Yes, we all know that the U.S. House Ways & Means Committee is focused on tax reforms for “businesses”, but the (Republican) Tax Reform Task Force does say:
— “In addition to these important reforms that will create a modern international tax system for businesses, the Committee on Ways and Means will consider the appropriate treatment of individuals living and working abroad in today’s globally integrated economy.”
Republicans Overseas (RO) has now released (see link) its “White Paper” summarizing key details of its proposal on “Territorial Taxation” for individuals.
Would the readers of this post who care about U.S. tax legislation be better off — or not — if the RO White paper were enacted?
You can send your point of view to the Members of the House W & M. RO says: “We welcome your comments and suggestions. Please email them to Mr. Keith Redmond at FATCA_Testimonials@outlook.com for our consideration and addition.”
From The Republicans Overseas FB site:
[Go to the RO FB page for details: https://www.facebook.com/republicansoverseas]
The gist of the White Paper is:
“Details of Territorial Taxation Proposal for Individuals:
What would be Taxed:
— Any wage, salary, pension, dividend, interest, commission, service or other income paid
by a bank, corporation or other entity organized within the U.S.
— Capital gains on sales of any assets, tangible or otherwise, located in the U.S. and
securities of corporations or other entities organized within the U.S. or listed or traded on
a securities exchange with the U.S.
— Any wage, salary, pension, commission, service or other similar income paid to an
individual resident in the U.S. by any corporation or other entity organized outside the
U.S.
— Any dividends paid to an individual resident in the U.S. by any corporation or other
entity organized outside the U.S. that is actively managed and/or controlled, individually
or jointly, by such individual to the extent such dividends are derived from earnings of a
business engaged within the U.S.
— Any dividends or interest of a passive nature (not from a company actively managed
and/or controlled, individually or jointly by the resident) paid to an individual resident in
the U.S. by any bank, corporation or other entity organized outside the U.S.1
— Any profit on any unincorporated (flow through) business engaged in within the U.S.
would be taxed in the same manner as for corporations, regardless of the residency or
citizenship of the owner(s).What would not be Taxed:
— Capital gains on sales of any assets, tangible or otherwise, not located in the U.S. and
securities of corporations or other entities organized not in the U.S. and not listed or
traded on a securities exchange within the U.S.
— Any wage, salary, pension, dividend, interest, commission, service or other income paid
by a bank, corporation or other entity organized outside the U.S. to a person not resident
in the U.S.
— Any dividends paid to an individual resident in the U.S. from a corporation or other entity
organized outside the U.S. that is actively managed and/or controlled, individually or
jointly, by such individual to the extent such dividends are not derived from earnings of a
business engaged within the U.S.
— Any profit on any unincorporated (flow through) business engaged in outside the U.S.
would be taxed in the same manner as for corporations, regardless of the residency or
citizenship of the owner(s)….”
@Karen
‘If the US is going to reform the tax system, I would think they would want to look at what other developed countries are doing ‘
Oh, such as everyone but them and Eritrea? They have no intention of following best practices or even simple rules of international law. Behind that curtain sits the wizard of Oz don’t you know.
There may yet be some tax reforms coming but they will be to the benefit of the 1% only.
It is not mentally healthy for me to read some of these efforts because it gives me 15 minutes of hope but then the reality crash is not worth it.
More power to those of you who believe. The world needs fighters and believers.
Here is what I do believe: the USA is now the most imperialist(ic) country in the world. As a student of history, I know what happens to such regimes in time. In the next four years, my prediction is the Rubicon will be crossed again.
@George
@Ginny, “Increase the soft power and reach of the U.S.”
In the context that you and I would like at this it would be to turn expats BACK into Goodwill Ambassadors instead of Badwill Ambassadors.
Yes thanks, that’s what I thought it meant. However, George you have me confused with someone who ever gave a **** about the USA. I am so glad I am on my side of this one mile wide river.
Canadian Ginny says, “Here is what I do believe: the USA is now the most imperialist(ic) country in the world. As a student of history, I know what happens to such regimes in time. In the next four years, my prediction is the Rubicon will be crossed again.”
Indeed I see the United States as having past the point of no return. Even with their horrific extraterritorial tax laws and CBT, the trillions of dollars in USA debt will never get paid. Not even the interest. Eventually Rome will fall.
