If u want 2 renounce ur US citizenship DO NOT believe those who say u can be refused entry ever again-IT IS NOT TRUE https://t.co/I7K58J2jzd
— Patricia Moon (@nobledreamer16) June 2, 2016
I have become very tired and once again, extremely irritated at claims “if you renounce for tax reasons, you can be refused entry into the United States-ever again.” This is simply not true. It is late and am finally sleepy so am just going to copy/paste from set of tweets created after seeing a volley of tweets between Keith and 2 other individuals. I hope it makes sense. Please, please, please, make sure you become familiar with this information in an accurate way and pass it on every time the issue comes up.This is the only way to offset the way this information is aggressively used to frighten people. There is no excuse for it. I hope someday, someone who fell for it realizes the deceit and sues the damned compliance person who is responsible for it
MYTHS ABOUT THE REED AMENDMENT & THE ExPATRIOT ACT
No would-be US renunciant/relinquisher should ever believe an advisor 2 making claims about Reed Amendment preventing ability to enter the U.S.1/11
Willard Yates on why the Reed Amendment is unworkable. “There was a little problem from the outset. It’s called section 6103 of the IRC.” http://bit.ly/1ud93xP 2/11
S 6103 prohibits disclosure of “return information,” by the IRS, subject to criminal prosecution under Title 18 of the U.S. Code” http://bit.ly/1ud93xP 3/11
How was the IRS going to tell INS that a taxpayer’s expatriation was tax motivated? Ruling procedure eliminated in 2004. http://bit.ly/1ud93xP 4/11
Whole idea of the mark-to-market tax section 877A was 2 eliminate “motive” element of prior version of S 877 http://bit.ly/1ud93xP 5/11
IRS does not make rulings on whether or not expatriation was tax motivated. In 2002, authority switched to DHS. http://bit.ly/1ud93xP\ 6/11
DHS has never issued regs bc unless former citizen admits given up due to tax, no way to enforce. From 2002-2015 -only 2 refused entry. http://bit.ly/2850Le8 7/11
Implementation of section 212(a)(10)(E) of the Act has been hindered by numerous policy, operational, and legal complexities and challenges. http://bit.ly/2850Le8 8/11
Confidentiality laws prevent disclosure of tax information to DHS or DOS absent a voluntarily signed disclosure from the renunciant. http://bit.ly/2850Le8 9/11
Congress since amended the tax code to eliminate a direct connection between expatriate tax liability and a renunciant’s intent. http://bit.ly/2850Le8 10/11
There is no law called the ExPatriot Act. Claims in 2015 that it would pass since attached to immigration bill incorrect. Has failed twice to be passed into law. 11/11
To recap, the Reed Amendment, passed in 1996 has to date, twenty years later, resulted in only two people being refused entry into the United States. And only because they chose to explain that they renounced for tax purposes. NO ONE has been stopped at the border and refused entry because a CBP agent suspected they renounced “for tax purposes.” There is NO CONNECTION between an expatriate’s tax liability and a renunciant’s intent. NONE!
@Mr A
That’s a great idea. I wrote to him about how the indicia method of identifying US persons will result in a lot of false positives and negatives, and expressed my concern for people who’ve relinquished getting railroaded back into the US tax system in error by the banks by virtue of the fact that they are sending them to compliance people instead of citizenship experts. Didn’t hear back from him.
Am I being too simplistic when I ask how the IGA’s can be sanctioned under the treaty when exempting TFSA’s, etc aren’t under the treaty?
As I understand it, in the UK, the IGA is implemented via Article 27, Exchange of Information. The exchange of information is already authorised under this article. It doesn’t matter if something’s tax-exempt or not. It can still be reported on, or not reported on, depending on what’s asked for by the requesting state.
Canada’s arrangements may be similar?
@Iota, here is a glimpse into the minds of our own UK politicians.
Sound familiar?
And take a look at this tweet from a former UK Conservative MP;
“Sovereignty is overrated. It wont pay the rent or put dinner on the table, it wont keep people in jobs.”
https://twitter.com/Edwina_Currie
Who is this person, “Writer, Broadcaster, Politician. Former Chairman of Conservative Group for Europe.”
@Ann #1.
“Still confident that I did do the right thing; if they bar me from entry that’s ok. I haven’t visited since 1999 and if I should ever have any money to travel, other countries are happy for me to stimulated their economy. If they try to recapture those who have renounced properly, then I guess they will be top on the list for human rights violations.”
It is not for me to argue that you didn’t do the “right thing” because in the never-never land of US tax law that’s something which just doesn’t exist. There is only what you yourself feel most comfortable with. I was merely pointing out that there will never be certainty no matter what a person does.
