AnonAnon posted this comment on the Consulate Report Directory thread, sharing their thoughts on how the US could clear up the problems of unwanted dual citizenship. It’s an important topic, one worthy of a thread of its own.
“One way the US could lessen the burden on its consulates and on those of us born in the US who no longer are or want to be US citizens would be to change the default option: Get rid of the whole CLN concept, and require all US expatriates who DO want to remain US citizens to maintain valid US passports while living abroad. That way they could track their citizens, report them to the IRS, and so on, without bothering and having to deal with the rest of us.
Whether they would still tax their citizens who live abroad is an entirely separate issue.
US citizens abroad who subsequently decided to give up their citizenship could simply return their US passports, along with proof of citizenship elsewhere.”
@AnonAnon. What are you crazy? A simple, rationale solution that would be a win-win for all concerned? And the Confused States of America might actually adopt something so logical, you think?
Sort of reminds me of that marketing ploy Rogers tried a few years ago and got publicly hammered by everyone, where they upgraded everyone’s subscription without asking (and charging for this) and putting the onus on the subscriber to opt out. I think that kind of marketing is illegal now in Canada, isn’t it? But it’s exactly how the US treats citizenship for people who haven’t lived there for years. In contrast with some other countries, I think Belgium is an example someone mentioned a few days ago, where if you live outside the country and don’t take active steps to maintain your Belgian citizenship after ten years, you lose it. Even if you were born there. Makes sense to me.
One part would be to abolish the requirement that you enter the US on a US passport if you were born there, unless you have a CLN … instead say you don’t need a US passport to enter the US if you were born there, but to get any rights or benefits of US citizenship when in the US you must either have a US passport, or produce a driver’s license or other documentation proving your permanent residence is in the US and not somewhere else. That way they can’t claim you’re evading payment of taxes for rights and benefits that you receive (they now have I believe a requirement that you provide your SSN and TIN when you renew your passport, and there are moves afoot to make it impossible to renew a US passport if you aren’t tax compliant, and — setting aside the residence vs citizenship basis for taxation issue — in principle I don’t have a problem with their doing that, or Canada either for that matter).
But these things all would take an Act of Congress and Presidential signature. What hope is there of getting anything this sensible through that den of thieves and trough-wallowing pigs, even if there were a sympathetic president?
Great thought though.
@Schubert, That Rogers negative-option marketing ploy is *exactly* what came to mind in my shock that awful moment a year ago when I found out that my citizenship might not be what it really was. Unbelievable. I was numb.
@AnonAnon —
The problem is, the US government wants its rules to be vague and unclear because it allows them to be hard-nosed or lenient, depending on which way the political winds are blowing. And since the political winds right now are blowing hard in the direction of stealing money from as many expats as possible, they are going to make it difficult to shed the citizenship (or the US Personhood).
Remember, too, that until the US was taken to court, citizenship was cheerfully removed arbitrarily from anyone who had the gall to become a citizen somewhere else. Now they can’t do that. Trouble for all of us is, they are imposing the new rules retroactively.
@AnonAnon,
I had the same thought as Schubert. Your idea is just too simple. They would never do that. U.S. Government just doesn’t work that way.
*I’m sad to admit that you’re probably right that the US won’t do it the way I’m suggesting. But that still leaves the question of how they are going to deal with the flood of applications for CLNs in the next few years. Most likely it will become increasingly difficult to get an appointment at a consulate, with longer and longer time delays.
*Well, they do have all those people out of work. Guess, they’ll end up like Bern and start employing more people to deal with the backlogs. Hey, they’ve actually managed to create some jobs! Maybe that’s been the hidden agenda all along.
That mention of Rogers’ ploy reminds me of when Sky TV bought in their new wonderful magazine to tell you about all the amazing programmes they have on. Put the cost of the subscriptions up by £3 with no opt out at all. Was a reasonable size when it first came out, but not really useful; now it’s about 8 pages, totally useless and I don’t know why they bother to keep the thing and send it out every month. Have the subscriptions gone down because it’s so crappy now – not a chance.
All the more reason for people who want to shed their USC to get in the queue asap before the deluge hits. There already is a big queue, but wait until mainstream media outside the US picks up on this. There still is very little coverage of the citizenship/CLN business even here in Canada, and really outside the Globe & Mail and the Financial Post even FATCA isn’t getting a lot of traction. Can’t imagine it’s getting much coverage elsewhere on the planet except maybe in Switzerland and even there I suspect the focus is more on FATCA and banking access than on CLNs and appointments at consulates and embassies. But I could be wrong.
