Potential high-risk SFCP participants enjoying the fruits (and vegetables) of their evil unpatriotic non-payment of U.S. taxes at a wet market in Shatin, a “new town” suburb of Hong Kong about an hour away from the central business district. Photo by Enoch Lau/Wikimedia Commons.
Yesterday, Roy Berg of Moodys wrote up a very helpful analysis (see also our discussion here) of the problems and uncertainties in the IRS’ new Streamlined Filing Compliance Procedures, also known here as Stealing From Canadian Pensioners. His comments are aimed primarily at Canadians, but are worth reading regardless of what country you live in. Below, I riff off several points of his in order to explore how the SFCP affects U.S. Persons in Hong Kong, and the likelihood that the IRS may classify you as a “high-risk” taxpayer for activities that everyone here would consider ordinary and innocent.
The IRS asks a series of 20 questions to determine whether a taxpayer is “low-risk” or “high-risk”. I’ve analysed the five most problematic ones below. Why does it fall to me, a random blogger, to do this analysis for Hong Kong? Why didn’t one of the copious numbers of cross-border tax consultancy firms here jump on the chance to point out these problems to the tens of thousands of U.S. Persons in this city? I suppose they don’t have any time to pay attention because they’re too busy shilling for data protection law amendments in order to dump all the costs and harms of FATCA compliance onto Hong Kong taxpayers. Anyway …
Question 5: Since January 1, 2006, have you had a financial interest in or signature or other authority over any financial accounts located outside your country of residence?
According to Hong Kong law — not to mention international reality — we live in the same country as mainland China and Macau, hence the famous “One Country, Two Systems” slogan. However, the IRS doesn’t see it that way:
Hong Kong has historically been treated as a separate country for purposes of the Internal Revenue Code and Income Tax Regulations, including subpart F of the Code. Consistent with the treatment of Hong Kong and China as separate countries under the Convention and the Shipping Agreement on and after July 1, 1997, the Service will continue to treat Hong Kong and China as separate countries on and after July 1, 1997, for purposes of the Code and regulations, including subpart F.
See United States-Hong Kong Policy Act of 1992, § 201, 22 U.S.C. § 5721 (1996) (providing that notwithstanding any change in the exercise of sovereignty over Hong Kong, the laws of the United States will continue to apply with respect to Hong Kong on and after July 1, 1997, in the same manner as before that date unless otherwise expressly provided by law or Executive Order).
From the perspective of taxing U.S.-based multinationals this may or may not make sense, but for U.S. Persons who actually live in Hong Kong this definition of “separate country” is pointlessly onerous. On my morning commute, if I catch the train on the left side of the platform instead of the right side, I can be in mainland China in about forty minutes. Tens of thousands of people here work cross-border two or three days a week at offices and factories in Dongguan. Hundreds of thousands of others take weekend trips to Shenzhen or Shanghai or Beijing.
As a result, it is perfectly ordinary for Hong Kong residents to maintain bank accounts in mainland China in order to keep “walking-around money”. And of course Hong Kong is not the only place where border-hopping is a simple fact of everyday life — just look at the European Union with its guarantees on freedom of movement for workers. Does having one account where you live and shop and another where you work put you at risk if you go into the SFCP?
Imagine if the U.S. decided that it was “high risk” for people from New Jersey to have bank accounts in New York? But of course, U.S. tax laws aim to make it impossible for U.S. Persons abroad to live like ordinary members of society in our countries of residence. (In the mean time, Congresscritters get very angry at immigrants who refuse to assimilate and live like “ordinary Americans”).
Incidentally, Beijing also claims a number of territories under the control of other governments — the Spratly Islands, Diaoyutai, Taiwan, and some parts of Northeast India. Someone who wanted to turn this “separate country” into a giant issue could just go open a bank account in Taipei, or if you’re looking for a more exotic destination, in Arunachal Pradesh on the other side of the McMahon Line.
Question 6: Since January 1, 2006, did you have a financial interest in any entities located outside your country of residence? If yes, do these entities control U.S. investments?
