Prologue
Weapons of mass disruption: America is deploying a new economic arsenal to assert its power https://t.co/0EoEv8Z86W via @TheEconomist pic.twitter.com/uEcRaPVska
— U.S. Citizen Abroad (@USCitizenAbroad) August 4, 2019
Most sanctions are announced and publicly threaten the sovereignty of other countries
A European perspective: Thanks to Timothy Smyth for finding this discussion of U.S. sanctions from the perspective of some Europeans:
This podcast discusses the problem of US sanctions on Europe and the role played by the US dollar, etc. – assumes that Europe and USA are moving apart. "Meeting the Challenge of Secondary Sanctions | European Council on Foreign Relations" https://t.co/YN5k4V5a5M via @ecfr
— U.S. Citizen Abroad (@USCitizenAbroad) August 4, 2019
A U.S. perspective: A discussion of the role of U.S. sanctions from the perspective of some Americans (Jack Lew was the Treasury Secretary in the Obama administration):
The USA is constantly at war. Currently the USA is imposing tariffs, sanctions and tax policies on the world. Is USA @citizenshiptax a sanction on other countries? "The Use and Misuse of Economic Statecraft "https://t.co/78XDDDj8U2 via @ForeignAffairs
— U.S. Citizen Abroad (@USCitizenAbroad) August 4, 2019
Do sanctions work? In any case there are limitations to U.S. sanctions as China is proving and will continue to prove:
There are limitations to U.S. power. China and other places are prepared to say, ‘No, we’re not going to follow the U.S. lead.’” @RichardMNephew https://t.co/Tm5TRqp3S1
— Mark Fitzpatrick (@MarkTFitz) August 4, 2019
Some sanctions are not publicized. They are U.S.laws that attack the sovereignty of other nations
About FATCA: is the use of FATCA to claim ownership of and impose U.S. worldwide taxation on the residents of other countries the ultimate sanction?
July 22, 2019 Canadian Federal Court Justice MacTavish puts the judicial seal of "good housekeeping" on the right of the USA to claim Canadian residents as U.S. tax property https://t.co/8AdmjboTuk
— U.S. Citizen Abroad (@USCitizenAbroad) August 4, 2019
Question:
In general the FATCA IGAs are for the purpose of forcing the world to locate individuals and entities that are “U.S. persons” (meaning U.S. property). But, the United States and the United States alone defines who is a “U.S. person”. Once defined as a “U.S. person”, the United States will impose U.S. taxation on those (defined as U.S. persons) who are citizen/residents of other countries. Is this the equivalent of a sanction? If so, how does the “citizenship taxation” sanction compare to other sanctions?
How is the US able to “impose” taxation on US persons with no US assets, property or sources of income?
In general, it can’t. The limited enforcement tools available to the IRS (collection assistance and passport withdrawal) are, generally speaking, not a threat to dual citizens.
Banking difficulties indirectly caused by FATCA are, as ever, a separate issue.
Excellent point! The fact that the Internal Revenue Code at present requires all individuals except nonresident aliens to pay tax on their worldwide income and report a large number of their non-U.S. assets (under threat of penalty) is of course
irrelevant– highly relevant.What you are actually saying (I think) is that the IRS has no way of enforcing taxation and reporting penalties on Canadians (including dual) citizens living in Canada with no assets or income associated with the United States. This position is found in Article XXVI A which says:
This seems to say that Canada shall/will not provide assistance to the IRS in collecting the U.S. tax debt. It doesn’t say that there is no tax debt. I agree that this creates logistical problems for the IRS – making it harder to collect.
I am not aware of a situation where a Canadian citizen has relied on this provision to avoid paying a U.S. tax debt. However, the viability of this position depends on a number of factors which include (but are not limited to): the laws not changing, the treaty not changing and the individual staying in Canada if he/she is seeking the protection of the Canadian treaty. What if a Canadian with a U.S. tax debt moves to the UK (which doesn’t have the same kind of treaty)? It doesn’t seem that the Canada U.S. tax treaty would help in that situation.
Your basic message (I think) is: don’t file U.S. tax returns – there is nothing that anybody can do if you don’t. That may be true for certain groups of people. But, it is too late for many people who (for various reasons) are in the U.S. tax system. IRS stats suggest there are about one million Americans abroad who do file returns. Many of them have been very severely damaged by having filed (transition tax, etc.) What about them? Does the fact that some people have learned from the mistakes of others and avoid filing, mean that the situations of those who do file don’t matter? Should they stop filing? What if they are not dual citizens? Are their situations relevant at all? Should these injustices be exposed? Should those NOT presently impacted simply say: Well, it doesn’t affect me – so it really doesn’t matter? (This reminds me of a famous poem by Pastor Martin Niemoller.)