@schubert,
You aren’t wrong; I try to read at least one paper (usually the Globe) and often the Vancouver Sun, every day. I do not believe I have seen one article about CLNs and what they mean, nor about U.S. born-Canadians trying to shed their U.S. citizenship.
In fact, just as Flaherty’s silence is deafening re FATCA, the media’s silence is also deafening on all of it.
@AnonAnon, I like your idea very much. The current reverse onus system has created such a nightmare of disrupted lives. I like that idea of just turning in a passport (if you have one, I never did) and I guess filling out a simple one-page form.
Where you mention your proposed system would require a person to maintain their passport or they would lose citizenship, I ‘d suggest a variation on that– to attach loss of citizenship more directly to acquisition of new citizenship instead of passport renewal. If someone’s seriously ill or just plain disorganised/forgetful, they may inadvertently let their passport lapse, not intending to lose their US citizenship. Also the system would have to ensure that US-only citizens who neglected to renew passport on time did not automatically become stateless.
So I think I’d attach citizenship loss to citizenship acquisition – that when you get citizenship in a new country, you should be considered to have terminated your US citizenship unless you notify the US that you want to keep your US citizenship. In today’s internet era, seems the Immigration Dept of your new country could easily inform US when a USC becomes a citizen of the new country. If the person wants to retain US citizenship, maybe they should have 60 days after becoming a citizen somewhere else to notify the US that they want to retain US citizenship, too. If they don’t, it’s relinquished.
I see it like taking a new citizenship is an active, conscious step … whereas not renewing a passport is a passive lack of action and could occur inadvertently, causing other problems (hard for us to believe, eh, but losing US citizenship would be considered a problem by some people).
I do like your proposal in general though. Either one would definitely be a major improvement over this morass.
@pacifica, I agree with you and @anonanon that US citizenship shouldn’t be like the Rodgers negative option – particularly in light of the very serious consequences for those who are opted in without any notice or consent. Serious life altering obligations like the Military draft, and citizenship-based extraterritorial taxation (especially as practiced currently by the US) should not be imposed by default – especially when coupled with making relinquishing/renouncing contingent on 5YEARS of IRS deemed compliance, plus the high fee, and the complex process. You can’t tell me that the Canadian born child, who inherits the US status from one dual parent should bear the heavy burden of US taxes, FBARs, and the draft – as a negative option. And when the US keeps changing the burden – and making it more onerous, the stakes keep getting higher and higher – yet we have no influence on the laws made that bind us.
So you want to automatically lose your citizenship if you stay away for too long, but scream like banshee’s when there’s talk about implementing something for those who leave that would not allow someone who’s no longer a citizen from re-entry?
Remember the US Government is made up of people who are emotional and irrational just like you and me, and based upon our unique “exceptionalism” it’s an ego hit when we see or hear about someone who doesn’t want to be one of us anymore.
I don’t think I’d support the concept but remember there are always consequences what if staying away too long not only resulted in a loss of citizenship but also meant you were then denied re-entry, still a good idea?
*@Whoaitssteve, it’s this irrational emotion that scares me off renouncing. I am frightened that I could be harrassed at the border and refused re-entry, even just to visit my aging parents; I’m scared that I could face an aggressive audit from the IRS because I had to amend several years showing I owed substantial double tax; fbar audits demanding I produce full records showing all the highest balances of my accounts; ostracising from some relatives and family friends; possible punishment taxes on any US-source inheritance; plus after the election, I wouldn’t be surprized if new laws are passed to make renouncing much harder, or further obstruction during the process as Tiger could be experiencing.
Someone mentioned possible increases in the exit fee from $450 to $2500; I’m thinking more in terms of $10,000, $25,000 or even $50,000 with the marked to market capital gains exit tax applying universally to all renunciants on top of this exit fee. It would thus be truly like an acrimonious divorce.
I am too scared to risk it whilst still during my open statutes of limitations for the fbars and amended returns because it could indeed raise red flags. On the other hand, someone young with no assets like Pomondoro had an almost unicorn case so could get out easily…which is why I believe they’ll substantially eventually raise the exit fee as a deterrent and lower the exit tax thresholds, especially if the numbers trying to renounce shoot up. There seems to definitely be an attitude that ‘you’re either for us or against us’ which is why Congress will continue to impose patriotic economics on the likes of us.