This question doesn’t even make sense. Having a “financial interest” in an entity is an impossibly broad standard which catches everyone from 100% owners down to kids whose grandparents bought them one board lot of shares. And what does it mean for it to be “located outside your country of residence”? Place of incorporation? Place of business? Location of directors? And why does the entity’s control over U.S. investments matter — shouldn’t the point be whether the taxpayer controls it?
Over on the Stock Exchange of Hong Kong, you can buy stocks of Hong Kong-incorporated companies which do most of their business in mainland China, but also have U.S. operations. You can buy H-shares of mainland-incorporated companies which also have U.S. operations. You can buy index funds which track India’s Sensex (2836.HK), Malaysia’s KLCI (3029.HK), and South Korea’s KOSPI 200 (3090.HK). The exchange even allows listings from companies incorporated in twenty other jurisdictions. Which of those would count as “entities located outside of Hong Kong” or “control[ling] U.S. investments”?
In short, this is yet another question from the fantasy 1950s world that the U.S. government is stuck in, according to which the U.S. is the hub of everything and the only place where any legitimate cross-border activity occurs, while the rest of us are sitting in little self-contained units called “foreign countries” which only ever interact with the One Big Important Country.
Tax law isn’t the only place where this attitude shows up. Immigration law is just as bad. Ever looked at the qualifications for getting a treaty trader or treaty investor visa?
To qualify for E-2 classification, the employee of a treaty investor must be the same nationality of the principal alien employer (who must have the nationality of the treaty country) … If the principal alien employer is not an individual, it must be an enterprise or organization at least 50% owned by persons in the United States who have the nationality of the treaty country. These owners must be maintaining nonimmigrant treaty investor status.
Are you a treaty investor in the U.S. who wants to sponsor employees of other nationalities than your own — even those from other countries having treaties of navigation and commerce with the U.S.? Too bad. Companies are expected to be of one nationality only.
Disqualification from the SFCP for accounts in the U.S.?
The flip side of that ridiculous attitude is that the IRS and Americans at large consider it “normal” for people from anywhere in the world — especially Americans abroad — to have bank accounts and investments in the United States. This is not merely a policy position (expressed, for example, in the non-reporting of bank interest, or the sweetheart 0% capital gains tax rate for “non-resident aliens”), but also a deeply-held unconscious bias of the IRS examiners who are going to be sorting SFCP participants into “low-risk” and “high-risk” buckets. You live in Hong Kong and you have an account 40 miles away in “Red China”? Sneaky and high-risk and anti-American to boot. You live in Hong Kong and you have an account 8,000 miles away in New York? That’s normal, we welcome you and your money to the Homeland!
Of course, this is just my gut feeling telling me that the IRS will not classify a taxpayer abroad with a U.S. account as “high risk”. My gut feeling is not professional advice. I’m not a lawyer, and even the actual lawyers on this site are not your lawyers. Which leads right back to Mr. Berg’s point:
If the procedure were properly tailored for these hapless minnows it would contain greater degree of certainty and not require the taxpayer to engage counsel to assess “risk level” before entering into the program.
Apparently the IRS believes it better that ten innocents pay thousands of dollars to tax attorneys than one guilty man go free.
Question 7: Do you have a retirement account located in your country of residence?
Pretty much every who works in Hong Kong is obligated to participate in an MPF or ORSO retirement plan, many of which allow the participants to allocate some of their savings into index funds and mutual funds. This is very helpful and convenient, unless you’re a U.S. Person abroad — in which case it would probably be lower risk and simpler for you to buy uranium and store it under your bed.
What if you were dutifully filing your 1040s, 1116s, and 2555s, but had no idea about the insane “information returns” for what the IRS calls “foreign trusts” and “passive foreign investment companies”? You’re not in a good position, because you’ll have to amend your past returns to include 3520s, 3520-As, and 8621s — the so-called “Streamlined Filing Compliance Procedures” don’t actually involve the IRS using its authority to streamline any filings for U.S. Persons abroad. As the IRS’ instructions state:
Amended returns submitted through this program will be treated as high risk returns and subject to examination, except for those filed for the sole purpose of submitting late-filed Forms 8891 to seek relief for failure to timely elect deferral of income from certain retirement or savings plans where deferral is permitted by relevant treaty.