As a self-relinquisher I did pretty much the exact opposite of what you did and I also believe I did the right thing, for me. Like you, I’m mentally prepared for the very unlikely possibility of being banned. It would be an inconvenience but certainly not a catastrophe. An unexpected bonus is that in order to minimize my interactions with the US government (and therefore the chances of some sort of problem) I have been enjoying seeing a lot more of Canada.
@maz57 An unexpected bonus is that in order to minimize my interactions with the US government (and therefore the chances of some sort of problem) I have been enjoying seeing a lot more of Canada.
exactly……and the rest of the world for that matter 🙂
Schumer and other vindictive Senators / Legislators will likely try again and again — they will continue with great revenge for Eduardo Saverin leaving (who to my reading left according to US law and paid his dues in exit taxes) and any others of us who decided / chose of our free will to leave the US. It is the same mentality that tells us in comments to articles regarding US expatriation not to let the door hit us in the ass on our way out. Those who choose to expatriate should do so only with full knowledge of the Reed Amendment and other absurd forms of punishment that could (but hopefully won’t happen). The Reed Amendment is too often used as the selling point that we could very well be punished; better consider if we want to ever see family again. The USA runs on fear-mongering of many types, the Reed Amendment another means to slow down the pace. What other threats must we take to heart to alter our behaviour?
We discussed it early on and here is one of Shadow Raider’s comments:
http://isaacbrocksociety.ca/2012/05/17/senators-to-unveil-the-ex-patriot-act-to-respond-to-facebooks-saverins-tax-scheme-abc-news/comment-page-1/#comment-18223.
There is much to admire in such persons as the one the US lost today – RIP Muhammad Ali, who wasn’t cowed by fear.
http://www.gilderlehrman.org/history-by-era/civil-rights-movement/essays/importance-muhammad-ali
He really stood up for what he believed in. So are we in standing up for what should be our Rights and Freedoms of the Canadian Charter just as that for any other Canadian.
The compliance condors like to blather on about the remote possibility of punishment for renouncing US citizenship but what they totally neglect to mention is the continually increasing punishment for those who try to remain US citizens. One way or another you are going to be punished so you might as well just renounce, get it over with, and be free. They are altering behavior but not the way they intended.
I remember from High School and studying the Civil War and the years up to it. Slave owners would spread rumours amoingst the slaves about what would happen to them if they were picked up in the North or in Canada.
They could say ANYTHING but the slaves that made it to Canada would never communicate with slave relatives again so any rumour could be spread.
The purpose was to discourage runaway slaves.
And they are still trying to discourage runaway slaves. It didn’t work then and it doesn’t work now. Humans recognize injustice when they see it and will go to great lengths to escape from it.
maz57 said:
Exactly!
@iota @Mr A
Thank you both for your different perspectives in answering my question about TFSA’s, etc and the treaty.
I read an interesting article sent to me by the Tax Foundation yesterday that others like you who know more about taxes than I do should maybe have a look at. The idea of the US no longer concerning itself with the tax regimes of other nations sounds great to me. Can this be applied to individuals?
“Our worldwide system doesn’t just impact the competitiveness of our multinationals; it allows other countries to define our tax base. Australia, when it changes its tax rate, defines our federal revenues, which is dubious policy from our perspective. It would be better to stop having the IRS concerned with what goes on abroad; this would best be done through a territorial or dividend exemption system. Under such a system, we would no longer concern ourselves with the tax regimes of foreigners. Instead, we would allow our corporations to operate freely in other countries under whatever tax systems those countries impose. Then, to the exent that this makes money for U.S. shareholders, the income would be taxed at the shareholder level.”
http://taxfoundation.org/blog/puzzling-policy-foreign-tax-credits?mc_cid=7479ce4272&mc_eid=6f30773d2e
@Bubblebustin – I saw that article and was left scratching my head. I don’t really follow what the writer is proposing. He wants US corporations not to have to pay US tax on their non-US-source profits, which would presumably result in a loss of revenue to the US. So it would probably be a hard sell. I’m probably missing something.
@Iota: US corporations already don’t pay US tax on their non-US source profits. Under the present system those profits will not be taxed by the US until such time as they are “repatriated” i.e. brought back to the US. If and when that happens, the corporation must then pay the difference between the US corporate rate (currently 39.5%, one of the highest in the world) and whatever rate was already paid to the foreign jurisdiction where the profits were made. That’s why the big US corporations have massive amounts of cash on their books from overseas operations. They would rather reinvest it outside the US and make more profits than bring it home and give a bunch of it to the government. It is CBT for corporations but operates differently than for individuals because the income isn’t taxed by the US until it is brought back home. A crazy system, but there you have it…US exceptionalism at its finest!