It’s a good proposal. Note that just talking to all of the House Reps and Senators does not make something happen.
In the same way that a lawyer is used to go to court a tradesman lobbyist is needed to have legislation written and to get it into bills. Like anything else of substance, Congress won’t bring any normal bill through committee and take it up on the floor.
The work that is necessary is to get a lobbyist who works with the writers of the upcoming tax reform bill and its sponsors. A lobbyist knows how to get things written by key players. The compliance mafia actually writes the wording themselves to slip into the bills. We need our own lobbyist to do similar work.
Talking and writing to Congresspersons is one of the facets of enactment, but it is a professional lobbyist that does the grunt work.
The decision makers at RO need to ensure that funds are used for a professional lobbyist and need to choose a lobbyist that is affordable and has access to the right legislators. RO itself has good contacts with some of the key players, but not continuous working relationship elbow to elbow in the bill-writing room.
Well, it is an improvement to what we have now. I applaud the efforts.
@Mark Twain: I agree that a lobbyist would be ideal. Jim Jatras was trying to sell us his services as a lobbyist not too long ago. And what happened with the UAE American Chamber of Commerce, which supposedly did hire a lobbyist to cover FATCA, RBT, and related matters?
Trouble is, lobbyists need retainers, meaning regular, ongoing funds. Sadly, I don’t think we here are capable of that.
@Mark Twain @Barbara
“The work that is necessary is to get a lobbyist who works with the writers of the upcoming tax reform bill and its sponsors.”
As Legislative Counsel to the office of Representative Holding isn’t Matt Stross one such writer?We’ve been successful at getting his personal attention on this matter. My last correspondence with him made him aware of RO’s “white paper”, but that it is a “work in progress”. He’s vocal about Holding wanting to move the tax system away from CBT, and he continually encourages me to reach out to him any time (as I’m sure he does others too) – perhaps he’d be willing to help draft something lawmakers can understand and move on.
As it seems US citizens are more interested in investing in their own renunciations than paying a lobbyist to help change the laws, we will have to continue lobbying on our own in any way we can to make headway. I don’t see any harm in asking Mr Stross to help beyond offering words of advice, do you?
A couple of million in superpac funds would have done it. The banks should have got their act together early. Unfortunately they didn’t. Jim J tried to scare up some business but he had a little baggage.
@Ginny..Ginny..”However, George you have me confused with someone who ever gave a **** about the USA. ”
When you did not give a rats a** about the USA that was in fact POSITIVE. In the past you were as interested in Belize as USA.
The problem NOW is that you want to do something about that rats a** so that makes you negative about the USA.
PS. That river would be to narrow for me I would not want to have to look at the place…I opted for a wide ocean. 😉
So true, @ George. Sometimes that river is too narrow but it’s far better looking across it from my side. Love Belize in fact. Did some great scuba diving there years ago. Have you been there, mr. world traveller?
I envy your quick and cheap access to the continental countries.
Are you in the north or south England area? I’ll give you a shout next time I am over the pond visiting my brother. He keeps moving around, which is fine for me as I get to see more of that beautiful country.
But they do drive on the funny side of the street- was it hard to adjust?
@DoD
Good point. I wonder why the banks, stashing my millions of tax evading dollars didn’t lobby the USG to avoid the compliance burdens. Didn’t want to upset their friends, I guess.
I will add that the head of Republicans Overseas lives in Hong Kong one of the few “territorial” countries. Having said that their are real advantages to a territorial system especially if a country is starting fresh as the US would be. I would not necessarily be as critical as some others.
@Bubblebustin, @Embee, @Karen, I just sent my comments to Republicans Overseas. If you are interested, you can read them here.
@ Shadow Raider
Of course I’m interested and having read your report I now understand much better the problems with TTR that you were able to spot right away. Good work and thank you. I hope RO is open to addressing some of the details and clarifying their proposal.
@Shadow Raider
Thanks for posting your comments, I look forward to reading them.
I’ve also sent my comments to Republicans Overseas as well. You can find them here.
I’m very grateful to the many great minds working on this!
Now to convince lawmakers that dropping CBT is the right thing to do, and for them to actually do something about it.
@Karen, Your comments are excellent! I think they are better than mine.
