Category Archives: Issues regarding US persons abroad

Support the UK legal challenge against #FATCA. Indiscriminate #data transfers are unlawful. #AccidentalAmericans #AmericansAbroad #GDPR #DataBreach #HumanRights @Jesse_Norman @ft @UKParliament @Jude_KD @PreetKGillMP @DougChapmanSNP @guardian @SophieintVeld https://t.co/CoCw5SE6BW

— Jenny

The link in the above tweet links to a post describing this upcoming litigation. There is (along with the presumed upcoming ADCS appeal in Canada) growing pushback against FATCA.

From ‘Accounting Today‘ September 6, 2019:

The Internal Revenue Service outlined new procedures Friday to allow some expatriates who have relinquished their U.S. citizenship the chance to comply with their U.S. tax and filing obligations and in turn qualify for relief from back taxes, penalties and interest.

The Relief Procedures for Certain Former Citizens will apply only to individuals who haven’t filed U.S. tax returns as U.S. citizens or residents, owe a limited amount of back taxes to the U.S. government ($25,000 in the past six years), and have net assets of less than $2 million. Only those taxpayers whose previous compliance failures were non-willful can take advantage of the new procedures, according to the IRS. Many in this group may have lived outside the U.S. most of their lives and not been aware that they had U.S. tax obligations.
…

A post for Brock readers to analyze and discuss.

As well, analysis / commentary here:

IRS provides limited tax relief for certain individuals renounced(ing) after March 18, 2010

Update – My thoughts the Morning After – September 7, 2019:

After having digested this for a day (it was announced the afternoon of September 6/19, I offer the following thoughts:

I think that this IRS announcement/program has value. It may be that those who have renounced would NOT want to come into compliance (although there are certainly some who would – just to bring closure). But, the IRS announcement makes clear that this procedure is available to those who have not yet renounced/relinquished and wish to do so in the future. The point is that these future relinquishers can:

1. Come into tax compliance and have up to $25,000 USD in tax forgiven; and

2. Come into tax compliance without getting a Social Security number. This has the potential to be enormously helpful to a lot of people (but this is a minority view). It’s a way to make the compliance/renunciation process easier and less expensive (tax forgiveness) than it has been to date.

Of course, this will anger the thousands who have previously come into compliance, paid taxes and gone to the trouble of getting a Social Security number.

But, I can so how this new program has value.

Now on to the post as originally written …

Breaking news – just released today – September 6, 2019

Introduction – your assignment if you choose to accept it …

After having read this post, please consider the following questions/thoughts and comment …

1. Do you see similarities between the proposed wealth tax and the tax regime that is imposed on Americans abroad?

2. Do you see how FATCA and citizenship-based taxation provide the support and foundation for a wealth tax?

3. Do you believe that a proposed wealth tax would make it more likely that the United States will retain citizenship-based taxation?

4. Note that the Holding bill is NOT a move away from citizenship-based taxation. While retaining citizenship-based taxation it removes foreign INCOME from the U.S. tax base.

On to the post …

The Isaac Brock Society has been a leader in providing education about the U.S. policy of citizenship-based taxation, FATCA (information exchange in general) and offshore accounts (to the extent that the United States regards the local day-to-day financial accounts of Americans abroad as offshore relative to the United States). The purpose of this post is to suggest how these three things have become relevant to U.S. tax policy in general and the U.S. election in particular. You may know that Massachusetts Senator Elizabeth Warren is proposing a wealth tax. As a result, it is likely that a wealth tax will receive significant discussion (at least among the Democrats). Interestingly, President Trump (before he became President) had flirted with the idea of a wealth tax (although I suspect that he would not support a wealth tax in his current role as President).

Why Americans abroad are uniquely positioned to contribute to the debate on a wealth tax

Individuals who are tax residents of other countries and are subject to U.S. worldwide taxation are living the confiscatory effects of U.S. tax policy. They are already subject to taxes that are not income taxes but are in reality wealth taxes. A few examples include: phantom capital gains taxes, Transition tax, GILTI, etc. The cost of filing returns and information reporting is also a wealth tax. In addition, they are already subject to the kind of information reporting that would be required to make a wealth tax work.

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Thanks to @HelenBurggraf for this about the upcoming problems created by the Dutch banks. You can see the actual video from the Dutch banks here – is this information accurate or not? https://t.co/WW1K973T4l https://t.co/wR3hhghhO7

— U.S. Citizen Abroad (@USCitizenAbroad) August 31, 2019

Thanks to Helen Burggraf at American Expat Finance for reporting on this story. Helen was recently interviewed by the BBC on this topic. (See also this article that appeared on the STEP blog.)

The most important issue in the world today (forget about the demonstrations in Hong Kong)  is whether US born people can supply banks with a US Social Security Number! Yes, it’s time to formally document, those undocumented US born people, who have always lived in other countries!

