— U.S. Citizen Abroad (@USCitizenAbroad) October 15, 2014
According to Allison Christians of McGill University Faculty of Law, the problems addressed by the conference’s panel on international taxation are not much different from those faced by four academics more than 90 years ago when asked by the League of Nations to study the question of how to share the world’s income tax base. Christians said the crucial issue now is the failure to tax income as opposed to double taxation, which worried policymakers then.
“If you gave international tax a grade over 90 years, it would be an F,” Christians said.
“We will not take fairness seriously on the international stage.”
Christians said that powerful countries too often end up calling the shots, much to the detriment of a fair and orderly international tax system. “When we turn to power, we sacrifice both efficiency and equity . . . and administrability as well,” she said.
Christians was especially critical of the U.S. for using the Foreign Account Tax Compliance Act to expose underpayment of U.S. personal income taxes while cautioning that the OECD’s base erosion and profit-shifting initiative could negatively affect U.S. multinationals.
“FATCA leverages U.S. control over the global financial system, thereby forcing the populations and governments of poorer countries to direct precious tax administration and regulatory compliance resources toward the enforcement of the U.S. tax system over their own,” Christians said. “Yet the U.S. has not used this same leverage to respond to base erosion. U.S. lawmakers have not seen as great a good in stopping tax avoidance by U.S.-based corporations as they have in stopping tax evasion by U.S. individuals.”
Speaking of Allison Christians, read her thoughts on Mr. FBAR:
— U.S. Citizen Abroad (@USCitizenAbroad) October 14, 2014
You can download the paper here.
Some persuasive arguments:
The Foreign Bank Account Report, or FBAR, is part of a regime designed to stop
terrorists, money-launderers, and tax evaders. Unfortunately, its increasingly
draconian requirements and consequences now apply to millions of innocent
bystanders who are collateral damage in the ongoing battle against financial
crime. Their inclusion in the FBAR regime is a massive waste of both government
and taxpayer resources, effectively criminalizing activities that are wholly
unconnected to financial crime, and perversely discouraging compliance. All of this
is unnecessary because as the administrator of FBAR, Treasury can immediately fix
It wasn’t always this way for FBAR. When it was first adopted, Treasury’s instinct
was to integrate foreign account reporting with the annual federal tax filing regime.
The IRS created form 4683, and included a line in the 1040 very clearly instructing
taxpayers to fill out this new form if they had any foreign accounts. Indeed, form
4683 instructed the taxpayer to avoid redundant reporting of information the
taxpayer provided elsewhere in her return. In the intervening years, FBAR has
transformed from this integrated system – targeted to a narrow and specific
population, involving a clearly understandable and easy route to compliance – to a
regime that is the polar opposite in every respect. This transformation has
massively diluted Treasury’s ability to identify criminal activity, and now many
individuals are being punished for paperwork crimes where there is no grounds for
suspicion of any actual criminal activity. There must be a better way.
But Treasury could very clearly effect the necessary reforms immediately
under the express terms of its statutory authority to implement FBAR. The law
plainly conveys Congress’ intent that this regime avoid undue burdens on people
that are unlikely to be engaged in financial crimes, and provide that Treasury can
exempt groups of persons, categories of accounts, and even countries, from FBAR’s
U.S. persons living permanently in other countries may disagree with the U.S. policy
of taxing citizens on a global basis. A harsh regime that involves extensive and
duplicative financial reporting with a criminal stigma attached is a recipe for
deepening resentment. If the United States takes the sensible route in adopting
residence-based taxation, the extreme cost of FBAR filing, measured in dollars and
time spent as well as an increasingly fragile taxpayer morale, will disappear along
with millions of unnecessary annual returns showing no tax owing. This will free up
scarce administrative resources, allowing the IRS to turn its focus where it belongs;
on those who are determined to cheat and evade the system to the detriment of
everyone. Until then, it is in the interest of all taxpayers, the IRS, and the income tax
as a whole that FBAR compliance be a normal rather than criminal experience, and
that it be no more difficult or draconian than is absolutely necessary.
Quotes and added emphases with permission of author.