Liberty and justice for all United States persons abroad

The Isaac Brock Society

Posted on by Posted in Issues regarding US persons abroad 33 Comments

Today the E.U. ruled that the “tax deal'” that Apple negotiated with the Government of Ireland violated the E.U. prohibition on “State Aid”. Understand that this decision was NOT about taxation. It was about the Government of Ireland giving a benefit to one company (zero tax) which they wouldn’t give to other companies. It just so happened that the benefit given was a generous tax deal.

Anxious to characterize the E.U. decision has a “tax related decision” (probably because the United States perspective is that EVERYTHING is about taxation), the Obama Treasury commissioned a “White Paper” which was released on August 24. (You can read it below.) The “White Paper” is evidence of a standard of hypocrisy which should be an embarrassment for even the administration of Barack Obama. One of the objections (among many) was that (assuming that this is about taxation, which it actually is not) the E.U. was engaging in “retroactive” tax enforcement.

 

White-Paper-State-Aid

 

See the following from page 15 of the Obama Treasury White Paper:

III. The Commission Should Not Seek Retroactive Recoveries Under Its New Approach

Where State aid involves impermissible subsidies provided through the tax system, the Commission requires the Member State to recover the amount of tax that, in the Commission’s view, should have been imposed in the first place. These amounts can be significant, since the Commission can require recovery for up to ten prior years, with interest for the period the illegal aid is granted until the aid is recovered.

In Fiat and Starbucks, the Commission has ordered the Member States to recover the allegedly unpaid tax with respect to prior tax years.

Because the Commission’s approach in the State Aid Cases is new and was not foreseeable by the relevant companies, recovery of past allegedly unpaid tax would constitute retroactive enforcement of a newly adopted approach to State aid.

With no indication of the Commission’s new approach, U.S. companies have been receiving transfer pricing rulings from EU Member States for decades and had no reason to doubt their legality. Under these circumstances, recovery of past allegedly unpaid tax would be inconsistent with EU legal principles and the Commission should void retroactive enforcement.

 

As I read the complaint of the Obama Treasury, I thought that …

III. The U.S. Treasury Should Not Seek Retroactive PFIC Penalties Under Its New Tax Treatment of Americans abroad

Where the investment in mutual funds involves impermissible tax deferral provided through the retirement planning system, the U.S. Treasury requires the American living abroad to pay the “interest charge” imposed on investing in a non-U.S. mutual – the amount of tax/interest that, in the Treasury’s view, should have been imposed in the first place. These amounts can be significant, since the United States Treasury can require recovery for many years dating back to 1986, with interest for the period that the illegal mutual fund was owned until the interest is recovered.

In Streamlined and OVDP, the IRS has ordered the taxpayer abroad to pay the allegedly unpaid interest charges with respect to prior tax years.

Because the U.S. Treasury’s approach in the treatment of Canadian (and other non-U.S. mutual funds is new and was not foreseeable by the taxpayers abroad, recovery of past allegedly unpaid tax and interest charges would constitute retroactive enforcement of a newly adopted approach to IRS treatment of Canadian mutual funds.

With no indication of the IRS’s new approach, U.S. citizens living abroad have been investing in non-U.S. mutual funds purchased from non-U.S. mutual fund companies for decades and had no reason to doubt their legality. Under these circumstances, recovery of past allegedly unpaid tax, interest and penalties would be inconsistent with fair tax principles and the U.S. Treasury should avoid retroactive enforcement.


There’s hypocrisy, extreme hypocrisy and the Obama administration!

33 thoughts on “The hypocrisy of Obama’s Treasury knows no bounds! Only the USA should be able to tax US companies!!”

  1. This is nothing new. The U.S. ONLY sees things from its own narrow perspective and is outrages that other sovereign nations would dare to apply laws that only the U.S. feels that it is entitled to apply. Fortunately, that game is over. FATCA and various other U.S. extortion operations, notably on several European banks, BNP Paribas for one, whereby U.S. law was applied extraterritorially and the bank was fined 8.9 billion Euros in 2014 for breaking rules that were valid in the U.S., but not elsewhere. Similar shakedowns were carried out by the U.S. Treasury with Deutsche Bank and others. Add FATCA into all of this and the international banking community has had enough. There are already parliamentary inquiries in France into the U.S. applying its laws extraterritorially on French citizens, resident in and paying their taxes in France. One parliamentarian has even gone so far as sending a report of this U.S. “shakedown” to French President François Hollande. Other members of parliament are taking up the issue and want to confront this invasion of their nation’s sovereignty and the siphoning out of funds that should remain within their own economy. Similar moves are afoot in the Netherlands, Germany, Estonia and Israel.
    FATCA and all the other extortionist and shakedown policies of the Obama administration will make it go down as one of the most unjust and corrupt administrations in history and thanks to FATCA the blowback and outrage will now intensify. Expect more of these Apple tax type of cases to continue and further foreign efforts to stifle the out of control IRS and U.S. Treasury, who believe that they can maraud across the world fining and taxing foreign banks, funds and individuals who are not within their scope nor within their legal jurisdiction.

