ACA recommendations for fundamental reform of U.S. tax laws affecting bona fide overseas residents has been posted on its website. They will be discussing these in DC this week.
http://www.aca.ch/joomla/index.php?option=com_content&task=view&id=504&Itemid=97
Cover sheet is here…
Position paper _ No. 1: An alternative to citizenship-based taxation with major economic advantages for the United States
Position paper _No. 2: Eleven proposals for tax reforms required and applicable within the framework of citizenship-based taxation.
Comments of support can be emailed to info.aca@gmail.com
Also, I will be sure to point ACA Directors attention to this web site for any comments that might be made here.
Excellent find. I have just read through their first proposal and I have two major issues with it.
First, I understand the need to “phone home” yearly in order to confirm onseself as not being resident in the US, but is this really necessary if citizenship-based taxation is eliminated considering that this is not required by most other countries?
Second, I do not understand why point 10 is necessary and would find that to be still very unfair:
“Bona fide overseas residents will remain subject to U.S. estate taxes during the first twenty
years of residents overseas, but on a sliding scale which reduces the applicable estate tax rate 8
by 5% for every year of residence abroad, reaching 0% in the 20th year”.
Do any other countries follow this model to exit estate taxes or is this a unique proposal?
What I want is the right to have absolutely no contact with the US government or tax collection authorities beyond passport renewal. I want FATCA repealed, FBARs to be rescinded for those abroad, citizenship-based taxation removed in its entirety. For these reasons the ACA proposal, even if implemented, would not be enough to convince me to keep US citizenship.
Just read the second paper as well. Some very good ideas here…I guess I am just unimpressed by everything that I have read because I know that when I lived in the US, Belgium and Italy never required me to report anything to them. Whilst based in the US I don’t think that either country would have had a claim to implement an estate tax on my assets and my parents and I certainly never had to file a yearly form confirming that we lived overseas.
Instead of filing a yearly tax form ACA should propose instead that US citizens abroad should have to register with the US consulate responsible for their jurisdiction. In Italy we have a formal system for this and I find it to be quite good since they know where I am and I am able to access a lot of services at the Italian consulate that US citizens could only dream of. Better than having to file a form every year in any case!
@Just Me, Thanks for posting this. Remember this is a proposal prepared and being presented by ACA in Washington this week. Do not count any chickens before they are hatched, since it is just one step in the battle which the volunteers at ACA have been waging for many years. It is a battle in which we are totally outnumbered by those in high places who honestly but mistakenly disillusioned in believing that the only reason a US citizen could possibly have for living anywhere but in the US would be to evade taxes.
@Roger…
I know it is a proposal, and chances are slim considering the institutional bias against this type of reform. I am glad a position paper has been prepared. I thought posting it at this forum for visibility will allow some non ACA members to see it and have some input belatedly that might work it’s way into modifications in the future.
However, we don’t want to let perfection get in the way of progress. And this active proposal, in writing, can become a focal point for broader discussions and force some in Congress to take note. I am a johnny-come-lately compared to you in the ACA ranks, but I can see that the more members and the more volunteers ACA can garner, the bigger the army, the stronger the voice.
I just re-read my comments and wish to apologise for the tone – I am an “accidental American”, so the point of view that I am coming from is that I feel as if I shouldn’t have to have any contact with the US at all, since I still believe that I shouldn’t even have US citizenship.
I appreciate the work of ACA and hope for a day when jus solis citizenship is abolished and people like me are not inadvertently trapped in a lifetime tax net.
@Don, I believe the consulate here DOES recommend registering with them. It was actually a requirement when I applied for residency in Brazil. I think it cost money too, or maybe the fee was for the notary stamp. && I think that the estate tax has gone waaay up under Obama. It used to be like 600k, and now it’s like 3 million. But I can see how people who have businesses can get caught up in this still.
This material is great (I read the 1st paper), but since we’re all Fat Cats sitting on the Canadian, French, Belgian, Brazilian beaches sipping champagne and gloating at the poor Americans, I’m sure this won’t go very far. If anything, I think the first step is education the “mainlander” Americans to show them who we REALLY are.
Sorry, I left out Just Me. He’s sipping champagne on the New Zealand beach! 🙂
@geeez, Yes, US passports urge US citrizens living abroad to register with US consulates. It may be important if someone is trying to locate you because of some sort of an emergency you need to know about. I always did when we lived in Peru and later in Brazil. But it is not obligatory nor do many who happen to have accidental citizens do it or even know that is recommended.
I know for a fact that given the US citizenship-based tax laws a goodly number of US citizens living abroad deliberately avoid such registration, fearing they might be arrested and extradited for failure to properly filing the myrad of tax forms that only US citizens living abroad are required to file. There is no tax treaty with Brazil, but the tax treaties with those contries where such exist all contain the obligation of both countries to assist the the other in enforcing its tax laws on violators within their respective borders. It does happen.
@geeeez
I definitely would not be covered by a US estate tax now at all…I just find it to be morally questionable that I could, assuming that I am successful in the future, be subject to an estate tax on assets and wealth that was made entirely outside of the US. I don’t view a tax on these goods as anything other than simple theft or highway robbery by a hostile foreign government.
