Introduction – Remembering Todundsteur 2013

The early years of Brock featured fascinating comments and analysis. Some of the best and most interesting comments and observations came from “TodundSteur”. Although referred to by Brockers as “Tod”, “Tod und Steur” means “Death and Taxes” in German – hinting at Todundsteur’s profession. Todundsteur exhibited a mastery of the application of how U.S. tax law applied to Americans abroad. I doubt that Brock has had as knowledgeable of a “tax commenter” since. For Brockers trying to understand the U.S. tax system he was a great teacher. For Brockers who were beginning to become FATCA activists he was a great mentor. In some of Todundsteur’s comments he identified Georgetown Law Professor Itai Grinberg as an individual who might be worth connecting with.

On January 6, 2013 Petros highlighted the following comment from Todundsteur:

FATCA is a large, clumsy, crude and unilateral attempt by the United States to cudgel, bluster and otherwise persuade the world to subscribe to the US American totalitarian assumption that the financial affairs of every denizen of the planet should be an open book to whatever sovereign entity claims the right to tax that person.

Over the years since the Civil War the citizens of the United States, with no historical experience – yet – of a totalitarian regime have been steadily surrendering power at every level: individual, familial, community and state to a centralized, Federal government.

The citizens of the US have been especially careless of their rights to privacy in the realm of financial and economic affairs. It began with the gradual introduction and imposition of electronic tax withholding and reporting on investment income in the early 60′s and then took a giant leap forward in 1970 with the massive wholesale surrender of financial privacy to the Federal government through passage of the “Bank Secrecy Act”.

The co-option of US financial institutions as the long arm of the IRS was part and parcel of that development.

The early 21st century has witnessed efforts – some more successful than others – by the democratically elected representatives of the US to expand the intrusion of the federal government into nearly every nook and cranny of economic intercourse; chiefly, by imposing reporting requirements on just about any individual or business that makes a commercial purchase of goods or services. Partly out of economic necessity the IRS has recently begun the process of co-opting the entire tax return preparation “industry” in the US and bending them to its will as the unpaid “deputies” of the tax collector.

It is perfectly natural that governments aspire to ominiscience and that is why citizens must always be on their guard and be prepared to challenge. But technological developments have abetted this megalomaniacal urge on the part of the US government to attain financial omniscience. There is serious doubt about the future of cash and the barter-based – and private – economy that cash enables.

Against this backdrop FATCA should be viewed not as an end in itself but rather a very large step in the direction of spreading the notion of the omniscient state throughout the world.

In the big picture, the US insistance on citizenship based taxation is simply a curiosity – but a potentially important one. If the US did not engage in the pointless stupidity of citizenship based taxation FATCA would have remained entirely invisible within the US and the political opposition to FATCA in and out of the US – weak as it is – would likely not have existed at all.

For those of you who are understandably focussed on the collateral damage inflicted by citizenship based taxation on US persons residing outside the US, I suggest that you consider looking for allies in the battle against US citizenship based taxation in a very unlikely place:

FATCA PROponents.

For those of you with the interest and patience to contemplate that possibility and who would like a clearer picture of the truly huge stakes for individual liberty and privacy that FATCA has put into play, I commend to your attention the recently published article by Itai Grinberg in the UCLA Law Review:

http://www.uclalawreview.org/pdf/60-2-1.pdf

Itai is a very intelligent scholar who has only recently left the US Treasury Department to return to academia. He is young and idealistic and he is deeply – and primarily – concerned about the ability of the nation state to force the winners of a globalized economy to contribute to the commonwealth of whatever nation in which they reside.

The question in my mind that I cannot yet answer is: assuming that the goal Mr. Grinberg espouses is good, is it worth the price in the loss of individual liberty and privacy?

When reading his article, ask yourself: would Mr. Grinberg be amenable to backing an end to the tomfoolery of citizenship-based taxation if in so doing it enhanced the possibility that FATCA or something like it became a universal model for world tax administration?

Todundsteur’s comment explains why opposition to FATCA in general and the FATCA lawsuits in particular are important.

Frankly, if there were a Hall Of Fame for Brock comments, this comment would be an early inductee.

Fast Forward Seven Years: Itai Grinberg’s Views On Reforming The International Tax System

Mr Grinberg has recently published, in Foreign Affairs, an interesting essay on the International Tax System. See the following tweet.

The decay of the international tax system could threaten the global economy. Neither the perilous state of the system nor the risks associated with its collapse are well-understood. My latest on these themes in Foreign Affairs. https://t.co/p8djW3PPFb

— Itai Grinberg (@ItaiGrinberg) January 18, 2020

The catalyst for the article appears to be the recent dispute between France and the United States over France’s imposition of a tax on the revenues of Facebook, Google, Amazon, etc. He does explain why, Frances’s revenue taxes on digital services, challenge the old order of the International Tax system. He also explains why disputes over (1) who should have the right to impose taxes and (2) double taxation issues are likely to become more prevalent.

Mr. Grinberg concludes with:

Without a compromise, multinational corporations face punishment with levies equivalent to tariffs, except on both goods and services. The consequences of inconsistent taxation of cross-border activity go far beyond the current dispute between the Trump administration and France, and they don’t only affect technology giants. All U.S. officials and companies should be deeply concerned about the perilous state of the international tax system.

Exactly the same issues arise in the context of the taxation of individuals under the U.S. system of citizenship-based taxation.

Mr. Grinberg’s article is written for a general audience and is well worth the read. Todundsteur would suggest that you consider how many of his observations/arguments would apply to the taxation of individuals too.