  2. Yeah, complete 180 from the days of the “Rebellion against the Rightful Monarchy of England”, isn’t it?

    Then: “We don’t want to be taxed!”

    Now: “No fair, we can’t tax everybody else!”

  3. It’s been a bad few days for the US vis-à-vis the EU. TTIP is been declared DOA this week.

    All the US has to do is threaten to pull out of NATO and any remaining US troops leaving the EU at Putin’s mercy than it’s complete. The US won’t have many more threats left.

    Chuck Schmuer seems to forget the $Bs he inflicted on the world’s financial institutions, but hey he lives in his own reality.

    The US’s place in the world is changing.

  4. It’s not changing fast enough in my books. They need to go back to the solitary insular little shit that they were back before WWII – minding their own fucking business.

  5. Sounds like Ireland will envy Britain its Brexit. I know the Swiss said they didn’t want to be ruled by Strassburg either.

  6. “The U.S. ONLY sees things from its own narrow perspective and is outrages that other sovereign nations would dare to apply laws that only the U.S. feels that it is entitled to ” – That’s the frightening truth of the matter. Corporate CFO. Nice succinct summation of the attitude of the United States.

    Here’s another “It’s unfair unless we’re the one’s doing it.”

  7. So, our beloved European Commission will do the same with CBT-FBAR-FATCA, right? … … … right?

  8. It’s interesting that if Apple pays, that’s over 10 years of FATCA revenue gone in a puff of smoke!!

  9. Because the U.S. Treasury’s approach in the treatment of Canadian (and other non-U.S. mutual funds is new and was not foreseeable by the taxpayers abroad, recovery of past allegedly unpaid tax and interest charges would constitute retroactive enforcement of a newly adopted approach to IRS treatment of Canadian mutual funds.

    Yet another example of how the US has moved the goalposts over the past several decades. And most expats who have been outside of the US for decades weren’t aware the goalposts had been moved until it was way too late to do anything.

    The situation is similar with superannuation in Australia, except that we don’t even know where the goalposts are!

    See http://fixthetaxtreaty.org/2016/08/31/entrapment/

  11. “There’s hypocrisy, extreme hypocrisy and the Obama administration!”

    Obama & crew would take this as a compliment.
    How so? They grasp the underlying (pun intended) relationship between hypocrisy and exceptionalism. The more exceptional you are, the more that examples of extreme hypocrisy serve as proof of your exceptionalism.

    – – – – – – – – – – – – – – – – –
    “The “White Paper” is evidence of a standard of hypocrisy which should be an embarrassment for even the administration of Barack Obama.”

    Yes, it should be an embarrassment. But you can’t shame these guys. They know that exceptionalism not only grants immunity from embarrassment… it turns hypocrisy into a source of pride.

  12. Great observation, Shovel. They cannot be shamed (sounds like whining to them, which in their minds should be returned with a further beating). We must fight fire with fire.

    Will the UE Commissioner roll?

  13. Isn’t “retroactive tax enforcement” exactly what the IRS, FATCA and all the other acronyms do to citizens choosing to live outside the US

  14. @Gail

    Is it really retroactive, when the taxing of it’s non-residents has been around since the Civil War? The only thing that’s changed is that Americans abroad are becoming aware of it, and the US seems more eager to enforce it.

  15. @All

    Friends, how much longer are intelligent people going to continue this Hamlet routine about deciding which way to go in this election? The notion that “Well, we just can’t trust either of them . . . “ is not viable.

    The GOP and Democratic positions are clear. One says get rid of FATCA and CBT. The other says, more “tax justice” pain with maybe (maybe – no promises!) SCE. So which side is getting all the attention? The Dems and SCE. What sense does that make?