Question for you: Does the probability that certain dual citizens cannot ultimately have their income and/or assets subjected to IRS enforcement, imply that there is no reason for people to have fought back? It appears that your position is that: The U.S. FATCA lawsuit, the FATCA Canada lawsuit, the French lawsuit, the lobbying efforts to change the law, the tens of thousands of hours invested in the development of the Isaac Brock Society and more are irrelevant and a waste of time. Are we not better off trying to remove the threat of these unjust laws? Should all the people who have made significant contributions fighting these injustices, simply stop their efforts and say: Don’t file?
It seems to me that your comment reveals the biggest fault line among groups of Americans abroad – those who are in the U.S. tax system (and are being damaged) vs. those who are not (and are not being damaged).
Indeed. There is a significant fault line between those who are in the US tax system (not all of whom are being damaged, by the way – some are quite happily collecting $1400 per child every year with no other costs) and those who are not (most of whom are blissfully unaware of US tax obligations; others may be perfectly happy to not rock the boat since they currently experience no difficulties).
The point is simply that one should be careful using words like “imposed” with respect to US taxation because it feeds the narrative that one cannot escape the clutches of the IRS, and this narrative scares the unwary into needless (and sometimes very destructive) US tax compliance.
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“Should all the people who have made significant contributions fighting these injustices, simply stop their efforts and say: Don’t file?”
They should always be saying “Don’t file” – whether they continue their efforts or not. Why would they ever suggest that someone should enter the US tax system?
As far as I can tell there is not a single person who has suggested that those who are NOT in the system should enter the system (maybe you can find one). That’s neither the issue nor the point.
You ignore the problems/realities of those who are in the an U.S. tax system. Furthermore, It’s completely obvious that those who are not in the system have learned that it’s far more dangerous to be in the system rather than not – as Dewees and others (whether dual citizens or not) have demonstrated. The non-compliant would only enter the system if they want to renounce AND guarantee they are not covered expatriates. That’s old news and a decision based on what individuals judge the benefits/burdens to be.
Not everybody is a dual citizen with no income or no assets in the United States. There are people with pensions in the United States, property in the United States and who will receive inheritances from the United States. This increases the chances of their having to confront this issue.
The fact that all nonresidents in the U.S. tax system are not being harmed is irrelevant to the fact that many are being harmed and are being significantly harmed.Furthermore, the harm extends directly to the countries where they are resident. Every dollar that the U.S. tax system drains out of the Canadian economy is a harm to Canada.
With respect to the word “imposed” – well the Federal Court just ruled that the Government of Canada was within its constitutional rights to impose FATCA on Canada’s financial institutions (which it has done). There will be people in countries like France who will enter the U.S. tax system because of FATCA. I agree that this doesn’t (theoretically) apply directly to individuals,. But, the judicial validation of FATCA (coupled with judicial pronouncements that U.S. citizens are subject to U.S. regulation) may be a first step. There are only so many people that Brock and other sites will be able to reach with the message (and I suspect many of them have already been reached).
Finally, you describe the “fault line as:
Those who are “blissfully unaware” do not contribute to the fault line. The fault line is formed between those who are in the system and want change vs. those who ARE aware of the issue, are not in the system, and are doing everything they can do discourage those who have spent time on the issue. At present, your side (because of numbers) is winning.
” The fact that all nonresidents in the U.S. tax system are not being harmed is irrelevant to the fact that many are being harmed and are being significantly harmed.Furthermore, the harm extends directly to the countries where they are resident. Every dollar that the U.S. tax system drains out of the Canadian economy is a harm to Canada.”
The harm that is mentionned here comes from US sourced revenue. The US can do and does whatever the hell it wants to its citzens worldwide. in terms of taxation ,as any other nation has that
perogative to do while putting aside questions of human rights for the moment..
How is the harm done ? Is it by direct or assisted US collection overseas.,no. So the notion of coercion is really not valid..It has be voluntary in spite of the fear of losing one’s pension, passport,,and whatever other nightmare you can conjure up.It is voluntary even though the nightmare is real.
