How cool is this? Dutch-Americans could be classified as ‘tax evaders’ IN THE NETHERLANDS!! https://t.co/zTCdzfxFaN pic.twitter.com/NwIdeLkwpq
— U.S. Citizen Abroad (@USCitizenAbroad) August 4, 2020
It’s hard to know whether the story referenced in the above tweet is true or not. But, assuming it’s true, this really would represent a milestone in the extra-territorial application of US law.
Think of this way …
So far, the United States of America – the great “citadel of freedom of justice” – has managed to:
1. Export FATCA to the rest of the world
2. Gotten the world to agree that, the United States, and the United States alone determines which of the residents of other countries are to be considered to be “US persons” for FATCA purposes.
3. Forced the non-US banks to pay for the witch hunt and general FATCA inquisition
4. Expand the US tax base into other countries (think of the OMG moment – am I really US taxpayer property?)
5. By expanding the US tax base into other countries manage to extract capital from other countries (think Exit Tax, Transition Tax, GILTI, etc.)
6. Solidify the status of the the United States of America as the world’s number one tax haven (remember since the USA hasn’t signed on to the CRS): “What goes on in Vegas stays in Vegas” and “What goes on in Wyoming (and other states) stays in Wyoming.”
But the best has now finally arrived … Truly amazing.
Assuming that this article is true, apparently now, the Netherlands may be willing to deem Accidental Americans (the one’s who accidentally escaped from America) as tax evaders in the Netherlands!!!! This is amazing. Think of it, now the United States doesn’t even have to charge these criminal “accidental Americans”. All they need do is:
A. Decree that a violation of US law in the Netherlands is actually a violation of the law of the Netherlands; and
B. Get the Netherlands to deal with them under the Dutch justice system.
Fantastic! One more expense that the United States need not pay. In the event that the “accidentals” are incarcerated (for disobeying the Homeland), the Netherlands can pay that cost too.
Russia, China and all other totalitarian regimes should really take note. Nobody does this better than America!
There was a time I would have just thrown this idea out as utterly unrealistic and untrue….as I once did with FATCA, FBAR and CBT. Now it’s, “well, it does fit the pattern.”
Well, as I said in the post “if this is true”.
Really, it makes a lot of sense though. Why in the world should the USA be burdened with with the cost of deeming accidental Americans to be tax evaders, when they get the FATCA partner country to do it? Put it this way and it would make a lot of sense to US Treasury.
But, remember International Adviser may have misinterpreted this …
If true, this is the kind of ‘mission creep’ we might have expected from other nation’s failure to draw a line in the sand with the US.
At this point FATCA partners are faced with a choice:
“You either officially become a US territory or you will be colonized by the Internal Revenue Code.”
@S.H.
Yep. Once defenses are breached the invader is free to move about within. You surrender your sovereignty and allow another county to tell you which of your citizens are actually their citizens and you surrender your sovereignty in all similar matters.
As Pumpkinhead would say the tweet is largely Fake News. It doesn’t take much to determine that the individual in question was concerned that he would be considered a tax evader in the US not in the Netherlands. Also that he would have to pay taxes on the sale of a house.
He was an accidental, faced with closure of his bank account. Quite reasonably he figured this to be unreasonable. A financial complaints tribunal ruled against him. The outcome remains to be determined.
It raises the important question of why the world’s governments are so reluctant to stand up to the US government when it comes to FATCA and its enabling legislation.
The issue has been proven to not be one of fear of standing up to the bully. Justin Trudeau was very much willing to stand up to Donald Trump when it came to coronavirus. When it came to stopping coronavirus at the border, Trudeau was true to his word: “a Canadian is a Canadian is a Canadian”.
But when it comes to FATCA we aren’t seeing the same level of courage on the part of Canadian or other non-US leaders. What is it about this particular issue–FATCA–that renders leaders so reluctant to act?
As for Trudeau standing up to Trump, doubtful, he never seriously pushed for it but decided that his self image was better served by not doing it.
I doubt for one minute that there was any ” standing up to ” to be done here.Besides, We currently have more border crossing than you think,or are led to believe.
@Dash1729
The 30% withholding of all US derived income of financial institutions is what causes the fear of the US over FATCA.
I have no idea why my mother (who spent the entirety of her first 25 years in the US) told me to be proud of my US citizenship. When I was young she registered my birth at the consulate (as I was born outside of the US and have never lived there), obtained a SSN (in 1996) and renewed my passport twice before I turned 18.
Until recently I knew nothing about citizenship based taxation and how it could affect me in the future yet throughout all those years I never divulged any knowledge of my US citizenship to anyone. In fact, when asked one time about if I was a US citizen by a classmate in the early ’00s I replied, ‘No.’ My teacher who overheard the conversation told me to be honest about it and that I should be proud of my American heritage. I remained silent and, in hindsight, maybe, for good reason.
Perhaps that it originated from the Obama (and not Trump) administration?
@Robin.
Lucky you. Not only do my employers market the fact that they employ Americans and list my nationality my children broadcast to all they meet. No matter though, as I have to provide citizenship to banks here in Japan anyway.
The reason for other nations fearful of the US in regards to FATCA and not with the corona virus is that noncompliance with FATCA carries huge fines for their financial institutions operating in the US.
Has the US ever followed through with this threat though, and would they really want to?
It seems a bit far fetched, to say the least.
The threat was cited by the bankers in Canada and even in the decision against us in the court challenge in Canada. They believe the damage to the economy from fines for not complying with FATCA is greater than the cost of violating the rights of Canadians with US citizenship.
This is an odd one. My first impression is that the radio reporter got it wrong. We’ve regularly seen Canadian journalists miss the nuance, no reason to expect it doesn’t happen elsewhere.