    Will American Expats Miss This Year’s Historic Opportunity on FATCA and RBT by Chasing a “Same Country Exception” Mirage?

    http://www.repealfatca.com/index.asp?idmenu=4&idsubmenu=325&title=will-american-expats-miss-this-years-historic-opportunity-on-fatca-and-rbt-by-chasing-a-same-country-exception-mirage (<== I NOTE THAT DESPITE ITS CLEAR RELEVANCE THIS ANALYSIS *STILL* HAS NOT BEEN POSTED ON BROCK!)

    Now we have news from Israel about a major blow via a lawsuit by – who, Dems? No Republicans:

    Court Bars Preparations to Share Tax Data With U.S.

    http://www.haaretz.com/israel-news/business/.premium-1.739683?v=58C1CF80C8D3170DCD934F00284EC5C2

    If this is sustained in Israel it could be game changer. Might other countries – Canada maybe? Australia? UK? CH? – finally grow a pair and tell the U.S. Treasury Department to shove it? Or will they just keep asking pretty please for the Treasury to beat them with a lighter stick (and not even get that)?

    Now That It’s Clear the U.S. Will Not ‘Reciprocate’ on FATCA, Will ‘Partner’ Countries Wise Up?

    http://isaacbrocksociety.ca/2016/08/03/now-that-its-clear-the-u-s-will-not-reciprocate-on-fatca-will-partner-countries-wise-up/

  18. @Charl

    The notion that any presidential candidate would be personally conversant with these issues and committed to them is not realistic. You may not like that, but it’s the truth.

    So I assume Trump’s never heard of FATCA and never thought about CBT/RBT. He may have and I’m not aware of it but if so I would be surprised. But I do know for a fact people on his staff are knowledgeable in this area and support the platform position. More importantly, the Republican National Committee has thought about these issues and committed to FATCA repeal and switching to RBT. That’s the formal position of the party. If Trump wins and there’s a GOP tax reform bill next year, there will be a lot of cats and dogs the party supports we need to shoehorn in. Is it a guarantee? No. But it’s powerful leverage. As opposed to the Dems, who don’t even promise anything.

  20. “The notion that any presidential candidate would be personally conversant with these issues and committed to them is not realistic. You may not like that, but it’s the truth.
    So I assume Trump’s never heard of FATCA and never thought about CBT/RBT.”

    That’s easy to solve. The UK should rule that Trump is taxable as a resident because of his property holdings in his mother’s country.

  21. “(<== I NOTE THAT DESPITE ITS CLEAR RELEVANCE THIS ANALYSIS *STILL* HAS NOT BEEN POSTED ON BROCK!)"

    That's easy to solve. The following paragraphs (and the preceding paragraph) are copyright by Jim Jatras. Normally a full quotation would not qualify as fair use, but Mr. Jatras seems to be requesting, therefore consenting, that it be posted on Brock.

    "August 27

    Will American Expats Miss This Year’s Historic Opportunity on FATCA and RBT by Chasing a “Same Country Exception” Mirage?

    Source RepealFatca.com | filed in News | Author Jim Jatras

    Several weeks ago in The National Interest, known as the flagship of American foreign policy realism, I published a commentary comparing the relevant portions of the 2016 Republican and Democratic political platforms addressing the concerns of American expatriates (“expats”) and to some extent of other people (dual nationals, “accidental Americans,” etc.) caught in the blunt-instrument machinery of the global financial information dragnet. (“GOP Woos Americans Abroad, Democrats Tell Them to Get Lost,” August 1, 2016; text below) To date, no other publication of which I am aware has made such a direct comparison of the two platforms, in either a commentary or news format.

    This omission is not because the differences are not newsworthy. As detailed in the TNI commentary, the contrast could not be sharper. The GOP language is direct, clear, and unambiguous: FATCA must be repealed and the U.S. should shift from citizenship-based taxation (CBT) to residency-based taxation (RBT). The Democratic language is vague and insulting, mentioning expats only in passing in the context of tax evasion, terrorism, and corruption. CBT/RBT is totally ignored, and FATCA relief is only hinted at as “finding the right solutions” for Americans abroad. The latter is taken as an oblique reference to creating a “same country exception” (SCE) for FATCA.

    You would think that given this gap, the choice would be clear across the expat community and the media that serve them. But instead, with a few honorable exceptions, the GOP language has been largely ignored except by the FATCA-natic “tax justice” crowd who predictably (and dishonestly) blasted it as attacking an “effective anti-tax evasion measure” and “effectively advocating for tax evaders.”