By way of background, the FATCA IGAs require that the banks include an individual’s TIN (Social Security Number) as part of FATCA reporting. Because the “powers to be” in U.S. Treasury, never contemplated that there might be accidental Americans (what in the world are those?), who did not have a Social Security Number, Treasury relaxed the requirement of a Social Security number until December 31, 2019. It is NOT clear  what happens on January 1. 2020. Do the banks cease to be compliant with their obligations under the FATCA IGAs?  Are the banks required to close the accounts of those life forms, who were born in the USA and are living as “undocumenteds”  without a US Social Security Number?  It looks like the Dutch banks think that account closures may be appropriate. There have also been “bank noises” coming out of the UK and France suggesting the same thing.

The UK, France, Netherlands (and Canada) have the same kind of IGA. Actually, most of the world has the same FATCA IGA. This means that “accidental Americans” the world over may be having problems. It’s just that “USness” (usually based on indentification of place of birth) is more visible in some countries (Europe) than in others (Canada).

Since it’s the IGA that governs what is required to be disclosed, it’s helpful to look to the IGA to see what is actually required. Not a single media article has referenced the section of the various IGAs that would require the closing of accounts. But, no matter …*

As Ms. Burggraf writes:

In the latest development in what is becoming a fast-moving international story concerning the bank accounts of tens of thousands of “accidental Americans” living outside of the U.S., it has emerged that the Dutch Banking Association has posted an animated video on the home page of its website in which it warns such clients of the need to get their U.S. Social Security numbers – if they don’t wish to lose their Dutch bank accounts.

A spokesperson for a European accidental Americans organization said that the video appeared to suggest that Europe’s banks were “well on their way to becoming the willing agents of the U.S. Internal Revenue Service.“

The actual video (which is well worth the look) is referenced in the following tweet:

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“I Spy” – the latest novel from Claire Kendal

I Spy by Claire Kendal – https://t.co/l4aw2tKPBg

— U.S. Citizen Abroad (@USCitizenAbroad) August 25, 2019

Why the book “I Spy” may be of special interest to Brockers and oppressed U.S. citizens the world over

Part of the book #Ispy by @ClaireKendal includes a discussion of the problems of being a "U.S. Person" born and living outside the USA and having one's life run by @citizenshiptax #FATCA, #FBAR, etc – amazing that this is now entering novels! https://t.co/mtmrqaV3kU

— U.S. Citizen Abroad (@USCitizenAbroad) August 25, 2019

Claire Kendal’s newest novel “I Spy” is a great read. Citizens of all countries will enjoy it. But, U.S. citizens are special. Therefore, the book contains a special section which will be best understood by them. The book contains certain insights that could be understood only by those who have lived the oppressiveness of U.S. citizenship. Not only does the book contain a description of the problems, but it even includes a description of a meeting with a “High End Condor”.

Starting on page 309 …

“Albert B. Matheson has the mega-watt smile of a superstar visiting from Mount Olympus. He is in his early forties, like Zac, and every move he makes his made with a snap. “Hey Helen, he says, snapping on a smile as he snaps open his briefcase. “Great to meet you.”

“Great to meet you too. I’m really curious about what the E stands for.”

“Ernest, my grandfather’s name. I do my best to live up to it.” He laughs. “So” he says, leafing through the forms I emailed earlier and his assistant clearly printed.

“Your US citizen father and British mother divorced when you were a baby, and you were born and raised in the UK. My main tip is for you to remain calm and not panic as you explore your next steps.”

Is this the kind of tip you charge $1600 for? Panic about what, Mr. Matheson?

“Call me Albert please. Your discovery of your U.S. citizenship and the tax obligations it brings.”

Seems like somebody in this book is having an OMG Moment. Free advice (not $1600) for those afflicted with this moment may be found on the Issac Brock Society.

Claire Kendal is on Twitter: http://www.twitter.com/ClaireKendal.

Then: On September 16, 2011 the National Post was writing about Mr. FBAR

Circa 2011: The late Jim Flaherty directs his message on FBAR, FATCA and U.S. @citizenshiptax to the American public. https://t.co/ecBmbbA4B5 pic.twitter.com/1emPZChuJZ

— U.S. Citizen Abroad (@USCitizenAbroad) August 17, 2019

In a brilliant and historically important post, Patricia Moon canvassed what happened during the summer of 2011 – The OVDI reign of terror.

Now: On August 16, 2019 the National Post was writing about Mr. FBAR

An #FBAR penalty is NOT a TAX penalty within meaning of Canada/US tax treaty which is the reason why the CRA won't assist the USA in enforcement: "Potential for massive IRS TAX penalties still hangs over U.S. citizens living in Canada" https://t.co/wt1v5RRs9S via @nationalpost

— U.S. Citizen Abroad (@USCitizenAbroad) August 16, 2019

Although the title of the above article is about “Tax Penalties”, the article is really about FBAR. When referring to the U.S. tax compliance burden of U.S. citizens living in Canada, the author states:

One such filing requirement that can cause particular hardship for U.S. citizens, whether they are living in the U.S. or abroad, is the requirement to annually disclose to the U.S. Department of Treasury all foreign (i.e., non-U.S.) financial accounts, including bank, brokerage, mutual fund, trust or other types of foreign financial accounts where the total, in aggregate, exceeds US$10,000.

