Who is the criminal? You–because you live “offshore”–or the media and politicians because of their “truths” ?
“Here’s another big, fat, hairy lie being trotted out right now by President Obama, Congress, and the mass media: ‘Offshore tax evasion costs the US Treasury more than $150 billion annually.’
That’s today’s number. In 2001, it was $70 billion annually. By 2010, the number was $100 billion. According to a recently published Senate report, it’s now $150 billion.
That’s one hell of a jump. Either the rich are totally sticking it to “the man,” or someone has been massaging the numbers just a tad.
Let’s look at the history, shall we?
The $70 billion figure originated with Jack Blum, an attorney and former congressional researcher. Blum cited this figure in 2001, when he signed an affidavit in support of an IRS summons for records from MasterCard and American Express.
He never explained how he arrived at this number……….”
Another interesting video.
Senator Warren claims that FATCA is going to drag in $150B while $870M per year is probably the real figure. $870M is a drop in the federal budget compared to the US’ real problems.
For Reagan budget director, David Stockman, weighs into the US federal budget situation.
Perhaps Senator Warren should watch this interview as well.
@ MuzzledNoMore and heartsick 3/22/15
I haven’t been to the USA since 1997.The reasons for not going there kept piling up and then FATCA piled on top of those reasons. I don’t expect the USA to ever make the changes needed to get me to rethink my now very firm stance to never go there. My formerly American husband had to make quite a few trips to visit his elderly mother. She passed away in 2012 and now that everything is wrapped up down there I’m not sure if he will be making any more trips. Last summer he worked an 8 state, 10K km, camping-driving tour into one more necessary visit and it might just have been his final farewell to the land of his birth … but that remains to be seen. I wonder how many people like us have been turned off of U.S. tourism because of American policy? Perhaps with such a huge economy they might not even miss our tourism dollars. Besides now they can extract our money by extortion, with the bonus of not even having to put up with our presence there to do it. It makes for fewer people to feed their irrational fear of terror tourists.
This is my 2 cents on how RBT would look for it to be palatable for the powers-that-be. It’s an attempt at a perspective from a homelander.
The main thing is that here would be something very similar to 8854 requirements.
1) It would be necessary to certify 5 years tax compliance. Given that the expat is severing her tax relationship with the US, it makes perfect sense to require her to be tax compliant beforehand. No tax compliance? Well, then no severing of tax residence status.
2) There would be a net worth threshold to contend with. This threshold would be based on the lifetime gift and estate exemption ($5.43M for 2015) at the time of severing tax residency. If the expat has a net worth at or below that threshold, no taxes would be due – *however*, the lifetime exemption, or some portion thereof, would have to be used. For example, assuming expat has a net worth of $3M, then in order to not pay any taxes $3M of the lifetime exemption would have to be used leaving $2.43M for future use. Future use would be for if the expat repratriated himself to the US and again became a tax resident.
3) Net worth exceeding the gift and estate exemption would be subject to taxation based on estate tax rules. E.g, assuming expat has a net worth of $7M, then $1.57M (7 – 5.43) would be subject to taxation. Pensions complicate things and I suspect it might be necessary to include the present value of a defined benefit pension in the net worth calculation as is now done for relinquishers in 8854.
I think the above makes sense from a homelander perspective because
1) it means that the person severing tax residency is not “getting away” with anything. He’s settling up his past, present, and deferred tax obligations, and thus the US loses little by letting him cease to be a tax resident (outliers like Eduardo Saverin notwithstanding). This is more or less the thinking behind Canada’s Departure Tax – a Canadian can sever tax residency, but he’s taxed along the lines as if he had died; resulting in a capital gains tax on the deemed proceeds of the deemed disposition of his assets (assuming no surviving spouse). Since the US, unlike Canada, has an estate tax, we end up with a somewhat different way of dealing with “tax death”.
2) it is not a revolutionary step – it is merely a reasonable extension to what is now done with relinquishers. It has the added benefit that since the expat retains US citizenship he may one day again become a tax resident and thus subject to US taxation.
FWIW, I believe current 8854 taxation is already based at least partly on estate tax rules and regulations. For example, the $2M net worth threshold likely came about because that was the estate tax exemption at the time the latest version of 8854 came into effect (2008).
Like I said, the above is from what I believe would be the perspective of a homelander. Notables are
1) non-compliant USCs are out of luck. So, anyone who’s not renouncing now because of an inability or unwillingness to become compliant would find their situation unchanged by this version of RBT.
2) the net worth threshold increases significantly. So anyone who’s not renouncing now because of net worth issues may find this version of RBT more palatable. OTOH, in the present case one can use the gift tax exemption to gift away $5.43M before relinquishing, thus making an effective exemption of $7.43M; so people in the position to be able to do this would come out worse off.
3) no special relief for accidental USCs or long term expats. At most, something like Obama’s proposal may provide relief to a narrow segment of accidentals.
My 2 cents.
This offers an indirect amount of taxes lost due to the “1%” and the multi-nationals…If they paid what they would owe , it would be in the “in the hundreds of billions of dollars….” watch clever accounting result in “double non-taxation” of this bunch of scofflaws and tax cheats.