My .02. This is not a phenomenon that is exclusive to the U.S. – globalization and international migration have cracked most citizenship models. Everything has been tried to fix it – read Patrick Weil’s work on this. France has been something of a lab in this respect – there’s been opt in, opt out, changes in residency requirements and a zillion other things and it’s still not quite right yet.
What the U.S. could try is a big window for accepting or declining citizenship. Say from 18 to 30 where a person could simply relinquish any time he or she liked no questions asked. After that there could be some restrictions – the common one today that most countries require is proof of another citizenship. Europeans in particular are very sensitive to preventing statelessness as Europe has a lot of these people already. Exit taxes are another story – I agree that they will probably become more onerous for U.S. renunciants. Thanks goodness for the EU which has stepped in and put some limits on the ability of European countries to impose such things on their ex-citizens.
And perhaps that simple opt out could be combined with some sort of opt in that shows that the person understands what U.S. citizenship means. Full disclosure. For example, why not have a “Duties and Responsibilities of U.S. Citizenship” seminar (a few hours) that would be required before getting one’s first U.S. passport. This could be required of all U.S. citizens at home and abroad. That way there will be no misunderstandings, no surprises and one can act according to one’s interests and desires from that point forward.
The doctrine of Dominant Nationality could solve all problems. One owes taxes and military service (if any) to the country where one has the most ties, residence, work, and family. The secondary country of citizenship simply permits you to return for visits and to live there if later you choose to move. Otherwise, they release you to your country of Dominant Nationality. This doctrine already exists and is used in international law to settle disputes. It is thus already in place in international law, and the United States has accepted it where it has been convenient. See http://isaacbrocksociety.ca/2012/01/07/dominant-and-effective-nationality-and-why-it-matters/
*Perhaps in many cases, but not all Petros. Myself for example. My ties through parents and husband are British, but obviously due to his work we live here in Switzerland. We pay tax here, but also if we have enough in the UK bank accounts we pay some tax there too. We have bought a house here and just inherited one in the UK which we’re still deciding what to do with. So it’s pretty much 50-50, maybe leaning a little on the British side as we don’t speak any Swiss languages.
However, the article on dominant nationality is one of the things that I read when making up my mind to renounce. Apart from cousins in the States, all my other ties are British ones these days and I use my British passport for all travelling except to the States. It is much more dominant in my life now than the US will ever be.
@Medea — The question would come down to this if the United States made a claim against you in an international court: to which country of citizenship do you have the closest ties. It seems your residence in the Britain and your closest family is in Britain, your Dominant Nationality would be clearly british, unless you are also a citizen of Switzerland. But then the issue is between CH and UK–the US has a little further claim to your allegiance. CH may clearly claim you as a resident for tax purposes–but force you to do military service–not unless you are a citizen of CH.
The US claims citizens abroad as resident in DC for tax purposes.
*Yes, I agree Petros. Britain is the dominant one now as far as any issues with US over citizenship. We’re not and have no plans to take out Swiss citizenship so purely British is what I will be when I renounce. I was just pointing out that in these days of more international work and living it’s not always going to be a clear cut decision.
And of course, the Swiss have their own way of dealing with those who don’t or won’t do military service. They simply pay more tax by foregoing the allowances that apply if you do.
@Steve,
I might be taking your quotes a bit out of context … basically these phrases were jumping-off points for my thoughts.
Right on! But the consequence of getting my Canadian citizenship was losing my US citizenship. 40 years later, the US decided it didn’t like the consequences, so it changed the rules, retroactively. Not fair.
This past year I’ve thought of refugees who come here and can’t return to their former country for a visit, for obvious reasons. And years ago, the draft dodgers came here and never expected that they’d be able to enter the US again. My ancestors who came from Europe (1640-1880) knew they would never be able to return to their home countries, for logistical reasons in those centuries. As for me, had I been faced with the choice 40 years if you become a Cdn citizen, you can never return to the US, I still would have become a Cdn citizen.
However, I think that proposed banning former USCs who may have expatriated for perceived tax reasons from re-entering the US is indicative of a meanspiritedness which seems to be part of what appears to be desperate flailing on the part of the US as its economy and national psyche are on a downward trend in this era. (Ironically just when they really need friends, they’re doing everything they can to alienate the ones they have). It’s also anyone’s guess on how they’d determine who’s in the banned group.
