Or what did England actually say to explain the merits of “taxation without representation” on America a few hundred years ago? And he says “just because a law it “unjust”? JUST because? Even Nina Olsen is in line with that truth and so many more have voiced just HOW unjust the system is- even people in charge. Its like they just want the money- no need to change anything until the protest gets loud and strong enough.
I`m guessing that it will really take somebody like Bopp to win a case on the Supreme Court level for anybody to listen. Anything beneath that in the hierarchy will only be seen as unlawful and criminal- and something irritating like a mosquito.
And sadly- what history shows is that those who went along with “unjust” were condemned for not doing anything, for being in collusion with those injustices and infringements on human rights – in the aftermath.
I feel Jack is wrong to lecture me on what is honourable. I think it is very dishonourable what the United States is doing.
@Petros
Its part and parcel of the condescension. America is NEVER wrong. Even when it is selling worthless derivatives.
Also, it is honourable, in my opinion, to protect my wife from the IRS. She has no reason to have her account information exposed to that criminal organization. So I disobeyed the law and I denounce the US and I relinquished my US citizenship. But I was forced to relinquish my right to return to the US.
I checked Jack’s website. For him this is strictly a business. In a nutshell he is saying the following: All so called US persons living outside the US are unhonorable and tax evaders unless they comply one hundred per cent to the IRS rule – Fair or unfair is beside the point. Well, what do you expect? He is a tax lawyer living out of the misery of the US persons who are caught in this drag net fishing FATCA rule; and the more complicated it gets, the better it is for him so he can make more $$$. In fairness to him, he is not the only one with this kind of opinions. Thank God he is not also a legislator. He brings no added value to the nightmare created by FATCA. His blog is to be ignored.
I am glad that it is you that is engaging in polite discourse with Jack Townsend. Petros, and not me.
“If you don’t like the system the U.S. has, then do what you did — expatriate and surrender your U.S. citizenship and then go somewhere else that has laws that you are willing to honor.”
My wife would gladly do that, if the United States is willing to let her go with her passport handed in and no stupid fines for a piece of paper that wasn’t filed. $10,000/yr for not disclosing a “local” bank account that we use for day-to-day survival (all because Obama thinks it’s foreign???)? My wife wants to be Canadian. She also wants to be able to put food on the table for our children. #FATCA considering that my wife makes less than $22K an year would leave us destitute.
And as a Canadian citizen (born and bred), I absolutely refuse to allow my tax information to cross the border. All the IRS will get is my middle finger. And to you…Jack Townsend. All I have to say is FUCK YOU!
Canadian First, from the standpoint of moral persuassion, yes by all means ignore Jack Townsend. But to understand the enemy, his blog is one of the best.
Here’s the Coles Notes version: Petros:
All expat Americans are tax cheats – they should all come into compliance with no complaining. If they do not, they deserve everything that they get under the auspices of the United States Codes bearing on tax evasion. We are an exceptional country (meaning the United States) and we can tax you wherever you reside. If you are refusing to pay taxes, you are morally ambiguous and illegally fraudulent.
There…saved everyone else 16 hours of reading.
I was lucky in that the bulk of my wealth was not in PFICs.
If somebody left the US at an early age an lived in another country their entire life they could easily amassed a large amount of investments in accounts the US believes are not tax exempt. They would likely be invested in ordinary stuff the US conceders toxic (PFICs).
To comply with US tax rules would mean this person could loose pretty much all their gains and even their principle since sec 1291 tax and interest front load the early years by assuming linear investment growth.
Add to this penalties and interest on the penalties etc and they could be looking at loosing the vast amount of their life’s earnings despite having paid all the taxes due to their local government.
They can’t comply. Learning the rules would be a huge job and very expensive and time consuming. Doing the taxes would be expensive and time consuming. They can’t afford to loose what they saved over a lifetime because they used their lifetime to accumulate the money.
The IRS even recognizes and uses as a threat the fact that complying with sec 1291 is close to impossible (this they used on me but I called their bluff and produced 400+ form 8621’s). They even allow a mark to market regime to avoid it in OVDP.