    Conversely, the thin gruel the Democrats have ladled out has received disproportion attention in the context of what I regard as quixotic efforts to achieve an SCE carve-out from FATCA. Even if such a carve-out were attainable (a slim chance at best), it would hardly constitute the solution it is touted to be. Even with SCE, the blind panic reaction of non-U.S. financial institutions in dropping their American clients would scarcely be relieved and might even be aggravated by adding yet one more layer of complexity to their compliance load (“Where does this person live?”) A U.S. passport or birthplace would still be seen as the dreaded Mark of Cain, leading more people reluctantly to conclude that “when it’s all said and done: all roads lead to renunciation” of American citizenship.

    Even worse from expats’ perspective, SCE (if it happened) would make adoption of RBT less likely (“Hey, we fixed your damn problem – now shut up!”). Finally, by supposedly “taking care” of expats, the “canary in the coalmine” when it comes to FATCA, SCE would signal a decisive abandonment of any hope of getting rid of a massive, invasive, expensive, and counterproductive pillar of the global surveillance state and set the stage for “global FATCA”: GATCA.

    Some may feel a targeted “smaller fix” that narrowly addresses expats’ concerns (i.e., SCE) is more “doable” than what seems a “bigger” task (FATCA repeal). The opposite is the case. An SCE fix addresses only a “niche issue” with no appeal outside of the expat community. (If Hillary is as smart as she is evil, she’d promise to institute SCE and then forget all about it after she had won.) FATCA gores a lot more oxen than CBT does; a FATCA repeal effort, if one were ever belatedly launched (I keep hoping!), would find plenty of allies. Instead of a force multiplier in working against FATCA, an SCE focus means wasting the unprecedented leverage provided by the Republican platform language. Moreover, as I have long argued, replacing CBT with RBT is far less achievable as a stand-alone enactment than piggybacking RBT on FATCA repeal. The wording of the GOP platform supports that approach.

    From my work on earlier GOP platforms, I can attest that fat corporations with powerful lobbies work for months, even years, and spend hundreds of thousands of dollars, to get just a sentence, just a phrase into a party platform that kinda, sorta, maybe points to their interest. This year expats have a whole paragraph, and a very explicit one, that’s spot-on their critical concerns. As platform language goes, this is the gold standard, and it has fallen on expats like manna from heaven. But instead of being hailed and jumped on as an extraordinary opportunity, it’s mostly been ignored or pooh-poohed while inordinate attention is being paid to bogus hints – not even promises – from the very party that birthed the phony “tax justice” torture regime.

    In 2016 expats and others who have problems with FATCA and CBT have a clear choice: either Donald Trump and the GOP ticket have your vote, or you can roll the dice and hope against hope that if he loses, somehow, in some way, something good might possibly, maybe, perhaps someday happen under Hillary Clinton (and your prospective new First Lady, Bill the Molester). Keep in mind that if Trump does win, he’ll definitely have a GOP Senate (the House will stay GOP in any case), meaning that the ability of the Grand Old Party to keep its promises will be there. If Hillary “Queen of Chaos” Clinton wins, gridlock in Washington will be the least of the world’s and America’s problems.

    It’s time for expat voices to come out in clear and unequivocal support for the GOP ticket and platform. Even if it’s limited to this one aspect of the platform, with caveats like “while we don’t agree with all positions in the platform, or agree with the candidate on this or that, we strongly urge this vote.” In the end, it’s about who gets to make the rules starting in January 2017 and making sure they see that expats were with them and are owed something.

    The text of “GOP Woos Americans Abroad, Democrats Tell Them to Get Lost” follows:

    GOP Woos Americans Abroad, Democrats Tell Them to Get Lost

    Jim Jatras

    August 1, 2016

    American citizens who live outside the United States are one of the least visible constituencies in U.S. politics. This is despite the fact that, at up to nine million people, they are more numerous than the populations of all but about a dozen of our fifty states.

    The Obama years have been tough for American expatriates, or “expats.” The prime culprit is the so-called Foreign Account Tax Compliance Act (FATCA). Supposedly aimed at “fat cat” tax cheats with money stashed abroad, FATCA includes not a single provision targeting actual tax evasion. Instead, FATCA creates a wholesale NSA-style information dragnet requiring under threat of sanctions, all non-U.S. financial institutions (banks, credit unions, insurance companies, investment and pension funds, etc.) in every country in the world to report to the IRS data on all specified accounts of U.S. persons (but not corporations). No proof or even suspicion of wrongdoing is required.

    Hoping to avoid sanctions threats and crushing compliance costs, institutions around the world have been dumping American clients, making it increasingly difficult for them just to open a checking account and pay their everyday bills. Businesses once eager for our expats’ expertise now shun them because FATCA imposes U.S. regulatory oversight of companies in which Americans exercise signature authority.

