@VLJeker This is one more way that the USG is putting the lives and security of #Americansabroad at risk – opposite of protection from USG
— US Taxation Abroad (@TaxationAbroad) September 15, 2014
I was recently attempting to explain FATCA, FBAR and U.S. taxation practices to a friend. After deciding that I was NOT fabricating a story, she remarked:
“It’s unjust! It’s inhumane! I didn’t choose where I was born!”
(Fortunately she was not born in the U.S.).
The truth is that issues of FATCA, FBAR and citizenship-based taxation are more “citizenship problems” than tax problems.
Incompatible tax systems create problems for people subject to both tax systems.
Incompatible citizenship laws create problems for people who have dual citizenship.
U.S. tax lawyer, Virginia La Torre Jeker has just published a fascinating post where she describes the problems of “incompatibility of citizenship”. Ms. Jeker describes the problems where a country:
1. Does NOT allow dual citizenship; and
2. Makes it a criminal offense to have dual citizenship.
I quote from her insightful post:
Not only are many desperately struggling to become US tax compliant, many GCC nationals are becoming quite concerned that their government will learn they hold a prohibited “second” nationality. Under FATCA, foreign financial institutions must agree to verification and due diligence procedures – meaning they must be on the look-out for customers, owners or beneficiaries evidencing any “US indicia”. They must identify and report directly to the US Internal Revenue Service or to their own government via an intergovernmental agreement (IGA), information on US account holders. FATCA will help expose GCC nationals who hold US citizenship by a financial institution’s transmission of that information directly to the home country government agency responsible for gathering information under the IGA. America, in its quest to root out tax cheats, has now put many of its own innocent citizens in a very perilous position.
This fear of detection seems particularly acute right now in the Kingdom of Saudi Arabia. In Saudi Arabia, Saudi citizenship can involuntarily be lost if a Saudi citizen obtains a foreign citizenship without the prior permission of the Prime Minister. See Articles 11 and 13 of the Saudi Arabian Citizenship System.
Now, some may be thinking, “so what?” What’s the big deal? How would you like to be stripped of the citizenship of your country of residence just because you were – as Bruce Springsteen would say – “Born In The U.S.A.”?
What are the consequences of being stripped of your Saudi Citizenship? Quoting again from Ms. Jeker’s article:
Article 13 provides that “By Decree, in any case, Saudi Arabian nationality can be stripped from Saudis, if they have any other nationality in violation of article 11 of this regulation”, stressing that “Saudis would be notified of the consequences of such actions, a legal notification, three months prior to the execution date of the Decree of the loss of Saudi Arabian nationality”. Under the provisions of this article “the liquidation of the property of the person who lost his nationality, in accordance with the legal system of property ownership, and be denied residence in the territory of the Kingdom and barred from any return to it”.
It’s hardly a surprise, as Ms. Jeker points out:
Many of my GCC dual national clients are now looking at renouncing their US citizenship. Many more thought they had already given up their US citizenship years ago when they took on, say, Saudi citizenship (usually after marriage to a Saudi national) and pursuant to Saudi law specifically renounced their US citizenship at such time. They are now learning, many years later, that this might not have been enough and that they are still US citizens because they did not give notice to the Department of State that they had the intent at that time to give up their US citizenship. They never obtained that critical document called a Certificate of Loss of US Nationality (CLN). If they try to get the CLN now with a retroactive relinquishment date, they will have to demonstrate they had the intent to relinquish US citizenship at that earlier time. This is often a very difficult burden to meet.
And let’s not forget the FATCA “security risks” (noted by Americans Citizen Abroad) that Americans abroad are subjected to.
Risk of identity fraud
Form 8938 provides full disclosure of personal assets and bank account information. It will be filed with the 1040 that details the tax filers name, address, phone number and Social Security number, thus putting Americans abroad at high risk of serious identity fraud, in particular, since the IRS is pushing to have all of this reporting done on-line in the near future. James White, director of strategic studies for the GAO, told the House Oversight subcommittee on Government Organization that there were close to 250,000 incidents of taxpayers’ identity theft in 2010, up from just under 52,000 in 2008. xviii) This is a five-fold increase in the number of instances in just two years. When 100% of all private financial information is acquired with such identity theft, the potential damage inflicted on Americans overseas will be substantial.
There is more to FATCA than tax! For example:
U.S. citizenship is now the most dangerous citizenship on the planet!
Cross-posted with permission from citizenshipsolutions.ca
The US can keep it’s citizenship based taxation – only they’ll have to do it without this citizen. Good luck with that when there’s no Americans left to speak of living abroad.
Another guy that doesn’t get it.
Kevyn Nightingale says FATCA is not your enemy. The US can pass any law it wants, but Canada shouldn’t have to enforce it.
He claims information sharing agreements have always been in place, but they weren’t signed with FATCA’s dragnet net style data grab in mind. Information sharing was suppose to be on a case-by-case basis.
This guy doesn’t get it.
I just posted the links from Phil Hodgen’s site on our continually updated top thread (FATCA IGA . . . ) but I’ll repost them here because it’s relevant to your article. Phil Hodgen deals with a lot of Middle Eastern clients who have to expatriate from the U.S. because their family wealth is inter-connected and naturally, their families oppose their financial information being divulged to the I.R.S. just because one family member has a U.S. passport (birthplace).
What is frustrating is the U.S. used to claim certain people had expatriated if they did X or Y in another country, but now the US has reclaimed these same people as “US persons” subject to their IRS tax regime. I wish more countries would stand to the US and have a simple path for their citizens to disavow US citizenship with no fees attached, without making these people go through the US mechanisms to prove non-citizenship or to shell out thousands of dollars to get a CLN.