As to sipping champagne…I think I can speak for the Canadians as well when I say that I would much rather be on a Brazilian or New Zealand beach than on a Belgian one…BRRRRR 🙂
Actually, I will be soon eating nachos, watching my one football game of the year, and trying to interest a few Kiwis on the finer points of this strange gridiron game called the Superbowl. Rugby fanatics that they are, this is a hard sell! 🙂 BTW, you all do know, that the “All Blacks” won the World Cup this year, don’t you? Americans with all their padding and helmets are just pansies. The “All Blacks” are real men! I am just passing on the sentiment and what I am up against today! LOL
@JustMe: Superbowl? Yawn. Canadians want to know isn’t there a hockey game on? Another big yawn for me.
@Roger, I saw your posts on the WSJ article today. Very good! Where are you living nowadays? When I go to the “estates” to take my son to visit my US relatives, I’ll stop by your place! 🙂 You don’t have to be too specific.. state is good for me.
@Justme, everyone is into football/soccer here, but every now and again, I see something the new about rugby. (In Brazilian Portuguese, it sounds like “hugbee”). I think there are teams in all of the large population centers here. I don’t know if they are any good though. 🙂 I have to admire Rugby players though because the sport is brutal. Given that some of the best MMA fighters are Brazilian, I don’t know why Rugby isn’t more popular here.
@Don, I also find it very questionable if all assets are made outside of the US. When I mention it to people here, they believe in the “death tax” about as much as the FBAR. The US is just crazy. But at the same time, there’s no gift tax either in most countries, so people have more “opportunities” to move assets to family members, so the death tax is not an issue in the first place. I think the Gift and Estate taxes compliment each other in the US. I think the death tax this is mostly a US phenomenon. I’m not affected by it for now, but I hope I could be affected by it long after I have renounced! 🙂
@Blaze, interacting with all of these Canadians on here, I’m really going to have to read up on hockey!
@Petros, how give us permissions so that we can edit comments?? When I got closer to the screen to read what I had written, I said “affecting” instead of “affected”.
So for now, I look like somone who is illiterate. Thanks a lot! 🙂
“In matters of style, swim with the current; in matters of principle, stand like a rock.”
– Thomas Jefferson
The estate tax issue from a Canadian perspective seems a little weird but that’s only because Canada doesn’t have one for residents or non residents. I do believe the UK does impose an estate tax on its non resident citizens in many circumstances. Also Estate taxes usually are not part of double taxation agreements.
@ DonPomodoro — please don’t apologize for your tone! As an “accidental American” who thought that I’d completely severed all American ties a quarter of a century ago, I’m very glad to see that people are complaining not just about the unfair fines being threatened against genuine expatriates — who of course are the primary targets here — but also about the retroactive attempts of the U.S. to claim rights over people who have no U.S. income or connections and no desire to be American.
@ The Ladies of Isaac Brock– Victoria, Blaze, Nobledreamer et al:
Some wonderful lines from “Casablanca,” the greatest Expat movie of all time.
@ALL… Here is a comment I got back from ACA, in reference to Don’s comments:
ACA writes:
“It is interesting to see the comments. Thank you for posting them. We fully understand their wanting a clean solution absolutely comparable to other countries. We put in those “compromises” because we know that the one big fear in the U.S. is that wealthy Americans will leave if the system allows them to easily – hence the scale on inheritance tax.
It will be interesting to see if there is any interest in DC at all.”
If they need a “compromise” on the estate tax, it would make more sense to use lifelong time in/time out as the basis for the scaling. A guy who spends 70 years of his life in the US and then goes overseas for 10 should not be paying a lower estate tax rate than a guy who lived overseas all his life, lost his exemption one year because he had to come to the US temporarily for family reasons or whatever, then got into a plane crash on the flight back to his real home.
@Don Pomodoro Homeland is capable of tracking who used their US Passport to enter the US, so I don’t see that “phoning home” makes sense either. In any event, I think that most foreign countries are able to provide a form letter to a taxpayer stating that they are resident in the country and that all taxes have been paid (without mentionning the amount).
ACA writes:
This is very useful input from Isaac Brock. We knew that the estate tax issue was a delicate one, and are very keen to have reactions. But first, we’ve got to try to convince some people in DC to accept the fact that citizenship-based taxation is flawed and should be dropped.
Just me and ACA,
Great work on the two proposals! One can only imagine the amount of time that went into preparing them.
Two issues that really should be taken into consideration before presenting the proposals in Washington:
1.) Eliminate “all” filing requirements for bona fide overseas residents.
2.) Eliminate “all” FBAR requirements for bona fide overseas residents.
Americans residing in “third world” countries have a hard enough time just surviving on a daily basis. Some are lucky to have electricity and H2O 50% of the time. I know because I’m one of them.
Any savings earned cannot be kept entirely in their countries of residence but instead needs to be kept somewhere else where it is safe from currency devaluation or expropriation.
Think Africa, many Americans are scattered across the continent.
Joe
@joe Expat: Number one is the elimination of citizenship based taxation and the adoptation of territorial taxation like all other countries of the world. Then all of these other “citizenship based” forms and reports would also go away since they apply only to US taxpayers. A tough goal to achieve, but we all need to work tirelessly towards makikng it happen. This is especially punishing in underdeveloped countries where even mail service is hard to come by, let alone the IRS acredited tax preparers that are absoluterly essential even for the simplest tax return for a US citizen living and working anywhere abroad.
Roger,
Thank you and thanks to ACA for everything they are trying to do. I am very impressed with their recommendations.
Hopefully someone in Washington will listen. But I won’t hold my breath for those bureaucrats.
Joe
Mail gets stolen all the time. I have to use DHL for everything. Accredited tax preparers, never seen one.
Joe