IMHO ,The fact the IRS can’t enforce its taxation oversea is very relevant and is the underlying reason why the last several court decisions worldwide have gone the other way…
“IMHO ,The fact the IRS can’t enforce its taxation oversea is very relevant and is the underlying reason why the last several court decisions worldwide have gone the other way…”
Yes, during the trial the government lawyer essentially said as much, to the judge’s great surprise. Her response came down to “why is everyone so worked up about this when the US can’t compel payment?” (There are other reasons to be worked up about FATCA of course. But she wasn’t wrong about the fact that under current law Canadian citizens/residents can’t be forced to file US tax returns or pay US tax bills unless they want or need something from the US.)
What you just wrote wraps up everything in a bow. Regarding FATCA,that is the tradeoff ,give them information and everything else will remain undisturbed. Denounce or do not denounce but what ever you do ignore the IRS ,unless of if the US has a possible reach on your wallet..
I don’t think the post’s author is talking about how people are or are not affected by FATCA, since the post explores the question of how it relates to sanctions; and the threat of sanctions generally impacts governments’, rather than individuals’, decision making.
He refers to “sanctions” twice in the post’s title, and asks “Is the use of FATCA to claim ownership of and impose U.S. worldwide taxation on the residents of other countries the ultimate sanction?” and further down asks some more questions about sanctions.
So far on this thread, we’ve been mostly discussing issues that have come up before quite a bit, but these questions seem to be more pointed and I’d be interested to see some replies to them because it’s an aspect we haven’t discussed very often.
Well, is it a sanction if it cannot be imposed?
The post refers to sanctions in the context of tariffs, oil sanctions, etc, as well, and refers to the sovereignty of countries, but reference to individuals comes across secondary to me. So, that has me reading the post as referring to the threatened sanction of 30% to FFIs on US payments, and govts taking action with IGAs to help the FFIs avoid that threat because they perceive it as a threat to their economies. So, the questions asked strike me mostly as being in the nature of how you feel this threatened sanction compares to other threatened sanctions and governments’ response to them, and things like that. There’s been replying to the question “do sanctions work?” but not much to the other questions, and those really intrigue me because they deal with an aspect we haven’t discussed much before.
“Banking difficulties indirectly caused by FATCA are, as ever, a separate issue.”
No, they are not. That is how extortion works. Pay the taxes we imposed or you’ll never bank again.
“They should always be saying “Don’t file” – whether they continue their efforts or not. Why would they ever suggest that someone should enter the US tax system?”
How about non dual USCs living abroad who must have a passport to continue living abroad with with their nonUSC families?
“give them information and everything else will remain undisturbed”
WOW. WTFO.
They have no right to that information and no one should be compelled to provide it except under warrant for suspected crime.
“since the post explores the question of how it relates to sanctions; and the threat of sanctions generally impacts governments’, rather than individuals’, decision making.”
Say what? Sanctions generally affect the individuals in the country sanctioned far more than its government. It is a way of forcing the people of the sanctioned country to force their government to change.
The N. Korean leaders have not been hurt by the long history of sanctions imposed upon N. Korea. The N. Korean people sure have.
Iran’s leaders are not hurt by sanctions against Iran anywhere near as badly as the Iranian people are.
Sanctions upon oil imports/exports affect the individual to a very great extent. Costs for everything go up as energy is needed for everything somewhere along the the supply chain. Oil sanctions hurt the individual so much that pressure upon the government of the country under such sanction from their own people is very great indeed.
That is how sanctions work, they hurt the people of the sanction country to the extent that they demand change from their government.
The individual can not be left out of the equation of sanctions.
I agree the individual can not be left out of the equation of sanctions. I meant that the comments were getting into discussing how is the US able to impose taxation on US persons with no US assets/property/sources of income, but I think the post’s author was focusing on the 30% on the FFIs on US source payments, which would affect all individuals in Canada, as opposed to an article focusing on the IRS collecting from individuals.
Anyway, that’ll be it from me on “what I think this post is about” because it bugs me when people keep stating their opinion and I’m probably starting to 🙂
That 30% on FFIs is a way for the US to impose tax upon those of us without US sourced income or US based assets.
I have neither but my FFIs here in Japan are spying on me for the US. A fact that causes concern for those who must renew their US passports to remain in their country of residence.
Many French US persons are about to lose their accounts due to the FATCA sanctions against French banks.
FATCA has turned every USC living abroad into potential trojan horses against are families, FFIs and employers. Sanctions help force compliance of the US desires for information and taxes.