(I don’t have a personal interest in this banning-or-not-banning-former-USCs as I have no clue when, if ever, I’ll take my next US vacation. I loved visiting the US for the past 40 years; I thought it was great to have such an interesting country to explore right next door. But now I’m so turned off by the harm the US has caused me and my family that I think it will be years before I feel comfortable going there. It really feels like a different country than it used to be. I’m hoping with time I’ll mellow out and feel differently because vacationing there was a part of my life, but for now the place makes me sad. Time will tell.)
So the concept of banning former USCs wouldn’t really matter to me personally, but I think it’s a dumb proposal, like a jingoistic concept, and indicative of the overall desperate flailing going on in DC, putting lots of energy into scapegoating, isolationism, and creating cutesy titles for pieces of legislation, instead of putting energy into fixing their real, and serious, problem.
Nothing short of the abolition of citizenship based taxation is acceptable, either the US government’s or mine.
@Medea Fleecestealer
I remember reading somewhere that the US used to be much more draconian in its punishment of those who did not register for military service, but they now have opted to go a similar route you’ve mentioned the Swiss do, to deny certain allowances to those who don’t register. It took quite some time for the US to learn that incentives really help compliance in this regard! Maybe they’ll one day figure out that beating someone with a carrot doesn’t work.
@all. Q3 has come to a close. How long does Geithner have to get us those renunciation numbers in a timely fashion?
@Medea Fleecestealer, you might find the following to be of interest:
An English expat living in Spain “was assessed for CGT for £1.75 million on asset disposals while she was overseas”
SwissPinoy, I found this on the same site. It’s interesting because it shows how FATCA is complicated life for non-resident-aliens who buy stuff from the US.
http://www.iexpats.com/2012/07/fatca-tax-laws-will-trap-us-courier-customers/
Amazing. It looks like the US is clamping down HARD and soon they’re not going to let people, capital, or goods leave the country without proper “documentation”. My, how times have changed since I was a boy!
*@SwissPinoy, yes that’s interesting, but our main accounts, house, etc, are over here so I hope we’d avoid getting caught like that. All official paperwork comes to our address here and not UK, even the bank and tax stuff.
@geeez, guess I won’t be buying much stuff from Amazon US in future. I think it’s only going to harm US businesses though as many customers won’t bother to have items shipped from US so companies’ sales will drop even further.
@WhoaIt’sSteve,
Yes, it would be wonderful to lose US citizenship if we stay away too long and all of us who choose to live permanently in another country (perhaps vs living in another country for work purposes for which visas or some other certification could be renewed) should be wise enough to take out that country’s citizenship for our benefits in that country. A better solution than what now exists and would definitely solve the Accidental American nightmare many find themselves in. With an other than US citizenship, we should be accorded whatever laws of entry to the US as any other citizen of our new country. We should also then be able to not be penalized for registered savings accounts or other investments available to all others in our new country. Parents, Guardians and Trustees would have the right to make necessary decisions for their family members’ best interests, medically or financialy, etc. We would not be second-class citizens of our new country by virtue of our extraneous US citizenship and would certainly not have the expense of US legal and accounting representation so as not to make small errors and be punitively caught by the US citizenship-based tax laws.
Yes, go ahead and threaten not allowing us (former US citizens) to visit relatives or just be tourists in our former country because we left under such a scenario, stayed away too long and, miraculously, had our US citizenship taken away. Go ahead and use that US exceptionalism and implement what would be another true Berlin Wall. What a brilliant move that would be for enhancing the worldwide reputation of the US.
*In my view, America hurts itself by preventing expats from spending money in the US. The US should seek for people to go to America to spend money there, paying for hotels, food, property or businesses. Telling us that we can’t spend money in the US is economic suicide for America. Sometimes, self-declared patriots are a nation’s worst enemy, unnecessarily harming their own country with their silly stubbornness and backwards views.
The most “damage” that I could do to America, would be to buy American products, pay US taxes and employ stateside Americans. If this is a horrible thing to do, then I must be banned from visiting America!
I don’t understand why Americans abroad are US citizens. They can’t even buy guns:
U.S. May Block Gun Sales to Citizens Living Abroad
http://www.courthousenews.com/2012/10/01/50805.htm
Granted, I’ve never wanted to buy a gun, but it is good to know that I’m a non-citizen like all the other Americans abroad.