@Don, Actually, while sadly Kevyn doesn’t understand the insult of FATCA to Canada’s sovereignty and why getting rid of FATCA is so important, Kevyn DOES get the underlying issue–the problem with America’s citizen-based taxation (CBT). He DOES realize that it’s”a dumb idea”, “complicated”, and that “the only winners are lawyers and accountants”. His remarks near the end of his article are worth repeating:
There is a ray of hope here. Last week the Republican National Committee officially endorsed a change to residence-based taxation. It’s only a first step. Most Democrats still support citizenship-based taxation, because it works for them as a partisan wedge issue. Still, the Republican change gives us hope the U.S. might eventually join the rest of the world.
The serious issues that Ms Jeker points out were predictable and discussed on IBS – and frankly it does not take a rocket scientist or a fortune teller to see this coming – seems like only the narrow minded and US centric Obama Administration and Congress (in 2010) missed this critical point. Some countries like Singapore and Malaysia that do not allow dual citizenship, may fine the person and require that they renounce the US citizenship. Other countries, such as in the Gulf (e.g. Saudi) may take much more serious actions against the ‘US Person’ including fines, jail, property confiscation or worse. As I have said here and to Mr. Woods at Forbes, the US Government is the biggest threat that US citizens living abroad face. It is a sad commentary that the US government in its quest to squeeze every last cent from Americans living outside the USA, effectively is destroying and endangering lives (financially and physical). Money is clearly more important and over-riding for the idiots in DC.
I would hope that Ms Jeker and the affected US Persons write to ACA, Ways and Means and Senate Finance to stress this angle.
It would be interesting to see how IRS and US Treasury would respond if a Canadian bank agreed to send a paper copy of each monthly savings account statement to Washington instead of figuring out how to complete forms designed by DC bureaucrats. If the US person agrees to that or if the bank makes it a condition for having an account, to comply with FATCA, then Treasury bureaucrats would actually have to WORK for a living instead of having everything automatically uploaded to their “secure” server.
The Metropolitain – article by David T. Jones, Washington, D.C. Entitled “Taxes & Dual Citizens”. I do not know how to share it on the Isaac Brock page. GOOGLE News. “Naturally, Can – Americans dual nationals are whining”.
Is David T Jones 12? Here’s the link, Ann#1, everyone:
@Don and @Jan, I have had conversations with Keyvn and he understands the issue. He just naively believes it is more chronic illness than terminal disease because if a person simply has good accountant and tax services – all will be well.
Of course, that’s not true because it hinges on the situation not becoming more complicated, contradictory and expensive as time goes on. It also doesn’t take into account people who are being told that they have decades of back compliance issues that they’ve never been made aware of before nor does it solve the problem for duals from birth who basically lived their lives in other countries or minors who spent a few years in the US but moved away and are also essentially citizens of other countries and … so on and so on.
The problem is that at some point in the later half of the 20th century, it got too complicated for countries to prohibit dual or more citizenship. It simply wasn’t easy to take into account or keep track of and for the most part, didn’t really matter.
And then came technology.
Now it is easy and multiple citizenship, which countries really don’t care much for, can be duly noted because it can be easily tracked down.
The US is just doing something it would have long ago had the means been available.
But knowing this is of little help. There is only way sure way out – short of being stupid rich and employing someone to take care of the finer details for you – and that is ditching the extra citizenship and it makes most sense to ditch the one from the country that you don’t make your home in.
Re: Is David T Jones 12?
I guess we could put this guy in the Isaac Brock Hall of Shame, but that would be giving him far too much legitimacy. Perhaps we should instead start a new Isaac Brock Hall of Complete Morons thread.
YogaGirl That doesn’t give Kevyn at MNP the right to give misleading information to people like John Johnson and charge $12000 in unnecessary fees.
“I was originally informed by the accounting firm I used, MNP, ….., that I would have to get current on taxes to pursue renunciation.”
Up to now, I’ve just seen banks asking if someone is a green card holder or born there, or has any other ties there. I haven’t seen anything asking where someone’s parents were born, until now.
I envy the people who were never born in the US.
Is it just me or is a typical upbringing in the US like Snow White and 12 dwarfes? We’re taught not to lie, cheat, do bad things. And then when we grow up, that’s what everyone, especially the government tries to do to us?
This kind of stuff happens a lot in the 3rd world: we have people trying to cheat us from all directions. Out of 6 bills I have, I’ve received 3 again, on purpose. The companies are hoping that we’ll just pay twice. If you want to dispute the 2nd bill, you have to spend 30 minutes to 1 hour waiting on the phone. It’s terrible. It’s sad to see the US lower itself to this skummy level.
Re: The Metropolitan Article
Same old tired argument. Does this author have any clue as to what it is to live in a different country?
– Traveling: How would you like to travel with an American passport? I would rather not travel with an American passport if I don’t have to. Apparently, I’m not the only [for now] “US Person” who thinks this way. State had some pages dedicated to this issue a while back on their site.
– Guilt by association: ignorant people blame us for stupid American decisions. I’ve been living overseas for half my life and I’ve heard my share of this crap from the 1990s – today.
Nowadays, if someone asks me why Americans do this or do that, I tell them to write a letter to the White House because I have no clue. The people in Canada probably blend in more, but I’ve always lived in non-English-speaking countries. I have an accent so it’s harder to blend in. My bad luck!
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