The only rational course for such an individual would be to ignore the IRS I would think. A choice I wouldn’t wish on anybody but we know some people have to make this choice.
Peter. Townsend and you will never agree. It’s like 2 blind men in a dark room trying to describe an elephant . 1 of you is at the elephant’s head and the other at its ass.
He is interested only in Homelanders or some duals who may want to or need to become compliant. He’s interested in those who have reason to fear the IRS. You are interested in those who wouldn’t want to become compliant and many of whom have learned ( from IBS and other sources) that they need not fear the paper tiger.
Arguing with him is a waste of your time.
KalC — not a waste of time to argue with him–or others of his ilk. Others are watching. I am neither blind nor am I describing the ass. I am confident that my moral persuassion can have an influence–perhaps not on Mr. Townsend, but perhaps on some of his readers–which include the beleaguered oppressed like myself only four years ago. Now that I am free, I can hopefully lead others to a path with less pain than the OVDP by which Mr. Townsend has made his mark.
Petros: The point for Jack to understand is that you obey the laws that apply to you. If the US deems its laws to apply to the ends of the earth, it does not mean that they do so (at least until they have extended their borders that far by military conquest). You live in Canada and comply with the laws of this country, including the ones you disagree with. Where you draw the line is when the US tries to enforce its laws outside of its borders. Your position for Jack is that the US simply has no jurisdiction outside of its borders to govern the affairs of non-domiciliaries who are subject to (and generally citizens of) another jurisdiction to whom they owe primary allegiance. The crime is in attempting to apply laws extraterritorially. CBT is a subsidiary issue (although important). I think that an argument could well be made that Congress is seeking to do indirectly via CBT and FBAR and FATCA what the Supreme Court said the 14th amendment bars them from doing directly: stripping native-born Americans of their citizenship. To me, that is their issue and their problem. I ask only that they check their legal system at the 49th parallel (OK – the 45th in southern Ontario…).
AF: It is indeed difficult to overcome arrogance when it comes to extraterritoriality. They act like the Romans, whose emperor was some kind of god, and therefore, of course they had the right to tax everyone in the world. But you are right about CBT, FBAR and FATCA forcing people to relinquish their US citizenship. That should be unconstitutional, to be sure. But I haven’t the money to mount a challenge. The most brilliant minds believe that CBT is right, since you tax people who belong to the great society: but since we receive no other benefits, it is, in essence, a tax on our right to return. That alone is an abuse of the most fundamental universal human rights.
@Annefranl
Brilliantly argued. We know that Petros its not only honourable and abides by the laws of his country, but he is brave as well.
Some thoughts on this post:
@AnneFrank
On the issue of the USG indirectly stripping people of their citizenship, see this post that I wrote on this topic:
http://renounceuscitizenship.wordpress.com/2013/07/10/cook-v-tait-12-the-implications-of-afroyim-and-the-14th-amendment/
I agree with you that the issue is the the reality that CBT is the extraterritorial application of U.S. tax law.
@Petros
On a personal level I find Townsend’s comment to incredibly offensive for two reasons:
1. The guy obviously thinks that the U.S. can apply its law to the world; and
2. It is painfully obvious that he totally lacks the capacity to empathize with the problems of Americans abroad. Put it another way, he is “sociopath”.
Jack seems like another Homelander (has he ever lived outside the country for years without going back to the US? – it seems improbable) who thinks it’s still 1970 and the US is still riding high in the world. Well in 2014 things are little bit different.
It’s hard to grasp how Homelanders think it’s right and just to tax ex-pats abroad when the US gives back nothing.
At times I feel like performing a lobotomies on Homelanders brains to achieve the needed attitude adjuster.
@Don
1970
Yes- one of the root causes for American exceptionalism is the fact that all other factories were in ruins after WW2. There was no competition from german or japanese factories for 2 decades. Everybody wanted american cars and TVs. Then Japan and Germany recovered and started to make cars and TVs too, and they made them quite well. Competition was born.
Here’s a link to a list of “tax quotes” on the IRS website:
http://www.irs.gov/uac/Tax-Quotes
What brought me here was searching for the person who said:
“Taxes are what we pay for civilized society.”