But don’t be too jealous of the Canadians (the only people who qualify for Form 8891). Most of them won’t qualify as “low risk” either, because they have other kinds of plans which aren’t covered by their treaty with the U.S. — TFSAs, RDSPs, RESPs, and the like. This is also why you shouldn’t put any faith whatsoever in the idea that U.S. government is going to relieve you of your paperwork burdens. The evidence is quite clear: in seven decades of tax treaties, the U.S. government still hasn’t managed to work out the problems that their tax system causes for their next door neighbour and closest ally in which as many as a million of their citizens may be living. What do you think is the chance that any future U.S. policy or agreement with Hong Kong is going to fix all these miserable issues for a mere sixty thousand of us living halfway around the world?
Question 10: During the above-listed tax years for this submission, have you declared all of your income in your country of residence?
As Mr. Berg points out:
In Canada, for example, certain items are excluded from gross income (e.g., capital dividends, lottery winnings, life insurance proceeds, income accrued inside a TFSA, etc.) and are never reported on the taxpayer’s TI (Canada’s general income tax return), even though such items may be taxable in the US. So if a taxpayer does not report income on a T1 that isn’t required to be reported, has he “declared” all of his income to Canada?
The larger problem pointed to by this question is that “income” has very different definitions in different countries. Hong Kong does not have an “income” tax and so we do not “declare income” at all. We have a salaries tax for people who are paid by employers, a profits tax for individuals carrying on business, property tax for people who own flats, and stamp duty for people who bought or sold certain Hong Kong assets (primarily stocks).
The U.S. thinks that gains inside non-U.S. ETFs are “income”. The Hong Kong government does not care at all if your MPF holds some 2800.HK. It’s none of their concern if you went to Macau one weekend and won some money at blackjack. Does your failure to “declare” something in which your local government has absolutely no interest disqualify you from the SFCP? Did anyone at the IRS think about this before they put out these vague and confusing guidelines?
Question 20: Are you claiming a refund on any returns you are submitting through this program?
This question is particularly troubling for Hong Kong because U.S Persons who did not know about their U.S. tax filing requirements may have invested in U.S. stocks through brokers who treated them as foreigners (perhaps due to confusion between the securities law and tax law definitions of “U.S. Person”). If they earned dividends, those would have had tax withheld on dividends at the 30% non-treaty rate, and thus — unlike people living in treaty countries, who get withholding at a lower tax rate — they would be entitled to refunds. The total of hundreds of thousands of U.S. Persons in Brazil, Taiwan, Argentina, and the various countries of the Persian Gulf — none of which have U.S. tax treaties either — will face a similar situation.
One small mercy of Hong Kong’s currency being pegged to the U.S. dollar is that we do not have to worry about U.S.-monetary-policy-driven “phantom gains” messing with our tax returns. That means that the vast majority of Hong Kong-resident U.S. Person investors in U.S. stocks are likely to have investment income well under the personal exemption and standard deduction for the years in question. With their dividends having been mistakenly taxed at 30%, they’re owed a complete refund of the tax paid. Even those over the threshold are owed a refund of half of the tax paid if they held the stocks long enough for those to become “qualified dividends”. And even if the dividends were ordinary income instead of qualified dividends, as long as their income was under US$171,550 they’d be in the 28% bracket or lower and thus are still entitled to enough of a refund to buy some beer.
The only possible reason for this provision of the SFCP is to intimidate people into not trying to claim a refund to which they are legally entitled. But of course, the IRS’ goal is not to make sure that people are paying the legally correct amount of tax (let alone the morally correct amount). The IRS’ goal is to use the ridiculous fines attached to all of these garbage “foreign information returns” to scare U.S. Persons abroad into giving the IRS money which does not belong to it — whether that be an unclaimed refund of a few hundred dollars, or an OVDI penalty of tens of thousands against a three-digit tax deficiency.
Just ignore this shit. Seriously. If the IRS wants to get all pissy and sue, let them try.
Eric, as always, good write up.
I think whoever wants to renounce, now is the time. I would prefer to relinquish, but with the FATCA going online next year, I don’t want to risk it. They can make that fee to be whatever they want to do. So yeah, I’m going to pay the $450 (and another $200-$300 in transportation costs) to buy my freedom.
