Posted by Barbara on the Media thread. Cross-posted from there.
UPDATE: Emailed letters will be delivered to the White House on OCTOBER 2. Deadline for sending emails is SEPTEMBER 30!!!
Write your letters, people!!
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YOU MUST ACT NOW!! NO EXCUSES!! PLEASE SHARE WITH ALL FELLOW AMERICANS OVERSEAS (regardless of party affiliation or non-affiliation) & ACCIDENTAL AMERICANS!! If you do nothing, nothing will change!!
We need your help. The Senate Finance Committee and the House Ways and Means Committee are working on tax reform, and we need to get overseas Americans’ voices heard. We have not had tax reform for 31 years, and if we miss our window now, we will not see another chance for 20 more years.
At the initiative of Republicans Overseas, the RNC recently adopted a White House approved resolution supporting the change from citizenship based taxation (CBT) to residence based taxation via RO’s proposed Territorial Taxation for Individuals (TTFI). We have champions and sponsors in both the House and the Senate. We have found tax loopholes that TTFI would close, thereby making TTFI revenue positive. The ingredients for success are lined up–but we’re missing one: the massed voices of ordinary overseas Americans.
What we need now is for our representatives to hear from as many overseas Americans as we can gather. We believe that the vast majority of overseas Americans support the inclusion of TTFI to the tax reform package, and we need to hear from thousands of them. We want to collect as many letters supporting TTFI and tax reform as we possibly can, which Solomon Yue will then present to the White House.
Can you please support our initiative by writing a letter to President Trump and copying your Congressman and Senator.
Here’s how it will work:
1) RO is providing a letter template along with an example which can be found here:
https://republicansoverseas.com/territorial-taxation-individuals/#sample-letters
We urge letter writers to share their own short stories, but also to link their letters to the themes outlined by the White House in their press release on tax reform by focusing on two points: \
(a) TTFI reduces the cost of hiring Americans working overseas, increases U.S. exports, and creates more American jobs within the U.S., and (b) it reduces tax preparation costs for overseas Americans. The sample letter already does this, but it is important to reiterate that we need to reinforce the White House’s points and link those points to individual situations.
2) The letters should be emailed to taxreform@republicansoverseas.com and copied to their local representative and Senators. Links to government databases providing this information can be found at
https://republicansoverseas.com/territorial-taxation-individuals/#contact-congress
3) Solomon Yue will print out the letters and take the physical package to the White House. Clearly, the more the better!
Thank you for your support! If you have any questions or suggestions, please contact Kym Kettler-Paddock at kym.kettler-paddock@republicansoverseas.com.
Regards,
Michael DeSombre
Worldwide President, Republicans Overseas
“The RO proposal seems to assume that not taxing capital gains of non-residents is a loophole. However, given that the source of capital gains on shares is explicitly mentioned in the Internal Revenue Code, and that US capital markets rely heavily on inward portfolio investment, I think that the current rules are a feature rather than a bug.”
I agree. Except that, perhaps cynically, I’m doubtful that whoever drew up these proposals really expected the Congressional taxwriters to smack their foreheads and exclaim “Of course! Why didn’t we think of that!”
Yes, JC, there’s really not much we can do until we see the actual proposed legislation. Right now we’re just working off of a rough draft of a proposal with more holes than substance.
“I can not find the exact reference to: Mnuchin plans to release details on tax reform plan Sept. 25”
Brady also has said week of Sept 25 so maybe the Six have agreed on this deadline and will actually present some details.
https://www.forbes.com/sites/kellyphillipserb/2017/09/13/brady-2017-is-our-year-to-make-history-on-tax-reform/
@Plaxy: “Not that different. It would be a tax treaty override, as with FATCA…”
And for that matter, FIRPTA and the ‘exit tax’ under HEART, to name but two others.
But this one would be a unilateral US tax treaty override that is orders of magnitude larger than those the US has already got away with. It is impossible to believe that other countries and non-resident investors would simply roll over and play dead.
@Karen: “I wonder how many other treaties have similar provisions.”
The US/UK tax treaty appears to include a clause absent from the US/Aus one, and which prevents the US from taxing US source capital gains, except for the usual exclusion on real estate.
Article 13 (Gains) paragraph 5: “Gains from the alienation of any property other than property referred to in the preceding paragraphs of this Article shall be taxable only in the Contracting State of which the alienator is a resident.”.
The “preceding paragraphs” of Article 13 talk about real estate and things like and business property, but do not encompass regular stocks and shares.
“It is impossible to believe that other countries and non-resident investors would simply roll over and play dead.”
Every country sets its own tax policy. If US law says withhold 30%, the US payer is going to withhold 30%. The partner treaty couldn’t just refuse to go along with the change in US policy. How?
The partner country can change its own policy, if it chooses – reverting to taxing US residents on capital gains. Or it can carry on exempting US residents in order to attract investment.