Apparently, it was USC Justice Oliver Wendell Holmes, Jr.
Notice he didn’t say “Taxes are what we pay for our citizenship.”
I will happily pay taxes where I live. I will not pay them based on where I was born but no longer live.
I posted only once to Townsend’s blog and received back a snarky response. I’m not a fan of his.
Jack-boot Townsend wrote:
“I understand the concept of civil disobedience, but that does not mean that we are entitled to only obey laws of our liking and disobey the rest. All of SOCIETY would be in shambles if that were the case…”
The problem with Jack’s argument is he is referring to a SOCIETY where expats do not live and therefore cannot possibly receive the same if any of the benefits enjoyed by the people who are living there.
It does not matter how large or how many Jack-boots are stomping on the heads of expats, Jack Townsend will always side with the STATE and SOCIETY where he lives. The lives and welfare of expats and the SOCIETIES where they live will always be irrelevant to him.
@All for Australia I know of no form that keeps the U.S. hand of tax out of the retirement account cookie jar.
I believe this focus on retirement accounts is a good one to highlight the injustice of the current tax regime. In posts I ask how would Americans living in America like it if the rules were suddenly changed and they get their 401K and IRA gain for each year added to their income and taxed at their marginal U.S. rate. I don’t know if I have connected with this one, yet there are so many injustices I thought I would just focus on this one and try to win the battle on this one, to open the door for consideration of other taxation issues. It appears Americans living in the U.S. have difficulty fathoming the concept that if you live in another country you get taxed there by the country you live in and which provide all the basic services services to you such as roads, schools, health care etc.
In terms of fairness, this year the IRS adopted a bill of rights for taxpayers suggested by the U.S. Taxpayer Advocate. #10 on the list is “The Right to a Fair and Just Tax System.” That now brings in some subjectivity to it all doesn’t it. I have suggested elsewhere on IB that the full list of taxpayer Bill of Rights be put up for comment at IB, we suggest modification especially in view of the case of USP abroad, then we send it back to the US taxpayer advocate and also issue press release and I think this may get attention of the U.S. press (a current theme is anti-IRS articles in the U.S. press).
In regards to civil disobedience, you might recognise that if done that perhaps not best to go back to the US. The posts and the threads focused on disobedience where I might have focused on fairness of it all to save for your own retirement and the financial security of your family along the lines of “the inalienable rights of liberty and the pursuit of happiness” with even application by government policy to Americans no matter where they live. And, don’t tax residents of other countries have these rights as well?
At significant issue is the U.S. tax laws disregard of the tax and compliance in your own country and to treatment of other countries as part of U.S. territory when they are not.
Another significant issue: that the Canadian-US tax treaty only really provides limited shielding taxation from double taxation, and the Canadian government acceptance of the US definition of double taxation very narrowly applied to each class of income and tax with the emphasis on prevention of tax evasion rather than on fairness for the individuals involved.
I look forward to the Human Rights case made public and hope that the injustice presented is easily understandable by others.
@Polly I agree. There are two figures that I keep in mind about the US’ role in the world.
1950: 50% of world GDP was the US economy
2014: 19% of world GDP is the US economy
When sitting down at the table with 50% your position is stronger than in 2014.
For that reason long term the US dollar is going the way of past world reserve currencies such as Sterling.
Is it really any surprise the BRICs want to bypass the dollar?
Don, the USA is 19% global GDP only because the US is the exclusive printer of US currency.
Petros, thank you for continuing the argument in the face of the inability of Jack Townsend and others to understand.
It seems that US homelanders expect a US citizen’s first loyalty to be to the US, regardless of whether that person resides in and is a citizen of another country as well. They just can’t seem to get it through their heads that a person might be most loyal to the country of citizenship in which s/he has been and continues to be a long-term resident.
If one could “just renounce” and be done with it, that would be great, but we know that it’s not so easy to get free of them.
Personally I”m tired of trying to explain the unfairness of the situation to people like Jack. I’m just glad that I have a CLN to document that my loyalty and obligations are no longer to the US and haven’t been for a long time.
Rocco Galati seems to share the same concerns that Khadaffi had with the Central Banking System.