I called VP Bank in Liechtenstein to ask if they would finance the mortgages of Swiss citizens who were denied banking services in Switzerland since they were considered to be “US persons”. VP Bank will have closed the accounts of all “US persons” by the end of the year. Nevertheless, they were very interested in me financing my mortgage with them, under the condition that I made a small financial investment.
Yet, as you mentioned in Question 5, the IRS would consider it to be “high risk” for a Swiss citizen to finance their mortgage in Liechtenstein after being rejected by Swiss banks due to US policy concerning “US persons”.
SwissPinoy, I know it sucks to be denied financial accounts due to US Citizenship. I was denied once or twice for a current/checking account in a couple of different countries.. just to have a “backup” in case.
But remember, your are Swiss laws that are the result of US laws. Why aren’t the Swiss standing up to the US? If Switzerland wanted to, they could pass a law making it easier for resident-citizens to get mortgages.. but they don’t. We’re dealing with an issue that doesn’t affect the majority of the population of EITHER country. So my bet is that it stays the same or just gets worse from here. US Citizens can still get a mortgage where I live, FOR NOW. This is why I’m not taking any chances!
Another job well done. You note that:
“Apparently the IRS believes it better that ten innocents pay thousands of dollars to tax attorneys than one guilty man go free.”
Almost one year ago, I made this idea the subject of the following post:
In it I noted that John Adams said that:
“.. it’s of more importance to community, that innocence should be protected, than it is, that guilt should be punished.”
In other words, the US has completely reversed its initial presumptions.
I will say again: The IRS does NOT want compliance. Compliance does NOT get them money. Non-compliance does.
Get out now!
Eric’s post demonstrates how people in different countries would interpret these new IRS procedures (which are meaningless anyway).
Would some of you residing in other countries take the time to explain how residents in your country would interpret this?
Perhaps Mona, Perhaps SwissPonoy?
I think this could be very very helpful in making the case down the road …
@Eric- well done.
Many thanks Eric;
It is very instructive for us to read how this plays out when applied to a variety of countries where those deemed US ‘taxable persons’ were born, live and earn outside the US. We benefit from perspectives on the compliance problems from countries of residence/dual citizenship other than those we know best from discussions here (ex. Canada). Obviously there is no hope to reconcile the conflicts between reality outside the US, and the US and IRS center of the universe worldview. One hopes that the Taxpayer Advocate Nina Olson has read both your post, and the one by Roy Berg – and sees that the IRS is determined to abuse us further. This shows that the IRS and Congress don’t give a flying fig for the realities of life outside Podunk Kansas USA.
Further confirming that the US doesn’t want or deserve us as citizens. It has institutionalized a citizenship-based extraterritorial system designed to confiscate our legal post-tax assets – one way or another – using penalties for information forms to get around whatever treaties against double taxation currently exist, and to offset the FEIE and Foreign Tax credits. Any country that lets them get away with doing this to duals and permanent residents inside their non-US borders is just giving away significant money that could be spent at home in their own economies and is aiding and abetting institutionalized discrimination. FBAR and FATCA and all the other layered draconian penalties are a threat to non-US countries. Prime Minister Flaherty couldn’t truthfully and with a straight face say that this newest ‘common sense’ ‘streamlined’ compliance program is ‘good news’ for those in Canada deemed US taxable persons, if confronted with this and the Berg analysis. If we can’t renounce/relinquish without IRS certification of 5 years compliance, and we can’t comply without facing penalties and repercussions that can bankrupt us and lead us into debt in the tens of thousands, then we are effectively being held prisoner by the US. I know the US doesn’t care about international law and the UN, but at what point does this become an international incident – holding countless millions and their children ransom through arbitrary citizenship laws – against our will?
@Badger- The fact that we, against our expressed will, are made citizens of the U.S. in spite of the fact that we obviously do not reside there is an act of legislative violence. We derive absolutely no benefit from this law which makes us involuntary residents of the U.S.
This forced residency is purely for the benefit of the U.S. government and has more in common with an arbitrary detention or an indefinite probation. And all done to us without evidence justifying the government’s act of punishment. As residents outside of the U.S. the U.S. has no power to grant us any Constitutional rights or government benefits.
