In his article Tax Evaders Renounce U.S. Citizenship Noel Brinkhoff writes:
Rather than deal with the complexities of U.S. tax law, Americans living overseas are increasingly renouncing their citizenship in order to avoid paying their income taxes.
Fortunately, the rest of the short article is a little bit better, as he refers to the complexity of the tax filing requirements and the IRS’s bait and switch tactics. Still, I am disgusted by the assumption of guilt that if you renounce you are a tax evader.
My response (their AllGov’s suppresses capitalization and makes comments look childish):
mr. brinkerhoff: i relinquished my us citizenship in 2011. if you want to know why people don’t want their us citizenship, why don’t you ask us? we are not tax evaders as you suggest. we are criminalized by the title of your article without even having a trial. this is why we are relinquishing. because people like you, who assume you know something about us, criminalize us without even understanding our situation. i am not a tax evader. i am a loyal canadian citizen who is in tax compliance. i was up to date with my filing until the congress and the irs decided to punish americans abroad. if you want to know more, please visit http://isaacbrocksociety.com and please stop the name-calling.
Hat tip: Gene Schwimmer, The American Thinker and our own renounceuscitizenship.
Petros, I was thinking that it maybe it could be useful to send letters to these people on behalf of the Isaac Brock Society. Maybe some of them are just “ignorant” to the fact that ordinary law-abiding citizens are getting called “cheats”.
The key that these people have to understand is that we live in other countries, make money in other countries, and pay taxes where we live.
Nobody likes REAL tax cheats so I doubt you’ll ever see anything positive about them. We just have to get the message across loud-and-clear that we shouldn’t be lumped into this category.
I think the real tax cheats are the almost 50% of Americans living in the US who don’t pay any taxes yet use the services. There are too many ordinary Americans down there who through all their deductions end up paying no tax, and most of these people are not rich. You can’t run a country that way.
In Canada everybody pays taxes no matter how little they make.
If Americans living in the US want to see a tax cheat, half of them just need to look in the mirror.
@renounce I just found that you already announced this article. Well, anyway, too late to do anything now. But here’s a second hat tip to you: http://isaacbrocksociety.com/2012/01/25/tax-evaders-renounce-u-s-citizenship/
@omg Exactly right. I wrote about how the GST/HST that Canadians pay is not allowed as a foreign tax credit. If it were, virtually no Canadian resident would ever have a tax liability in the United States. As it is, our tax freedom days is in June, in the US April.
@Petros
One of the weird things in this regard is in the US you can now claim a deduction for state and local sales taxes but not foreign. This is a relatively new rule.
I wanted to post another paper from someone who is pro citizenship based taxation but not for the reasons nationalistic reasons you might think. I think the big problem with his arguments(and he goes into some details of the Canadian, Australian, and British systems) is they actually somewhat out of date as at least in the Canadian context the rules for residency have been made much more liberal for Canadian citizens residing in treaty partner countries in the 1990s.(Canada has more tax treaties than the US also).
http://www.uiowa.edu/~ilr/issues/ILR_96-4_Zelinsky.pdf
@ tim: From reading the abstract of the article, the author appears to be living in an ivory tower. He doesn’t seem to understand the reality of US citizens making their permanent home in a new country.
@tim, I haven’t finished reading it yet (tropical summer storm — I had to turn off my computer!), but I think this last 3rd paper is my favourite. It gives a case that the US uses to justify their flimsy case of Citizenship-based taxation. The arguments are really quite weak too. Up until this point in the paper, I get the idea that the US thinks it’s the absolute BEST country in the world and people should PAY to have affiliation with America. I’ll know more after I’m done reading it.
Who is Noel Brinkhoff ?
Incidentally, the US may be the only jurisdiction to tax its overseas citizens, but it’s not the only one with demagogues who try to smear anyone living outside their jurisdiction as a “tax dodger” or a fellow-traveller: From the UK Parliament last Thursday:
Indeed, tax justice folks in the UK have repeated proposed imposing citizenship tax on their expats too — usually with the same flimsy justification that they get “services” such as consular bureaucrats living in fancy residences with servants and official cars, invading armies going all around the world protecting “their interests”, etc. (Of course the proposal is to start it first solely for the rich ones. We’ve seen how that went in the US: you understate your official inflation rate for a few decades, and suddenly the middle class is caught by it).
@Eric
Indeed. The UK has tried several times to implement this. It is currently actually very difficult to separate oneself from the UK tax system. For example, say you move to Switzerland yet retain a house in the UK. The UK has tried to argue that many of the people who moved were still actually domiciled in the UK and thus subject to full tax like US expats. The only way to completely detach is to literally shed oneself of all assets. I even read once of someone who dropped a club membership since the tax authorities implied that that could be equated with being resident…
Citizenship based taxation was floated around the German parliament recently as well to “catch the Germans who moved to Switzerland”. I don’t know what happened to it though – I imagine that it died a quick death.
The US has really opened a can of worms though, haven’t they? More and more countries are seeing the US model and thinking that they can gain benefit from it. France especially seems interested in implementing a French sort of FACTA/FBAR requirement for its citizens.
@Eric
“Indeed, tax justice folks in the UK have repeated proposed imposing citizenship tax on their expats too …” and links to http://www.taxresearch.org.uk/Blog/2010/05/09/time-for-a-passport-tax/
Well, yes. But. “Tax Research UK” is pretty well known in the UK as being the mouthpiece of assorted organizations that are… let’s say ‘somewhat left of centre’ (so much so that in some cases the only thing to the left of them is the wall!). Its prime rabble rouser is Richard Murphy, a person who, from the picture on his website, appears to have the permanent look of a zealot who has just spotted another unbeliever he can burn at the stake. He is regularly lampooned here: http://timworstall.com/category/ragging-on-ritchie/
Frankly, you probably shouldn’t put much credence in anything you find at Tax Research UK.
@All
A couple of comments. As I understand citizenship based taxation is a violation of the Treaty of Rome as determined a long time ago by the European Court of Justice. Now given what is going on right now in Europe I suppose someone could propose amending it to undo this decision. Having said in doing so one would be underdmining a fundamental right that EU “citizens” have had almost a generation. An interestng question does this “right” apply to Swtizerland who is not an EU member but as an agreement with the EU to allow immigration and movement of people back and forth across its borders as if it were an EU member state.
The other issue is almost all non US double taxation treaties prohibit it. So any country attempting to do so would essentially be reneging on a ton of its previously negotiated obligations. I am not saying it can’t be done. Its just something “middle powers” which are most of the EU if not perhaps all excluding Germany don’t tend to do.
I know Richard Murphy quite well and was actually hoping he would find this blog and come over and heat things up so to speak.
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