@Shadow Raider – Thanks. I thought the two sets of comments complemented each other well. You did a much better job of explaining why the “Worldwide Tax” label was confusing/misleading. You also focused more on the underlying justice (or lack thereof) in the proposal, while I covered macroeconomic effects. I didn’t realise you had written the wikipedia page that I relied on for my numbers – well done!
“I think it has a snowball’s chance in hell of actually getting passed.”
Then, Sally, you can be damned sure that there will be complete and utter defiance. Those of us who don’t have the finances to get free of the noose will just ignore the US government and go about our expat lives secure in the knowledge that we will not do anything to trigger the United Slave States by ever visiting their foul Orcish haunts of “Mordor”.
This proposal is brilliant and would be far easier to sell on capital hill. Sadly many of the negative comments fail to consider what is doable. To use a world war two analogy rbt is arnhem bridge and tbt is nijmagen bridge.
There is a reasonable principle of fairness that profits should be taxed where earned. Is it fair for Starbucks to profit in France but pay tax in the USA not France.
There will be losers and that includes nra having USA investment profits that will now be taxed in the USA which I do support.
Any proposal must and I mean must be revenue neutral. We can conjecture all we want on what the USA gains by cbt but the bottom line is that the bill will need to be scored.
In this bill the price of freedom for expat is paid for by nra paying tax to the USA on profits in the USA.
Politically this is a brilliant proposal and would gain cross party support.
When this is passed the only expat that will need to file a return is if you invest in the USA.
Who would not like this proposal. An expat who renounced that has USA investments would be drawn back into filing while a USA citizen expat with no USA investments would have no filing. That is a flip of the obligations today.
“When this is passed the only expat that will need to file a return is if you invest in the USA.”
George (TOR – sorry, but can’t write out the whole thing even though I can type at 60wpm)
I agree that if that is actually the case and the Democrats actually agree to this instead of stymieing the Congressional process like they’re advocating doing, then this will solve quite a few problems. Hopefully they will also absolve the filing requirements for the IRS instead of just the FBAR since any US expat with NO US investments will not have any income from US sources. CBT will still be a problem and until that is resolved, it still doesn’t do anything for the outlay of $700-$2000.00/return every year that becomes an onerous burden for those of modest means.
@George, I’m not going to support a proposal that would require anyone to pay more tax than in the current system. I find it immoral to force nonresident aliens, who have nothing to do with this, to pay the “price of freedom” for nonresident citizens. If Congress can’t accept an insignificant reduction in revenue to fix something irrational, so be it. I prefer to do nothing than to be part of a wicked political game.
Moreover, if it’s really necessary to compensate for the loss of revenue, Congress should reduce spending, not tax someone else. Since they often mention US consular services to justify CBT, they can reduce some of the endless wasteful construction of embassies and consulates, like the monstrosity in Baghdad.
I’m not convinced that RBT (as practiced by the rest of the world) would necessarily mean a net loss of revenue for the US. The US would continue to withhold tax (at the treaty rate where applicable) from interest and/or dividends paid to non-residents. And non-resident tax rates for income from real property or effectively connected businesses would be higher than resident tax rates. This is an empirical question, and I don’t have the data to answer it. I would suspect that many expats with investments in the US would find that their US tax bill is actually higher as an NRA (unless they are currently burdened with PFICs or NIIT). For those in high tax countries, tax paid to the US would be allowed as a credit, so higher US tax is really just a reallocation between the US and the resident country. Of course, this is just on average. Individual cases could be winners or losers. Plus, by removing the need to police compliance by expats, the IRS can reduce its budget. The only real losers will be the compliance industry.
For those who would lose by a move to RBT (social security recipients in a country where the US can tax US social security under the treaty, for example), the law could provide an election to be treated as a US resident taxpayer.
[from a few posts ago] “As it seems US citizens are more interested in investing in their own renunciations than paying a lobbyist to help change the laws”
If I had $2350 to invest in escaping US taxation, would I (1) spend it on renunciation for a guaranteed return, or (2) spend it on a lobbyist and hope for the best?
As ever, full under-the-radar is the simplest approach if you’re fortunate enough to have Canadian citizenship and residence without US financial interests. No renunciation. No US tax or FBAR compliance. No correct answer to bank questions about US citizenship.