But whether these changes are likely to happen is a matter if opinion. In my view, the US isn’t likely to change its tax policy in order to finance (in part) foregoing the right (under US law) to tax and brutally penalize non-resident US citizens.
@Plaxy
Of course the country on the other end of the treaty cannot refuse to go along. So it has a choice: either renegotiate the treaty, or don’t.
If it decides to react by changing policy and renegotiating the treaty, it would have to apply a mirroring retaliatory tax, which in the best case for the US leads to a likely zero-sum outcome for both countries, but more likely will discourage US investments due to the US tax being larger than the country’s own capital gains tax rate. And if it does nothing, then that country’s investors into the US face double-tax on their US gains, in which case they avoid US investments and producing a negative outcome for the US.
Either way the US loses, while at the same time pissing off every treaty country off for less than nothing.
As quoted above, the US signed up to a treaty with the UK that explicitly prevents it from taxing capital gains on anything other than real estate and some business assets. What do you imagine the UK government will do if the US unilaterally reneges on that? And what do you imagine UK investors holding US stocks and bonds will do in response?
I’m not saying the US cannot simply do this by fiat. Of course it can; we’ve seen it override treaties time and again in the past, with the last-in-time rule as Exhibit A in all of this. I am saying, though, that in this particular case it cannot afford the economic damage that overriding this long-standing feature of the US tax framework would cause. The losses will far outweigh any benefits.
Watcher, I think we agree about what would/could happen: there would be a renegotiation, the partner country would agree to allow tax relief for the foreign tax paid, and probably the partner country would change its own tax policy to tax US residents; the revised treaty or protocol would reflect the new agreement.
As I said, I can’t see it happening because I can’t see why the US would want to do it.
“As quoted above, the US signed up to a treaty with the UK that explicitly prevents it from taxing capital gains on anything other than real estate and some business assets.”
The treaty doesn’t, and can’t, prevent the US from taxing US source income. Tax treaties are like dictionaries – descriptive, not prescriptive. It’s up to each country to concede or refuse to concede taxing rights, through negotiating. The treaty describes the result.
@Plaxy: “The treaty doesn’t, and can’t, prevent the US from taxing US source income. … The treaty describes the result.”
Well, okay, but I’ve now lost track of any point you’re trying to make. Worth noting, by the way, that tax treaty negotiations currently happen on average less than once per generation, so a wholesale rewrite of all sixty odd US tax treaties in existence is neither simple nor quick. One more reason why this part of RO’s proposal is fantasy.
All of the RO proposal is fantasy. Fantasy tax reform is the pasttime du jour.
JC: I’ll leave the deadline in the post as stated since September 25 appears to be the date the “Big Six” are releasing their comprehensive plan for tax reform. Perhaps those of us who wrote to them last month will have had their voices heard. We’ll see in just a few days. The recent article in Forbes linked above by Plaxy (http://isaacbrocksociety.ca/2017/09/12/call-to-action-from-republicans-overseas/comment-page-5/#comment-7998822) mentions the inclusion of territorial taxation. Again, we’ll see if they’ve applied it to individuals or just businesses.
Trump is fixated on America First. What happened to the Border Adjustment Tax. In some ways that made sense because many other countries do something similar with their sales tax. Australia has a 10% GST, for sales within Australia. Any exports from Australia to other countries do not attract this GST and that makes Australian exports more competitive.
The Border Tax is similar in concept plus it would favor manufacturing within the United States and kind of acts like a tariff for imports. As the tax would be relatively low in the the distribution chain perhaps a 5% tax may end up a 10% end user cost after margins of distributors etc get added on top. This seems to have been given up which places greater focus on territorial for business.
I am trying to work my way to arguments to have the “territorial” for individuals be more like the “residential” for all other countries. There was RO rhetoric that for individuals that their worldwide income should only be taxed once. Here is a hole they have to answer with territorial: U.S. people just shift your money overseas – how about to a zero tax jurisdiction – then avoid tax. Can’t have that. Although with territorial for individuals then FATCA/FBAR is not needed even for U.S. residents.
So perhaps if you live in the U.S. then the U.S. should continue to tax on a global basis.
If you live overseas, then maybe some sort of territorial so global income is only taxed once. Would there then be benefits of being a citizen? If you are a U.S. citizen living overseas with investment in the U.S. then perhaps your investment would not attract territorial treatment but as is withholding on interest and dividends. ?
Part of the push for Territorial is to tax businesses like all other OECD countries to:
End incentive for inversion
End incentive to keep cash hoards overseas (I saw a RO tweet this morning that had a 10% once off tax on cash hoard repatriation).
Make American companies more competitive in global markets.
How about this.
A U.S. Move to Territorial Tax for Business would remove U.S. regulatory disadvantage on U.S. business operating overseas compared to companies of all other OECD nations.
A U.S. Move to Residence Based Taxation would remove U.S. regulatory disadvantage on U.S. persons resident overseas compared to nationals from other OECD nations.