A duration of stay required by state and local laws that entitles a person
to the legal protection and benefits provided by applicable statutes.
Given that Hong Kong has an alternative maximum flat tax of 16% on gross income (that’s right, maximum, you pay it if it’s less than the regular tax with deductions and progressive rates), having US citizenship in Hong Kong is a great disadvantage.
I just found the following article: http://www.woodllp.com/Publications/Articles/pdf/IRS_May_Issue.pdf. It’s a few months old, but it enforces my belief that the IRS does not charge FBAR penalties outside OVDI or criminal cases.
Good news: I just received my first response from a politician. He’s independent presidential candidate TJ O’Hara. (I know, independent candidates are unknown and have virtually no chance of being elected. But at least he responded.)
My email to him:
Dear presidential candidate TJ O’Hara,
I would like to make you aware of a subject that is largely unknown only because it does not concern most Americans living in the US, but which is creating a true nightmare in the lives of the estimated 6 million Americans living abroad and many of the 20 million recent legal immigrants living in the US. The subject is citizenship-based taxation and its related reporting requirements. I would also like to know your opinion about it.
The appalling facts below are only a summary of the issue, and if you are interested, please contact me as I have a wealth of information and more details about it, including examples, testimonials and sound proposals to fix the problem. You may also find more information from American Citizens Abroad (ACA) at http://www.americansabroad.org.
1. First of all, the United States is the only country in the world* which taxes the income of people based on citizenship. All other 238 countries and territories, and even all 50 US states and DC, base taxation on residence and source of income. (*The only exception is Eritrea’s diaspora tax, which has been repeatedly condemned by the United States itself and many other countries, including a Security Council resolution at the United Nations.)
2. According to data from the IRS, 91% of US taxpayers residing abroad do not owe any income tax to the US, and the rest of them owe little tax. This is because they can use the usually higher income taxes they already pay to their countries of residence as a credit on their US tax returns. Still, they must file US income tax returns every year, and the forms required of them are numerous, very complex and costly, as foreign income is treated with special scrutiny by US tax law. The IRS has admitted that Americans abroad are the single group that needs the most assistance with tax return preparation, and the one that has the least access to it.
3. Besides income tax returns, all US citizens and permanent residents must file a report of foreign bank accounts (FBAR) every year, and unreported accounts are subject to a draconian penalty of 50% of the value of the account, regardless of whatever tax has been owed and already paid on the income generated at the account. US citizens abroad have bank accounts where they live, and to them these are local accounts necessary for mundane activities like earning salaries and paying bills, not offshore investments, while many immigrants simply retain the accounts they already had in their home country before immigrating to the US. The overwhelming majority of these people does not file the FBAR, simply because they don’t know of this requirement, even though they already report their foreign income in their US tax returns and pay any tax on it.
4. Over the past three years, the IRS has launched a virtual war on foreign bank accounts held by US taxpayers. While the goal was to discover willful tax evaders who intentionally hide US income by sending it to foreign bank accounts in tax havens, the IRS has undiscriminately applied the same penalties to innocent taxpayers who honestly were not aware of the complex reporting requirements of their foreign bank accounts. In most cases, the penalties were a large part of lifetime savings, and completely disproportional to any tax owed. This practice has been severely criticized by Ms. Nina Olson, who holds the position of National Taxpayer Advocate at the IRS, in her periodic reports to Congress.
5. In 2010, Congress passed the Foreign Account Tax Compliance Act (FATCA), which was included as an amendment to the unrelated Hiring Incentives to Restore Employment (HIRE) Act, and passed without deliberation. FATCA is an extraterritorial US law that unilaterally asks every financial institution in the world to report to the IRS information about the accounts held by US citizens or permanent residents, or face an automatic withholding of payments coming from the US. FATCA also creates another form to be filed by US taxpayers disclosing foreign bank accounts, a complete and useless repetition of the information already required in the FBAR. The international financial community has been severely complaining about FATCA, as its implementation will cost them much more than any possible additional tax revenue to the US. Many foreign banks have decided to avoid FATCA completely by closing accounts of Americans abroad, because it is less expensive for them to refuse banking services to Americans than to implement FATCA in their systems. Americans are now pariahs in the financial world.