    FATCA has thus vastly compounded pressures imposed by earlier laws like Report of Foreign Bank and Financial Accounts (FBAR) and America’s unique worldwide taxation system. (Virtually all other countries impose taxes based on residency, not citizenship). While genuine “fat cat” evaders can easily slip the FATCA net by putting assets into gold, diamonds, art or real estate, middle-class Americans overseas are being smacked with massive penalties for filing deficiencies even when they owe no tax, on top of hefty accountant and attorney fees to navigate an increasingly labyrinthine regime.

    In short, this vital part of “America's international sales force” is being strangled. It’s hardly surprising then that the number of American expats reluctantly making theheartrending decision to renounce their U.S. citizenship has skyrocketed. The only response from the Obama administration has been to crank up the fees and penalties for doing so.

    In a timely move, the 2016 Republican Platform promises rescue in a clear and unequivocal statement that champions expats’ financial interests and constitutional rights:

    “The Foreign Account Tax Compliance Act (FATCA) and the Foreign Bank and Asset Reporting Requirements result in government’s warrantless seizure of personal financial information without reasonable suspicion or probable cause. Americans overseas should enjoy the same rights as Americans residing in the United States, whose private financial information is not subject to disclosure to the government except as to interest earned. The requirement for all banks around the world to provide detailed information to the IRS about American account holders outside the United States has resulted in banks refusing service to them. Thus, FATCA not only allows ‘unreasonable search and seizures’ but also threatens the ability of overseas Americans to lead normal lives. We call for its repeal and for a change to residency-based taxation for U.S. citizens overseas.”

    Let’s keep in mind that the GOP Platform also proposes a far-reaching and long-overdue overhaul of an American tax system that seems almost designed to stifle enterprise and drive jobs overseas. If Donald Trump wins the presidency, he almost certainly will have a Republican Senate as well as a GOP-led House of Representatives to work with. This means a Trump administration will be in a position to keep its promises on FATCA and residency-based taxation.

    By contrast, what do the Democrats promise expats in their platform? Just more pain and blame, lumping them with presumptive lawbreakers:

    “Democrats believe that no one should be able avoid paying their fair share by hiding money abroad, and that corrupt leaders and terrorists should not be able to use the system of international finance to their advantage. We will work to crack down on tax evasion and promote transparency to fight corruption and terrorism. And we will make sure that law-abiding Americans living abroad are not unfairly penalized by finding the right solutions for them to the requirements under the Foreign Account Tax Compliance Act (FATCA) and Report of Foreign Bank and Financial Accounts (FBAR).”

    Sure, there is a milquetoast hint at “finding the right solutions” for expats. If there is a Hillary Clinton administration, they can file that with “if you like your healthcare plan, you can keep it.”

    Despite their formidable numbers, American expats (who vote via their address of domicile back home) are not concentrated in any particular states or congressional districts. It’s thus unlikely they can decisively swing the 2016 race. Nonetheless, the GOP has made a bold and principled play for their support. Democrats have given them the back of their hand.

    If the American expat community wants relief, this is a no-brainer.

    Jim Jatras, a former U.S. diplomat and foreign policy adviser to the Senate GOP leadership, comments on financial and foreign policy topics and on U.S. politics. He edits http://www.RepealFATCA.com.&quot;

  22. Donald Trump plays to win and if he needs to sounds like a well-balanced person to do so, I’m confident he will.

    As a single issue voter, I must support the GOP platform.

    It’s a long way to the election and a lot can happen.

  23. “Re: Donald Trump, In your guts, you know he’s nuts.”

    Sure, but which is worst: a nut, a criminal, or a third party?[*]

    [* If you are now, or have ever been, living in a country where a third party is normal and reasonable, please avoid interfering with the Americans in the room.]

  24. @Jim,

    Re:

    Will American Expats Miss This Year’s Historic Opportunity on FATCA and RBT by Chasing a “Same Country Exception” Mirage?”http://www.repealfatca.com/index.asp?idmenu=4&idsubmenu=325&title=will-american-expats-miss-this-years-historic-opportunity-on-fatca-and-rbt-by-chasing-a-same-country-exception-mirage (<== I NOTE THAT DESPITE ITS CLEAR RELEVANCE THIS ANALYSIS *STILL* HAS NOT BEEN POSTED ON BROCK!)"

    It’s been mentioned with link posted on the Media and Blog Articles thread since August 28th and it appears on this week’s list in the main post at the top of that thread.

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