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As goes the dependence on the US dollar, so goes the effectiveness of US sanctions. But, in this context consider: "The Biggest Migration Since the Barbarian Invasions of Rome" https://t.co/w2m34LV0iI via @intlmandotcom

— U.S. Citizen Abroad (@USCitizenAbroad) August 10, 2019

In the 1990s, University of Toronto economist David Foot, developed the theory that demographics isn’t everything. It’s the only thing. In other words, most of what goes on the economies can be explained by demographics. Could you imagine the possibility of Lagos Nigeria having a population of 90 (yes you read correctly) million people?

The article referenced in the above tweet (whether you believe it or not) is rational and fascinating. It describes the interaction between population growth in Africa, the large population in China, the need that the world has to reduce it’s dependence on the U.S. dollar and the implications for U.S. power.

This is part of a continuing theme of posts recognizing the relationship between the dominance of the dollar and U.S. power. The article includes:

International Man: If China comes to dominate Africa and its resources, what does that mean for its rivalry with the US?

Doug Casey: Well, the US government is basically bankrupt at this point. The only thing that the US exports in quantity is US dollars. And sometime soon, the Chinese, the Russians, the Malaysians, the Iranians, and the Indians, among others, won’t need or want US dollars. They don’t want to accept them now, because it’s an asset of their adversary or even their enemy. They’re unhappy about having to settle accounts in dollars that all have to clear through New York.

So, they’re going to come up with their own alternative. And I suspect they’re going to use gold. Why? Because they don’t trust each other’s paper currencies. And why should they?

How’s the United States going to react to that?

It’s going to be left out in the cold. No one needs or wants their dollars—they want and need real goods, not the paper obligations of a hostile, unpredictable, bankrupt government. Also, the US isn’t in a position to export people, except for some unwelcome soldiers. The Chinese are in an excellent position to export a couple hundred million spare people. The bottom line is that the Chinese are going to take over Africa financially, and they’re going to take it over demographically as well.

Purpose of this post. Yesterday I made the obvious mistake of putting a post on Brock. What was I thinking? Well, I was thinking: Brock really needs a post. I have been reading a great deal about sanctions and thought that FATCA could perhaps best be viewed as a sanction. Of course, the “don’t comply” group immediately jumped in (what this had to do with the post is beyond me) with the general message that FATCA (and the July 22, 2019 McTavish decision) are irrelevant for one simple reason. The reason is that pursuant to the Canada/U.S. tax treaty, the Canada Revenue Agency shall not assist the United States in collecting a tax debt on a Canadian citizen. Generally, the whole situation should be ignored – nothing will ever come of it.

For the reasons specified in the comments (read them yourself) to that post, I think it’s unlikely that there will be any enforcement of citizenship-based taxation in Canada today and tomorrow. But, I think it’s a mistake to think that this couldn’t change. I do NOT believe that the situation should be ignored. I believe that people have an obligation to do what they can to oppose U.S. citizenship-based taxation, FATCA and it’s component parts (which includes many in the compliance industry).

The question is this:

Are you going to ignore this extreme injustice, which is dangerous to the sovereignty of Canada, which has resulted in your being effectively stripped of your Canadian citizenship (that’s the true impact of the McTavish decision) or are you going to contribute to changing this for the next generation. Are there any aspects of this that extend beyond your personal interests? That’s for you to decide. For your information, the essence of the McTavish decision is found in paragraphs 348 and 349 which read:

[348] First of all, as noted earlier, the U.S. tax obligations of American citizens exist regardless of whether or not the IRS is actually aware of such individuals. I also agree with the Defendants that the benefit that would accrue to those affected by the Impugned Provisions by their ability to ignore their obligations under American tax laws is outweighed by the need to protect Canada as a whole from the economic consequences of FATCA.

[349] I further agree with the Defendants that the ability of those individuals resident in Canada to claim immunity from the duly-enacted laws of another democratic state of which they are citizens is not the kind of interest that the Charter was ever intended to foster.

This is what the decision means. This is the section that other courts and government agencies will focus on. This is extremely dangerous!

Let’s consider the following …

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Greg Swanson has written a three-part series, “Americans abroad: a case study in the dumbing down of American policymakers,” providing a concise synopsis of the situation faced by US persons outside the US as a result of CBT and the history behind it.

Part I and Part II are online at Medium.com now.  Part III to follow soon. I’ll post the link when it does.

Greg is the coordinator of PurpleExpat.org, which is focused on the elimination of citizenship-based taxation.

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?