Karen Alpert (Australia), John Richardson (Canada), Larry Stern (Israel) and Leonard Tuber (Israel) will discuss “territorial vs. citizenship-based taxation, their many advantages and disadvantages, and the myriad of challenges and questions posed by the US’s use of this type of tax system,” Monday 3 June 12:00 BST (11:00 UTC / 07:00 EDT).
You can submit questions at the TaxLinked site. For more information and/or to submit a question, click here.
Do we really have to create yet another account just to ask a question? Can’t we also just ask here and roll them in?
Yes – you can ask questions here and I will pass them on to the moderator.
Thanks to John and Karen for your continued engagement on these issues.
These are questions I have already submitted:
Group of four questions:
Will you acknowledge that by using the name U.S. “citizenship-based taxation” that you are supporting its continuance? In my opinion, to object to “citizenship-based taxation”, to varying degrees, may be construed as an attack on U.S. citizenship, U.S. patriotism, and the U.S. flag.
What is preventing you from calling the practice: “citizenship-based double taxation” which focuses on the objectionable part?
What is the most compelling basis for a lawsuit against the Israeli government in regards to the Israeli-U.S. Tax Treaty/FATCA IGA violating rights and anti-discrimination protections enshrined in Israeli law for Israeli citizens/residents?
Might an anti-“savings clause” be pursued as part of Israeli-U.S. tax treaty modernization that would include, as all good legal documents, a definition section with definition for the purpose of the tax treaty: “prevention of double taxation?” Suggested for inclusion of such definition is the following example: if an Israeli is a tax resident of Israel and they have zero income and zero assets in the United States, then for such person double taxation is prevented if they have zero U.S. tax and zero U.S. compliance required under The Israeli-U.S. tax treaty.
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I got some pushback against that over at fix the tax treaty facebook group:
“it’s not double taxation if the country the US citizen lives in does not charge income tax.”
“The only people we have to convince are those in Congress and the compliance lobbyists. Calling something double taxation when it is not simply plays into their hands and will be shot down in seconds. Tax on the sale of Susan’s Canadian home is clearly not double taxation – it is simply unfair taxation. Playing the semantics game with those we have to convince will never work.
CBT is not just about double tax. It is about fairness, compliance costs (time and $, potential penalties), discrimination and payment for services/infrastructure/protection that are not needed or used by non-residents. US persons living outside the US cannot live the equivalent lives of residents of either the US or the country in which they live. They live disadvantaged. For little to no financial gain for the US.”
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I added the following question:
Might these considerations provide sufficient justification that the definition of “preventing double taxation” needs addressing and expansion in tax treaties and for the application of U.S. persons tax resident outside of the U.S.?
* The U.S. in devising and changing its tax laws gives generally no consideration (outside FEIE and some housing deductions) to whether the changes/new taxes would be considered double taxation and if tax treaties would prevent the double taxation; that compliance firms take wide latitude for interpreting and determining often in a conservative fashion how the U.S. tax code is applied as an overlay on top of tax codes of other nations.
* Form the standpoint of U.S. persons overseas, the purest definition of “preventing double taxation” from the U.S., as in taxed at no higher rate than the highest rate of the two countries, is that of dividend only or capital gains tax only on a non-resident non U.S. person with investments in the U.S. Once a U.S. person tax resident outside the U.S. is factored into the picture there becomes further nuances and complexity and tax considerations.
* In situations where the U.S. does not recognise resident country tax as creditable but as an expense. An example is Australian Superannuation which is taxed by the Australian government on the way in and along the way (but not on the way out in retirement), where U.S. taxation of retirement pensions is on the way out. Also where the U.S. will not provide indexation of credit for such resident country tax – paid years/decades earlier – representing the time value of money. Nor where Australia will not allow credit for any U.S. tax paid on superannuation.
* Where the country of residence will not allow credit for U.S. tax paid because the source is the county of residence.
* Where the U.S. will not allow credit for source country tax because the tax is by a different name in the source country or slightly different. AMT, NIIT.
* The U.S. does not allow overseas SALT deduction for U.S. persons living overseas.
* Where total income and total tax is not considered in totality, especially where U.S. persons live in countries known as taxing way higher than the U.S. ~92.5% of U.S. persons living overseas live in equal or higher taxing countries. In cases where U.S. persons live in countries with way higher taxes generally than the U.S., but then some U.S. taxes still apply on top.
* Where the U.S. does not recognise different and substantial taxes in other countries such as VAT (which may be multiples higher than U.S. sales tax). Also such as the 2% Australian Medicare Levy and social taxes in France.
* Where international norms of when taxation is justified are not considered: such as when the U.S. claims tax jurisdiction over U.S. persons tax resident in other countries but in exchange for this the U.S. provides zero in the way of resident services, protection of local property, or protection of local rights.
How did it go?
To my mind, an equally interesting issue is the imposition / ascription of (involuntary) US citizenship, and acceptance of this by the host countries. Are there any limits to this? For example, could North Korea declare us all to be its citizens, and then expect other countries to cooperate in collecting taxes from us?
Video of the 3 June webinar is available at https://youtu.be/yNNQyETBltY
There will be a second session for the questions we didn’t get to. More info at https://taxlinked.net/taxlinked/live-events/citizenship-based-tax-us-part-ii
Thanks Karen. For some reason I thought this webinar was going to be June 12th so I missed it live. It was a good discussion and John did a great job of steering the conversation. I agree that the proposed bill is not a complete remedy to the “big, big problem” John often calls the mess of CBT. He’s right, the full remedy is going to the international norm of RBT but US exceptionalism, indifference and intransigence are huge barriers to overcome.
I’ll probably see the video this weekend, this is just in response to comments by EmBee.
“US exceptionalism”
IMO, best not to fight it. Not to fight “citizenship” “patriotism” “the flag.”
Better to “take the flag first” and call it un-American. In this way such statement is reaffirming Americaness of those making the statements, as opposed to giving the impression to some of “denouncing citizenship” and taking backlash of that.
Allison Christians once stated that: America should be about the greatest liberty in the world. True right? And in the context of CBDT such statement would be channeling the force of US exceptionalism “back at them.”
While “greatest liberty in the world” taps into the American psyche of being the best in the world, IMO, the statement has the problem when combined with the perception of all U.S. persons overseas as fatcats and taxcheats moving overseas. That has got to be actively countered by focus that 92.5% of USP overseas live in equal or higher taxing countries, and they would not go there to avoid taxation. It might be done with examples of certain income and assets of USA vs France vs England vs Australia and show all the tax they are up for. Bar charts. & include sales tax etc.
When the FEIE is mentioned a common reaction in the US is to think this income is completely tax free, as with mention of FEIE this tends to erase fathoming that other countries have their own taxing authorities, and erase other information known by lots of Homelanders that many other countries tax way higher.