But consider this: a foreign company, like BMW, makes a bunch of money in Germany, pays German tax on it, then decides to take some of that money and build an assembly plant in Tennessee. They can do that and will be welcomed with open arms. Contrast that with a US company, say GM, which makes a bunch of money in Germany, pays the German tax on it, and then decides to bring the money to the US to build a plant in Tennessee. Before GM can do anything they have to fork over the US tax on those repatriated profits. In other words, the US tax system actually gives foreign companies who wish to set up operations in the US a competitive advantage! I’m not making this up!
That’s why these corporate inversions are so popular lately. A large US company buys a smaller foreign company but structures the deal such that the large US company is “taken over” by the smaller company and then becomes a foreign company domiciled outside the US. Voila! No US tax except on US operations. (Plus all that offshore cash can now be brought into the US tax free!) Don’t you just love the intelligence of the US tax code?
@maz – Company tax, then, is it?
The Australian Institute article referenced by the Tax Foundation piece says:
Whatever the tax is called, it seems to me it might be hard to get Congressional approval for eliminating it while it’s bringing in revenue.
Maz & iota,
I think the Australian Institute article is ignoring the fact that the US only taxes foreign profits of US corporations when the money is repatriated to the US. The IRS still has a problem with Australian tax policy affecting US tax revenue, but with lower Australian rates there is an even greater incentive for US companies to reinvest profits in Australia rather than investing in the US or paying taxable dividends to US shareholders.
Either way, the US actually benefits from territorial taxation of companies.
Karen said: “Either way, the US actually benefits from territorial taxation of companies.”
Yes, I agree.
The Tax Foundation argument does not make much sense, as far as I can see.
@iota –
I really don’t understand the US insistence on CBT for corporations or individuals. RBT/territorial taxation could actually increase tax revenue (maybe not penalty revenue).
Non-resident US citizens with US investments would pay the treaty rates on their US portfolio income, rather than paying tax at lower marginal rates. This tax would be withheld at the source and the IRS would save as there would be fewer returns to process.
US corporations with overseas income would be free to repatriate that income and invest it in the US (or pay taxable dividends). Again, increasing US tax revenue.
@Karen – CBT limits the investment options for non-resident compliant US citizen individuals, thus sucking capital into the US. With RBT, non-resident US citizen individuals would be free to save for their retirement in their country of residence, paying taxes in their country of residence and not paying anything to the US at all.
If I’m not mistaken, that’s the point of CBT, where individual non-resident taxpayers are concerned – US capital accumulation.
The exit tax rules illustrate with horrible clarity what the US feels it’s being cheated of whenever a US citizen renounces US citizenship.
On a human level, it’s insane. But on a capital-accumulation level, it makes perfect sense.
@iota
Point taken. But, if that is the real aim of CBT, then the US is doing a really bad job of it. Long-term expats have difficulty investing their money in the US without a US mailing address.
For many reasons it makes more sense to invest locally in direct shares and direct property. First, you avoid the currency risk. Second, local investments are much easier to monitor. Third, your home country may tax your foreign (US) investments punitively.
Having said that, I’m looking forward to having a full range of investment opportunities after I renounce next week.
“The exit tax rules illustrate with horrible clarity what the US feels it’s being cheated of whenever a US citizen renounces US citizenship.”
Yes the US understands that perfectly. That’s why the US has been paying countries where immigrants were educated, to reimburse taxpayers of those countries for the expenses of educating them. The US has been doing this for hundreds of years, give or take a few centuries.
“Third, your home country may tax your foreign (US) investments punitively.”
Don’t we wish. If Canada would punitively tax every foreign (US) investment made by a bank, preventing banks from investing in the US, we wouldn’t have to worry about the US withholding 30% of nothing.
If US individual tax worked the same way as US corporate tax, none of us expats would ever pay a penny of US tax until we tried to take the money back to the United States. Obviously nobody in their right mind would do that and CBT would be pointless.
That’s why certain Congressmen have their knickers in a knot about US companies which don’t bring the cash back home and expose the it to US taxation. They then accuse them of not being good corporate citizens when it is the tax code itself which is the problem. When you have the world’s highest corporate tax rate everywhere else looks like a tax haven.
Of relevance to this discussion: Roger Ver spoke in person at a bitcoin conference in Denver, Colorado recently.
https://btcmanager.com/news/roger-ver-at-5280-feet-on-bitcoin-and-his-life-journey/
This provides obvious evidence for his earlier statement that he was able to obtain a US visa in Tokyo without any Reed Amendment problems
http://pastebin.com/iUS72J9E
All the Homeland “journalists” like Josh Marshall of Talking Points Memo, who said “I don’t think American citizens who renounce their citizenship for tax purposes should be allowed to return to the country ever” and who claimed his visa denial was due to the Reed Amendment, have yet to issue a retraction.