6. In the last two years, the number of Americans renouncing US citizenship has risen from about 300 to almost 1800 per year. From preliminary data, it is expected to reach 8000 this year alone. Contrary to what is sometimes reported by the US media, the overwhelming majority of people renouncing US citizenship are not wealthy individuals fleeing the US to avoid taxes, but people who have lived abroad most of their lives, with few ties to the US, and who would probably remain US citizens if not for the restrictions they face due to FATCA, FBAR and citizenship-based taxation. They do not complain about paying taxes to the US, as most of them do not owe any US taxes anyway due to foreign tax credits. What they complain about is the requirement to file very complex and expensive forms every year, the restrictions they face at their local banks, and the draconian penalties they face for not reporting their assets to a country where they don’t even live or have money. They would gladly remain US citizens and support their country of origin abroad if they were treated fairly, like every other country in the world treats its diaspora.
Again, please don’t hesitate to contact me or ACA if you would like more information.
Thank you for your attention,
Thank you for bringing this to my attention. It is further evidence of the illogical structuring and execution of our Nation’s tax code. It also is a demonstration of a fatal flaw in our Government’s approach to regulatory control: it often is directed at solving an ill-defined problem.
With regard to the latter, we need to do a far better job of defining the actual problem.
Then, we need to learn how to clearly identify the root cause(s) of the problem. At that point, we should explore every alternative (not just those that are conducive to the Party-in-power’s political benefit).
The next step is to assess each alternative on a basis of the probability that it will provide the best solution (given available resources), in the time frame required, and with the least negative consequences should the original assumptions prove to be untrue.
Unfortunately, this isn’t the approach our Government generally takes.
To use a tongue-in-cheek description, our traditional approach is more akin to “Ready. Shoot. Aim.”
With regard to our tax code in general: it is in need of a drastic overhaul. It is far too complex to be effective; wastes far too much money on compliance issues; and it is far too influenced by lobbying factions to be fair.
If I am grace with the opportunity to serve our country as President, I will work diligently to correct both of these fundamental flaws. Thank you again for your comment.
Candidate for President of the United States
Campaign Website: http://TJOHARA.com
*Shadow Raider, Excellent letter! If you don’t mind, I will use much of this information to for my own letters. Up to this point, I was thinking of writing in Ron Paul on the ballot, but since he is no longer campaigning and since he never responded to my letter, I may have now discovered a new candidate of interest! I’ve never been one to vote for the lesser evil and have in interest in changing that pattern.
@swisspinoy, You can use what I wrote for your letters, no problem. An update: you can say that 242 countries and territories do not tax based on citizenship, if you want to include all unrecognized countries like Abkhazia and South Ossetia (I found their tax laws after I wrote that letter). I have also added more infromation to paragraph 2, and added paragraph 7:
2. According to data from the IRS, 91% of US taxpayers residing abroad do not owe any income tax to the US, and the rest of them owe little tax. This is because they can use the usually higher income taxes they already pay to their countries of residence as a credit on their US tax returns. To put things in perspective, the total income tax paid to the US by these taxpayers amounts to an insignificant 0.3% of the federal tax revenue. Still, they must file US income tax returns every year, and the forms required of them are numerous, very complex and costly, as foreign income is treated with special scrutiny by US tax law (for example, see IRS forms 1116, 2555, 3520, 5471, 6251, 8621, 8891 and 8938). The IRS has admitted that Americans abroad are the single group that needs the most assistance with tax return preparation, and the one that has the least access to it.
7. In terms of the impact of these policies on the US economy and jobs, it has been suggested that one of the reasons for the US trade deficit is the relative lack of representatives of American companies in other countries to promote US exports, due to the high cost of tax compliance for US executives located abroad. Citizens of no other country face this disadvantage.
Although TJ O’Hara has an extremely small chance of being elected, perhaps the media would take notice if he ends up having an unusually large number of votes from Americans abroad.
@Eric, another outstanding post. Thank you. Yep, they are taking a round peg and trying to fit into multiple square holes. What an enormous amount of energy expended (at US taxpayer expense) for questionable gain. The IRS and Sisyphus have a lot in common. 🙂
@shadowraider, you made my day. That is the first response I’ve even seen from a U.S. pol on this topic and he gave a good answer.