There is the similarity. Can it be said better?
Thoughts?
The RO proposal (at least the proposal they floated in January as I have not seen any updates) is really a hybrid. It taxes worldwide portfolio income for US residents while taxing only US source active business income for US residents – but they say they would like to move to a more complete territorial system if they can figure out how to do that without losing revenue from US residents investing overseas.
@Watcher, Karen, Plaxy
Just wanted to thank you all for your thorough analysis of all this. I just hope that someone at RO is as smart and can realise the problems.
http://harbourtimes.com/2017/09/19/republicans-launch-worldwide-campaign-bid-territorial-taxation/
An ambitious number but here’s hoping the letter writing campaign is all they/we hope for and more.
Here is more saber rattling as posted by the attorney Virginia who posted this as a new update on her blog. https://www.angloinfo.com/blogs/global/us-tax/irs-cid-chief-significant-international-tax-investigations-under-way/
While you are all getting excited about FATCA being repealed and CBT going away I doubt they would let go of anything that is making a penny for them. The best advice given as per the person who started this blog is to renounce and rejoice yoir freedom. The sooner the better. Even people who went into OVDP and streamlined programs are now regretting.
This is due to the TIGTA report criticizing the IRS for not pursuing OVDP withdrawers brutally enough. No reason to think those who went through Streamlined only are at any increased risk of audit.
Do nothing or file quietly is often safest.
@Plaxy, filing quietly or doing nothing might also cause them to look at data being mined as stated on the blog. Best choice is to renounce as Patricia Moon did and suggested to everyone in several of her posts. I never thought it about until banks and brokerages started refusing my accounts based on my US passport. I agree FATCA needs to be repealed asap but I doubt the condors will let it go easily.
All the horror stories are about people who filed. None are about people who never filed and told them nothing.
Renouncing certainly helps solve the banking problems.
Sadly, I agree with you about the prospects for legislative change.
“Here is more saber rattling as posted by the attorney Virginia who posted this as a new update on her blog. https://www.angloinfo.com/blogs/global/us-tax/irs-cid-chief-significant-international-tax-investigations-under-way/”
I typed a comment, clicked “Post Comment”, and her web site responded “Oops! That page can’t be found.”
So I’ll post it here:
“Don Fort was appointed Chief of Criminal Investigation (CI) for the Internal Revenue Service (IRS) in June. He’s quickly making his presence known as the IRS’ top law enforcement officer. Just last month, Fort publicly announced various of CI’s goals and how it will be using data mining in its forthcoming tax investigations.”
He will make the IRS obey laws, right? He make the IRS obey court orders too, right?
He will improve investigations, right? He will find what happened to money paid by withholding agents that didn’t get credited to beneficiaries? He will find what happened to money that the IRS credited but seized by offset (sometimes in violation of court orders but sometimes not) and subsequently deleted records of where the offsets had been credited to?
When IRS records don’t show withholdings that payers reported to beneficiaries, he will make the IRS issue Notices CP-2000 so that victims will have an opportunity to get a clue as to why the IRS is attacking them?
Pardon me while I doubt it. His job isn’t to take revenue-negative actions, only revenue-positive actions. He won’t enforce laws except when they’re convenient to his goals.
@plaxy. Did you read that link I posted by Virginia the attorney. Even if someone does not file they will find out from data collected from banks all over the world. Many Canadians did file too and IRS collected data from those banks for those who are not filing. They need money desperately it seems to run the office for a few hours. I doubt this monstrosity would ever be repealed or even we would see the end of CBT. Wish I had renounced a long time ago.
My horror is I am filing but getting denied by banks and brokerages who don’t want US citizens. They just don’t want the extra paperwork and threat of penalties. I want to have partnership with some non US persons in a business venture but they don’t want me due to my US citizenship as their business would be exposed to IRS too.
@Norman, He will not make IRS obey laws but he would investigate to shake some more trees it seems to get some fruit . For people who are in OVDP and streamlined limbo he will make sure they get more money out of them. For those who didn’t file anything as of yet, I don’t know what they would do to get them.
“Even if someone does not file they will find out from data collected from banks all over the world. ”
Those who don’t file may get reported on by the banks, but they don’t get pursued by the IRS.
‘Those who don’t file may get reported on by the banks, but they don’t get pursued by the IRS.’
Did you notice this:
“Don Fort was appointed Chief of Criminal Investigation (CI) for the Internal Revenue Service (IRS) in June. He’s quickly making his presence known as the IRS’ top law enforcement officer. Just last month, Fort publicly announced various of CI’s goals and how it will be using data mining in its forthcoming tax investigations.”
Though maybe he’ll wait for the ruling in the ADCS lawsuit to assert that no one’s been harmed yet.
Yes I read the scarey-scarey blog piece. I read that the IRS is going to search through its files looking for something useful. My advice to US citizens living outside the US is, don’t help them out. Tell them nothing, or file quietly.