I find the Dutch case quite peculiar. Their banks are extremely aggressive in demanding SSNs and threatening to close accounts, well beyond what’s actually required by the IGA. The US government has even told them to tone it down a bit.
Digging into the article a bit, the first part makes some sense:
The tribunal ruling is basically correct: a US-born Dutch citizen can’t decide to be non-American, and the IGA requires that he provide an SSN once he has been identified as a US person. However, the next statement makes no sense.
There is no reason why applying for an SSN would compel one to file US tax returns. We need to see (and presumably translate) the “Kifid” ruling to determine if and how they argue that a failure to file returns would constitute tax evasion under Dutch law. This is where I suspect that the reporter got something wrong.
However, I have a vague recollection that there is an unusually broad collection assistance agreement in the US-Netherlands treaty – giving the US more power than they would have in Canada. I’m sure the Dutch accidentals group would know more about this.
@Robin – To your question, no, the US has never invoked the threatened withholding against a foreign bank for failing to comply with FATCA (to the best of my knowledge). Everyone sure seems to be scared of it though.
http://isaacbrocksociety.ca/2016/11/01/dual-citizens-of-sweden-france-netherlands-denmark-canada-take-note-your-country-will-not-collect-for-the-u-s/
Collection agreements
It seems you are safe if one is also a citizen of the resident country at the time the so called tax debt was incurred.
There is nothing really surprising here. The Criminal Finance Act 2017 (UK) makes it a criminal offence for a relevant body (typically an account or financial institution) for “Failure to prevent facilitation of foreign tax evasion offences” This is reinforced by the Institute of Chartered Accountants in England and Wales ethical rules. This creates a problem for an Accidental American or indeed anyone subject to U.S. tax who is in a situation of inability to pay.
As an aside: Those who are insolvent might be able to discharge debts to and claims by the IRS in an English bankruptcy proceeding, but such a discharge would have no effect outside the United Kingdom. Some, but not all, IRS claims could be discharged in a U.S. bankruptcy proceeding, but only if timely tax returns were filed and a required time period has passed (the rules for this are complex).
I have seen this law used by “compliance condors” to effectively coerce a prospective client to resolve U.S. tax and reporting obligations in a way profitable to the condor and not so much the prospective client.
Here are some references.
CFA 2017 Art. 46 https://www.legislation.gov.uk/ukpga/2017/22/section/46
Association of Chartered Certified Accountants comment https://www.accaglobal.com/uk/en/student/exam-support-resources/fundamentals-exams-study-resources/f4/technical-articles/cfa-2017.html
Institute of Chartered Accountants in England and Wales comment https://www.icaew.com/technical/financial-services/financial-services-faculty/fs-focus-magazine/previous-editions-of-fs-focus/fs-focus-2019-issues/may-2019/how-firms-should-tackle-tax-evasion
This will continue and even get worse until Americans abroad stand up. Fight for your rights. Hit the US embassies and consulates with protests against FATCA and CBT.
I don’t understand why the guy doesn’t stop arguing and get a SSN. Not ideal, but not the end of the world, either. His bank will likely FATCA him, but so what? That would do nothing except add more data to the mountain of useless information that the IRS has already collected and does nothing with.
He won’t become an actual tax evader unless he is dumb enough to start filing, owes something, fails to pay, and is assessed a tax debt by the IRS. Only those who try to comply have problems. Why on earth would he go down that road? I have never heard a report of the IRS going after an expat non-filer based on nothing but FATCA reporting. Obviously, renouncing is his best solution, but that can’t be accomplished in the short term.
@Heidi
Relying on my unreliable memory here but I think I recall once seeing something to the effect that there was slightly higher possibility of collection in the Netherlands. Which still doesn’t explain the nonsensical idea that not filing US tax returns is somehow tax evasion under Dutch law.
@andy05
I’m not sure I follow the logic here. If a US person living in the UK failed to file US tax returns, how is any UK financial institution with whom they hold an account at risk of penalty for “failure to prevent facilitation of foreign tax evasion offences” – where’s the facilitation? Under FATCA, all the bank needs from a US-person customer is their SSN – it does not require them to provide proof of US tax compliance. (We did hear of that happening to a small number of Americans in Switzerland, but early on when paranoia levels were running high after Swiss banks had been badly slapped.) Which isn’t to say that the compliance-industrial complex won’t cite any old law for marketing purposes.
@maz57
Indeed. He complained on principle, and lost. Now the sensible thing is to renounce (without SSN) or just get an SSN to make the bank happy. Tax compliance should not be on the table. It appears that our Dutch accidental doesn’t understand the situation, or something was lost in translation via the journalist. Note that this year, possibly this year only, he could renounce at no cost if he obtained an SSN and scooped up the stimulus benefit, assuming there’s a second cheque.
@andy05
One further thought. If a UK bank requests an SSN from a US-person customer, and properly reports the account under FATCA rules, the bank literally cannot be facilitating US tax evasion because it has reported the account to the IRS. The customer’s overall US tax compliance status doesn’t enter into it.
Why would anyone expect an accident who one moment thought they were a citizen of the county they reside in and the next learn that they are also a citizen of the US with tax obligations there the next to have anything understanding if anything afterwards?
“…the bank literally cannot be facilitating US tax evasion because it has reported the account to the IRS. ”
Maybe facilitating tax evasion by NOT reporting the account. Even that doesn’t make sense. ,the bank is a form filer and not responsible for final
tax repoting for individuals or enterprises.
For what it’s worth, I e-mailed the author and asked for clarification, pointed out that several things made not much sense, and provided a link to this post and the discussion.