Did you write to Gary Johnson, Libertarian candidate? I can’t find anything he’s said about extraterritorial taxation of individuals but he’s proposing to abolish the IRS, personal income and capital gains tax, estate tax and would replace them with a 23% national sales tax.
There was some speculation that Ron Paul might run with him, but that was dispelled on the Tonight Show last week when Paul said that it was ‘highly unlikely’ he’d run outside the Republican Party. Paul did say (jokingly) that he’ll taking another run for at the nomination in 2016.
@bubblebustin, Gary Johnson and Ron Paul both propose abolishing all direct taxes and the IRS. This would, of course, end citizenship-based taxation and much more, so I thought that it would be unnecessary to write to them.
That is certainly true, but I’m curios to know if we are even on Johnson’s radar, because it appears we aren’t. I think I’ll write to him as he could potentially be a good champion of our cause.
@recalcitrant, re; UScitizenship-based taxation as “an act of legislative violence” and “involuntary detention“. Well put – that phrasing is very powerful. Any US act which forces us to maintain a relationship with the US that is against our will, and also constrains our children through mere parentage, is indeed involuntary detention and denies our and their human rights. Any US act that can threaten to wipe out or confiscate the legal post-tax savings of an entire household abroad – whether through forcing us to pay expensive tax law and accounting fees for protection, or through draconian penalties on funds generated entirely outside the US – is, as you say, ‘an act of legislative violence‘ against us and our families – many or most of whom are non-US persons.
@Shadowraider; very well written letter. Thank you for posting it and the reply. Anything which sheds public light on this situation is welcome – re the official discrimination and legislative violence and oppression applied to those outside the US, at the hands of the IRS and Congress, which is fed by media silence and political obscurity. Only glaring scrutiny and publicity that reaches a wider audience will help us. Otherwise, the US will decide that it can afford to continue indefinitely in the same vein. Congress and the IRS will not make any meaningful change in this matter unless it becomes too embarassing to ignore.
I wonder what the response of the 99% at Occupy Wall Street would have been if they were asked of their opinion to citizenship based taxation. 🙄
@Uncle Tell, as we know, US residents only know how the system applies to them. Just as until very recently, I only knew of the tax system where I grew up, and comply with as an adult. And I only know of the small portion of the tax system as it applies to my particular situation. With the numerous complexities and nuances that make up the contradictions and abuses of citizenship based taxation as we experience it, and as applied by the US – the 99% would probably have difficulty understanding our issues. Although directly asking them if they would volunteer to report and potentially pay taxes to two countries, or pay taxes to some country they’ve never been to or even lived in – and to pay penalties exponentially larger than their post-tax savings represent – that might grab their attention…
The IRS and US has made a good job of using us as scapegoats, and mischaracterizing anyone living outside the US as the ultrawealthy attempting to either hide money, or to pursue advantages leading to wealth, abroad. The coverage doesn’t acknowledge that there are countless generations of former and current US citizens who went abroad to study, or travel, or work, and naturalized elsewhere, or married, had families, and created more duals ‘abroad’. The mischaracterizations by the IRS, Treasury and US politicians are deliberate, make better sound bites, and are easier to sell to the public – using the popular media to amplify the message for free. It would tend to divert the attention off the 99% away from all those corporations and banks that have entire departments dedicated to getting around and lobbying for lucrative loopholes for themselves.
And the Canadian media assists when it keeps referring to ‘Americans’ in Canada. If you’re born or naturalized a dual, and you live inside Canada, which citizenship should be more salient – the inherited accidental one, or the one that governs all of your daily existence? So the 99% would conclude, just like the Canadian public, that this is all about Americans who left the US recently, and are profiting somehow by leaving.
‘Divide and conquer’ is a time-honoured tactic by governments, the powerful, and manipulators of the public.
So we have to create our own soundbites, and just keep repeating them, which the issue just doesn’t lend itself to.
As discussed previously though, tapping into the underlying currents of anti-US feeling in our home countries and country of permanent residence, or dual citizenship can work with the 99% here, because they are more alert to oppose US arrogance and overreach.
*I sent a message to O’Hara and got back the following a few hours later: