Via Just Me on Twitter, we learn that Congresswoman Carolyn Maloney (D-NY), head of the House’s Americans Abroad Caucus, posted a video of her questioning Treasury Secretary Tim Geithner on, among other things, banking issues faced by U.S. Persons in non-U.S. jurisdictions. For those of you who hate watching videos (like me), after the jump I’ve made transcript of the relevant section, which begins around 3:14.
3:14/Maloney: Also, I’ve been corresponding with your office and you on the challenges that Americans living abroad — I represent many Americans working abroad, and they are reporting that they’re having problems gaining access to bank accounts abroad. And I know that we’ve requested a meeting with your office — and you’ve granted one in April, I want to publicly thank you for that — so that they can work out why they’re being denied access to these bank accounts.
3:40/Maloney: Now your office is saying that there is no policy in the American government that in any way denies American citizens or makes it more difficult for them, but the testimonials that are coming into my office tell a very different story, and I certainly support all of your efforts to improve tax compliance, and to determine the ownership of U.S. assets of foreign accounts — but these efforts should not impair or hurt law-abiding American citizens. My basic question is really on the fact of the US PATRIOT Act and foreign bank and financial services, and basically what are you doing to help accomodate American citizens so that legitimate American citizens are able to access bank accounts abroad? With more and more people in the world economy it’s becoming a growing problem across the country.
Leaving aside the fact that I am not trying to access a bank account abroad and it’s a growing problem across the world outside the U.S., it’s heartening to see someone in the U.S. Congress taking up this issue.
4:37/Geithner: Very important question, and you’re right, there’s been some concerns with the impact of this set of laws, particularly what we call in shorthand “FATCA”, and the [inaudible] rules. We are working very closely to try to meet the Congressional intent, in making it harder for U.S. citizens overseas to avoid U.S. taxes, without putting undue burdens on their ability to have a bank account, for example.
5:12/Geithner: And we’re doing a lot of things to provide more time for banks around the world to adjust and to try to make sure that we’re designing the rules in a way that creates a better balance between the important objective you spoke to of preventing tax evasion, but also to make it easier — a lot of Americans live[d?] overseas, or are living overseas, and it’s perfectly legal, and needs to be possible, for them to have bank accounts overseas. So we’ve got some work to do on that, I’m happy to work with your office and your colleagues on how to make sure we’re as responsive as we can to those concerns.
Some readers may think that Geithner misspoke, or is misrepresenting the Congressional intent. I would disagree. Ever since the U.S. started putting limits on the foreign earned income exclusion in the 1950s, every succeeding generation of Congresscritters has made its belief in American economic exceptionalism very clear — they think that the U.S. is the only place anyone could make any money, and that Americans abroad are all movie stars and other rentistas leeching off of the U.S. economy and spending their money in tax havens. So there’s a pervasive and destructive myth that taxation of Americans abroad only affects “the undeserving rich” thanks to the Foreign Earned Income Exclusion. And even the FEIE is subject to attack on the grounds that it’s a “tax expenditure” which violates the principle of “horizontal equity”. Once you’ve accepted these myths, you’re reduced to trying to defend the FEIE in terms of benefits to homelanders or to higher causes, such as promoting American exports or relieving burdens on Americans who live in hardship areas in developing countries. Indeed, people like Senators Chuck Grassley (R-IA) and Tom Coburn (R-OK) disbelieve those latter arguments, and on that basis argue that the tax code should put more burdens on U.S. citizens abroad, especially those who use their “American brains” to the benefit of foreigners. As the latter put it in his Back in Black: Reforming Tax Expenditures and Ending Special Interest Giveaways tax plan (at p. 35):
Regardless of where they live, U.S. citizens with identical incomes should have similar tax liabilities. The Congressional Research Service also found this provision is potentially a subsidy for business because it “subsidizes employers sending employees overseas” and it “may work against U.S. domestic interests by encouraging highly compensated U.S. citizens to work overseas … expatriating U.S. intellectual capital and reducing U.S. tax revenue.”
Also of note, citizens working overseas are not just working for American companies. In the 21st century global economy, many Americans are working overseas for non-U.S. companies, yet taking advantage of this tax break. The tax exemption is provided for these employees, but is not necessarily encouraging U.S. competitiveness. In fact, depending on the country, some employees working for non-U.S. companies may not be subject to Medicare and Social Security taxes, in addition to enjoying the income tax exclusion.
Once you’ve accepted the argument that the FEIE is a “subsidy”, nothing else looks like an “undue burden”. So Congress finds it perfectly reasonable to make U.S. Persons outside of their jurisdiction spend thousands of dollars on professional help to file ridiculous international tax forms allegedly aimed at catching onshore tax-evaders — like Form 8890 for an RRSP, Form 3520 for an RDSP, Form 8621 to buy an ETF or mutual fund from your local bank, Form 8858 to register a sole proprietorship and work for yourself where you live (or Form 5471 if you’d rather incorporate), Form 8938 if you sell your house, FBAR every single year — and to impose $10,000 failure-to-file fines on each and every one of the above items on those U.S. Persons who think they are “tax compliant” by virtue of filing Forms 1040, 1116, and 2555.
4:37/Geithner: “……, in making it harder for U.S. citizens overseas to avoid U.S. taxes, without putting undue burdens on their ability to have a bank account, for example.” ????? 😡
U.S. citizens overseas should NOT have to pay U.S. taxes!!! PERIOD.
We are already paying taxes where we are liviing. Why can’t the US just grow up and accept the fact????
All assets now abroad including me – I am a non-filer (Grassley can put it where the sun doesn’t shine). I think it’s a big waste of time reporting to the IRS every year that my tax bill is ZERO. If I won money, I can guarentee you the IRS wouldn’t see a penny. Local rules on gambling is all wins are tax free – I play by local rules – sorry Chuck!
“…In the 21st century global economy, many Americans are working overseas for non-U.S. companies, yet taking advantage of this tax break. ”
The arrogance of this statement is breathtaking!! So in all the jobs I’ve had in Canada, my home for the past 40 years and where I’m a citizen, (but unfortunately born in the USA), the main thing I’m doing is taking advantage of tax breaks???
By this reasoning US citizens, (born in Cuba, ireland, France etc.) , and working for a US companies are also tax evaders from the countries where they were born. Why can’t Americans see the absurdity of citizenship based taxation?
@Somerfugl
Just think of all the benefit you have received from the “worldwide deployment of ground troops and constant patrol of naval war ships along commercial shipping lines”
.
@canuckdoc,
when they put it that way,
we supposed to say: “in that case – ‘please sir, can I have more?’…”
: )
@ all…
On the glass half full front, it was good to see the question raised, but the response and the intent of Congress Statement by Geinther just made me sick to my stomach.
Maybe I should give him the benefit of the doubt, but I think that time has now passed. As slow and measured as he was in this response, that was not a slip of the tongue. He knew exactly what he was saying.
“We are working very closely to try to meet the Congressional intent in making it harder for American Citizens overseas to avoid US taxes without putting undo burden on their ability to have a bank account for example…”
That was a such a deliberate expression and no one on that committee challenged it, I have now stepped across the line in giving him any benefit of the doubt. This is no longer “involuntary manslaughter” to be a bit hyperbolic here! 🙂
Further, when it comes to intents of Congress, he pays NO attention with his IRS DATCA imposition on US Banks. As Congressman Charles Boustany, Jr., Chairman of the Ways and Means Subcommittee on Oversight said in his September 27, 2011,
http://waysandmeans.house.gov/UploadedFiles/Letter_on_NRA_taxation_final.pdf
“Congress has long had the opportunity to legislate reporting requirements on deposit interest, and has declined to do so. In the waning days of the Clinton Administration, the IRS attempted to put in place similar reporting requirements. After Congress, the Federal Deposit Insurance Corporation, and the U.S. Small Business Administration raised strong concerns, the proposal was eventually withdrawn. It is disappointing to see the IRS once again try to impose unnecessary regulations and costs on U.S. banks.”
So intent of Congress only matters to Geithner, when it is his intent, and clearly it is his intent to go after Citizens abroad who he considers to be tax evaders.
I revise my previous statements which gave him/them the benefit of the doubt or chalked up these OVD activities and FATCA to “unintended Consequences”. Those abroad are not Collateral Damage, but were clearly prime objectives of this legislation and the offshore Voluntary Disclosure processes. Clearly he, Geithner, knows what he is saying and what he is doing.
Expats abroad, be forewarned. They are playing a serious game here, and compliance or denunciation are your “black and white” choices. Both come with great cost emotionally, financially and with LCU expenditure. After a long conversation with a progressive friend back in the States yesterday, if he is any example of the majority of progressive Americans, he doesn’t get it, nor does he care. In the myriad of issues he is concerned about in America today, Citizenship taxation doesn’t rate 2 seconds of time and attention, and he is all for DATCA! I have to say, I understand why he thinks that way. As he scornfully said, “If this is such an important issue, where are those GOP leaders of individual freedom and Democracy speaking up for your issue?” Answer, there are none!
So, like when I went sailing and launched offshore for the first time, once out there, you are on your own! You have to make your own decisions and chart your own course. If you want to cling to the shoreline and be part of the US Exceptionalism Club, then these are your choices, “Complain but Comply or Renounce.” Ignoring, evading or doing the full Ostrich, over time, given the current trends, is going to turn out badly for you, in my opinion.
thank you @just me,
I read the *letter you posted and found that if you read the contents and apply them to the issue of taxing US ‘persons’ where they live ‘abroad’, those are the types of *questions that seem to work really well in terms of the burden of proof and scrutiny that Shulman and Geithners should have to answer publicly from the TAS and from those of us ‘abroad’.
Below are the *questions extracted from the document you referred to above in discussing ‘DATCA’:
The *extract below is from a letter by Congressman Charles Boustany, Jr., Chairman of the Ways and Means Subcommittee on Oversight – September 27, 2011
*”Has the IRS considered the administrative burden of this proposed regulation on U.S. banks? If so, how is this burden outweighed by the IRS’s policy goals;
2) The proposed regulation states that neither Executive Order 12866 nor section 553(b) of the Administrative Procedure Act applies to it. Provide all correspondence and other documents relating to the formation of this opinion;
3) Agencies must conduct a cost-benefit analysis of all “significant regulatory action” under Executive Order 12866, which include regulations that have “an annual effect on the economy of $100 million or more or adversely affect in a material way… a sector of the economy.” Provide all correspondence and other documents relating to the proposed regulation and its “significant regulatory action” status;
4) Provide a thorough cost-benefit analysis of the proposed regulation; and
5) How does IRS plan to implement this regulation? In your answer, please include:
a. How the IRS plans to share information collected under this regulation with foreign countries; and
b. The annual costs to IRS both in dollars and full-time employees of this new regulation.
To clarify the intent of my post above (I can’t edit it) – it is the level of detail and scope that I am referring to, “Provide all correspondence and other documents relating to the formation of this opinion” and the call for ‘a thorough cost-benefit analysis, implementation, annual costs, … etc.
Have any legislators submitted this type of request to the IRS re the costs/benefits of the current approach to administering services and enforcement re ‘international taxpayer’ individuals?
For example; surely if the US wants to attract immigrants bringing skills and assets to the US, there must be an analysis of how the design and administration of FBAR, FATCA, and OVDI/Ps relate to that goal. Right now, even if there is a gain in ‘offshore’ penalty revenue, as word gets out (esp. with FATCA), that might discourage anyone with significant assets from immigrating to the US, and choose Canada or another country instead – because of the reporting structure imposed on any of their assets held legally in their countries of origin – to help their families. Why would anyone compliant ‘abroad’ who is following developments closely continue to put themselves at the mercy of the unpredictable and runaway juggernaut (“massive inexorable force, campaign, movement, or object that crushes whatever is in its path “) that the IRS seems to have become? If we see the unfairness and contradictions applied to even compliant ‘international’ taxpayers, why would we ever believe that it would be different within the US – even if the filing and forms were different? The overall ethos driving the organization would be the same.
Perhaps there should be some disclosure law attached to getting a green card, immigrating to the US.
That immigrant should have to sign “I AGREE” to the full disclosure made to them by the US Government departments in charge of immigration and taxes, their understanding and agreement to the complete US tax responsibilities that come with their green card in the land of opportunity.
Anything less is entrapment.
@calgary411, absolutely! And entrapment seems to be what it is all about. Passing all the onus and burden of proper ‘compliance’ onto the deemed ‘taxpayer’s – keeping up with multiple changes in forms, mastering incomprehensible rules, paying specialists to assist…Anything less reaps draconian penalty revenues for them. Again, I note – it is a massive conflict of interest for the IRS – there is absolutely NO incentive for them to change, to listen to us, to make it easier, assist us in any meaningful way, or invest effort in services for ‘international’ taxpayers. Look at their defiance and delays in the face of the TAS reports – even about ‘domestic’ taxpayer issues. When they hold all the cards and resources – and barely answer to anyone, what can stop the juggernaut from crushing us? Geithner’s answer to Congresswoman Maloney shows that he is WILfully aware of the situation and the consequences.
Thank you Ms.Maloney for getting that on tape, and those of you here on IBS for capturing it and sharing it with us!
@All
Case in point re the above – many of us who became Canadian back in the 70’s,80, and earlier were sure we “relinquished” our citizenship. If you do a search even today, DOS Loss of Nationality law says we did relinquish. Then along comes 1990, IRS makes its’ own Loss of Nationality Law (for tax purposes) – who notifies all the hundreds of thousands around the world to tell them – you are now liable for 5+ years of tax forms. How on earth are you suppose to know that?
Exit tax, FArTCA, FuBAR, repeal of FEIE, cancellation of passports etc are the equivalent of the “Intolerable Acts” imposed on the colonists in America by the British Empire.
Why would the US Empire behave any different?
I think Hodgens is right, being an expat with US citizenship is a problem that must be dealt with.
As blogged above, the options are clear:
a) accept tyranny and comply or b) renounce or relinquish citizenship.
Full-ostrich is dangerous. Ostriches are vulnerable and will soon be on the endangered species list.
Sometimes “the law is the law” and sometimes, to suit the occasion, “the law ain’t the law.” It’s quite reversible in this case of what we were told — we certainly were not given “full disclosure”.
@JustMe
Did your “progressive” American friend have any thoughts or views on renounciation?
@Everyone
I should mention on the topic of American “progressives” I have always wanted write a book with this particular title; Ultimate Betrayal: American “Progressives” and Canada in the age of Stephen Harper.
@badger, I agree. They should have to answer the “burden of proof”, but don’t and frankly, even in the hearings it is not really raised…
Speaking of Congressman Charles Boustany, Jr., Chairman of the Ways and Means Subcommittee on Oversight, I thought I would go and watch his entire hearing on March 22nd. (it is only an hour or so, and I had the time this morning.)
You can watch the entire proceeding here. It is instructive to see what issues seem to matter to Shulman and the Congressman in attendance.
http://www.c-spanvideo.org/program/TaxFilin
Note: The Honorable Boustany was not in attendance for Commissioner Shulman’s opening remarks and did not arrive at the Hearing until minute 41.
Shulman starts on minute ~7, and gets to offshore compliance and success statements at minute ~12.
Notice, as you watch the hearings there is no questions about DATCA, FATCA or OVDIs. No international tax compliance issues are raised at all. Boustany in his question after the hearing followup, which was a press release, asked nothing about his original request about DATCA, I repeat,, NOTHING about it… Maybe he has already gotten a response, but I don’t see anything about it on his web site. In fact, if you go back to the September 27th time frame, there is no mention of the letter at all in his news releases. Maybe I missed it? Hummmm.
http://boustany.house.gov/112th-congress/boustany-questions-irs-for-targeting-of-groups/
Also, note the only question about the National Tax Advocate report to Congress came up at 1 hr and 2 minutes by Congressman Ron Kind, D from Wisconsin, but look at what his focus was, and it was NOT any of the international issues that concern us. Surprised? It was about inadequacy of funding going forward as it relates to noncompliance issues.
So after listening to the entire program, it does tell you a lot about what is NOT a burning issue for our Congress.
One final comment: Look at how empty the room is, to see the level of interest in tax matters. Also, when I watched this, there were only 34 views total, so America is not interested either.
Also, I found the opening statements by Congresswoman a bit disingenuous at best, as she didn’t really show good recognition about why TAX complexity is so onerous. She did call it “convoluted”, but what made it that way? Congress heaps statute upon statute, loophole upon credits upon exemptions upon new deductions and recreates the 72,536 pages of monstrous complexity and yet tends to blame the IRS for the implementation problems without much recognition about how they create the problem in the first place.
Although, in fairness, I notice the last comment by Rep Boustany about “the broader question of Tax complexity giving impetuous to all of us to get fundamental tax reform on a bipartisan basis” going forward, but that was almost a throw away obligatory line. There was nothing that was said or discussed in the hearing would give you any comfort that it is about to happen anytime soon.
@Tim…
No, not really. Didn’t express anything about that, but I didn’t probe him as to his feelings as I have not expressed that it was something that I was contemplating doing. Although, next time we will talk, I might solicit his opinion about it. Now, by very right wing friend almost thinks it is treasonous! LOL
mvh
@JustMe
Interesting. I am planning on doing another Kristina Keneally post. One of the things I found interesting was that from what I could tell she was politically active in the US Democratic Party while she was still a US citizen however, she renounced in almost the shortest amount of time possible. Keneally became a landed immigrant in Australia in 1998 and became an Australian citizen within in days of qualifying in 2000 and relinquished at the same time. I almost view Keneally as “premeditated” renounciant. Clearly she had little desire to just live in Australia as a US Citizen she really wanted to become true blooded singular Aussie.
My next Keneally post is going to have picture of her with several American dignitaries as part of her duties as Premier of NSW>
@JustMe
From what I could find out Keneally’s parents and siblings are big time conservative Republicans
Tim…
And being a Liberal fits nicely with a Conservative Republican background. Liberals are Republicans in Australia politics. I am sure Rush Limbaugh and Glenn Beck would have a hard time with that classification! LOL
@JustMe
Except Keneally is not Liberal but Labor LOL
@JustMe
I also believe to become an Australian citizen in two years means absolutely no travel outside Australia. You are literally running the clock at full speed. Having said I have to imagine for a newly arriving US citizen immigrating to Australia there is quite a bit of new things to do without leaving the country.
@Tim – when you guys say “Landed Immigrant” are you saying that the person obtained “Permanent Residency”? I’m assuming that’s what it means….
@geeez
Yes, that’s what I meant. In the commonwealth historically the term landed immigrant was used but I believe just about everyplace now uses permanent resident.
@ Tim… You are right about Keneally. I don’t know why I was thinking she was Liberal. Duh… Thanks for correcting me. I was obviously confused. She came and went in government and I wasn’t paying that close attention to NSW politics. I am now trying to figure out why I was thinking she was Liberal. It must have been something she said or did that sounded that way to me.