@tdott: The problem with your proposal is that born duals who have never lived or worked in the U.S. as adults are stuck with huge compliance problems because of a residual citizenship that they never wanted. It’s sort of the opposite of the problem created by the new Obama proposals. There are two separate issues here: the U.S. needs to find a way for non-resident citizens who want to retain citizenship to do so without being bankrupted, and citizens of countries other than the U.S., who have never wanted anything to do with the U.S., despite a U.S. parent or birthplace, need to be able to establish that they are sole citizens of the countries in which they live — also without being bankrupted.
@tdott: to add to janb’s comment, the compliance costs for those of us who have spent our entire adult life living outside the US, 44 years in my case, can be mind boggling. I have nearly two dozen mutual funds, all held outside an RRSP because I was a stay at home mom and had almost no income of my own from which to generate any RRSP contributions. There is no way I could become compliant, even if I wanted to, which I don’t. So how about modifying your “tax compliance” requirements in paragraph one to acknowledge some of the more egregious aspects of compliance, specifically mutual funds and sale of primary residence. They are both killers.
” I wonder how many people like us have been turned off of U.S. tourism because of American policy? Perhaps with such a huge economy they might not even miss our tourism dollars.”
With the dollar weak the U.S. had plenty of tourist dollars rolling in. 2015 will be the first summer where the dollar is no longer weak, and expect the American tourist industry to begin to squawk. Might be a good time to point out the adverse effect of U.S. policy. I myself have only taken a couple of week-end trips to the U.S. to see my son and mother in the past 4 years. Definitely reluctant to go back. I also try to shop as little on Amazon as possible…
tdott: I understand that you are playing “devil’s advocate” in your suggestion above and I don’t want you to take my remarks here as a criticism of *your* position, but I hope that your idea is never implemented. The switch to RBT in the manner you have suggested (“from a homelander’s perspective”) would only benefit Americans who leave the United States *in the future*. Under your suggestion, none of *us* would benefit at all. I have been gone from the United States for 55 years, that’s well over half a century. Why should I have to lay my entire life’s finances before that government? In the immortal words of the “Eagles”, I am “Already Gone”.
On behalf of every single so-called “US Person” living outside the United States, whatever the circumstances that caused them to be in this situation, I am looking for nothing less than a complete exoneration. I would accept forgiveness but what I really want is a presidential and congressional apology! If that’s a problem from the “homelander’s perspective”, so be it.
And, on a completely different subject:
@ttt: I absolutely agree that it is time, and then some, to inform the US government of the adverse result of enforcing their absurd foreign tax policy upon those who have likely been amongst the U.S.’s most frequent visitors. Is it not a singularly strange economic policy to seek tax dollars that go into a black hole while discouraging tourist dollars which actively fuel the economy? *That* is one of the major idiocies of FATCA/CBT. Whenever I have an opportunity to comment safely to the U.S. government (as in the package of testimonials being sent to the Senate Finance Committee by Tricia and Stephen, et al.) I always touch on this issue.
@ No Name You can add calling our local government registered accounts “foreign trusts” and penalizing us for saving for our retirement, our childrens’ education and the future of our disabled children to the list. After all similar accounts are available in the US to those living in the US (and not penalized by the US) but for some reason our local accounts, held in the financial institution down the street from where we live, are attacked through US taxation and the associated high tax form accounting fees for US tax filing. The US needs to acknowledge that we are just trying to live our lives the same as those living in the US, there is no reason to treat our local accounts as “foreign”, we are investing were we live.
@ ttt It’s too bad the US dollar strengthened at the same time the knowledge of FATCA and CBT is increasing. Of course US policy will not be blamed unless people get more vocal about their reasons for avoiding the US. As stated by EmBee, many of us are increasingly uncomfortable with other things going on in the US as well as FATCA and the CBT inflicted on its citizens living abroad as punishment. Those of us with no ties to the US can easily avoid going there.
@janeb, @No name
Note that it’s not really my proposal, it’s more something of a thought experiment on what RBT might look like in order to be acceptable to homelanders (hence the use of the term “homelander perspective”).
I totally sympathize with what you’re both saying. It’s just that I don’t see those issues getting much traction with homelanders – they just don’t see things from an expat’s perspective.
Good find in the other article comments section http://www.ntanet.org/NTJ/62/4/ntj-v62n04p727-53-tax-havens-international-tax.pdf
“Guttentag and Avi-Yonah (2005) estimate $50 billion in individual tax evasion, based on an estimate of $1.5 trillion of non-U.S. holdings held by high net worth individuals, using a 10 percent rate of return and a 33 percent tax rate. They also summarize two other estimates of $40 billion by the IRS, and $70 billion by an IRS consultant in 2002. ” Another source of the lie.
Indeed, she recommended FATCA p 746
The United States could impose withholding taxes on interest income and other exempt income received from U.S. sources by foreign intermediaries, and provide a refund upon proof that the beneﬁcial recipient was eligible. Alternatively, withholding could be imposed unless the names of customers including beneﬁcial owners were provided. President Obama’s proposals would impose withholding requirements with a refund mechanism, but only on non-qualiﬁed intermediaries
One problem with inflated estimates of tax evasion is that if the US Gov doesn’t recover these sums it will assume that penalties and enforcement needs to be escalated. You can imagine some lawmaker yelling “why aren’t we getting that $150bn back?”
Australia is now joining the AIIB. South Korea and Japan next?
Government “Stats” Strike Again