The following conversation that took place at Jack Townsend’s blog. Jack Townsend is of the opinion that Canadians can’t simply choose not to obey the IRS. I am of the opinion that the IRS is a criminal organization that is violating the rights of Canadians and it is only good and proper to disobey what are clearly unjust laws. Jack’s view is that Canadians who choose to disobey US tax laws are not going to get any sympathy from him. What he says about jury nullification is particularly interesting in light of my argument that the US tax laws applied in Canada are a violation of the right to trial by jury in the district in which the alleged crime was committed. It is sad to see the law professor with such little sympathy for the our situation, as it is so very much like the causes of US revolution against British rule.
That an RRSP is even considered some kind of delinquent account at all is offensive to Canadians. The IRS could take a much more lenient stand towards RRSPs since they are equivalent to IRAs except in a “foreign” country. Foreign only from the point of view of the IRS, but domestic as far as Canadians are concerned. What’s “foreign” to us is the IRS, which is the External Internal Revenue Service.
I understand what you are saying, but many countries have deferred compensation plans that are like IRAs. Those plans are not treaty qualified and thus are subject to current income taxation and FBAR reporting.
Thus, since I see a lot of these, I have to ask the question why Canadian RRSPs should get better treatment where the taxpayers have not done what is necessary to get the better treatment? Canadian taxpayers may not think it fair from their perspective, but Canadians subject to the U.S. tax regimes overall get better treatment that U.S. taxpayers in other countries. So what is fair?
I think what the Canadian / U.S. persons are really complaining about is the U.S. tax regime. That is a complaint they are entitled to make and, if they feel strongly enough, withdraw from citizenship. What I think is inappropriate is for them just to ignore their known U.S. tax obligations simply because they think the tax system is unfair. If that were a reason not to pay tax, almost everyone could find something that is unfair in the system (tax protestors do it all the time).
Jack, I understand your ultimate paragraph, although I have to admit, I think the complexity required in for Expats to comply is daunting and the number of necessary forms is overwhelming. In situations where the income should be tax-deferred but for the failure to fill in a form, the IRS could/should be more accommodating. For years, the IRS ignored expats, barely providing any education or outreach and many preparers were unaware of the multiple forms (for another example, see UK ISA’s, which are often considered trusts under US law. The number of people who failed to file 3520’s is quite large). The service has gone from almost zero enforcement to making expats their number one priority.
Peter W. Dunn (reply to Jack Townsend)
I am of the opinion that the IRS is a law unto itself. It does not have the welfare of the people in mind. The reason why RRSPs programs are set up in the first place is so that Canadian people can look after their own retirement, and that their retirements might be invested in solid vehicles which can lead to the prosperity of Canada. It is an unacceptable situation that angers me and gets my blood boiling, that the IRS thinks that it has the right to reach into and steal Canadian RRSPs.These accounts are supposed to be protected by treaty but instead the IRS has decided that their own rules are more important than a treaty with Canada. This is an example of bad faith–and it is an example of how the IRS has no concern for bigger issues, such as Canada-US relations.
But you are right–my anger is with citizenship based taxation. The American system of “citizenship” (as defined by their own laws, not the laws we have made here in Canada) based taxation is a travesty of justice. It is unjust tax by its very nature, since the proceeds of the tax go to benefit not our community here in Canada, but your profligate and immoral society south of our border. You won’t balance your own budget, you borrow over 40 cents on every dollar you spend, and your country is creating disorder and instability everywhere in the world.
I was just in Niagara on the Lake. It was settled by Loyalists who fled the United States. Unwittingly, I’ve been thrust into a new Loyalist movement. I think it was wrong for the United States to destroy Niagara on the Lake in the War of 1812. And I think it is an unmitigated evil that the United States has decided to go after the Canadian tax base in the enforcement of laws passed in Washington DC, where we have no representation.
You were the richest nation in the world. Do you think that it is morally justified to steal from our Canadian tax base? How can you justify that?
US tax laws applied outside the borders of the United States and imposed on other nations are in violation of international law. Take for example the Master Nationality Rule. Canada has no need to have any concern with your so-called citizens here in Canada, if they are Canadian citizens. It’s none of your business. The lawsuit by the Alliance for the Defense of Canadian Sovereignty is exposing the United States as a violator of Canadian sovereignty and rights violater, because the US has no respect for the human rights codes of other countries in the implementation of its own extra-territorial laws.
The US provides no services or protection to Canadians within the borders of Canada. It says so in a US passport. Since the constiutional justification of citizenship based taxation is “protection” then it is completely wrong to apply citizenship based taxation to citizens of Canada living in Canada. There is no justification for the tax.
Jack, there is an age old rule that says that a law which is unjust is no law. Perhaps you heard it. Or said otherwise, “One has a moral responsibility to disobey unjust laws.'” Did you not learn that in law school?
Milan Madhani, CPA
I don’t believe it’s okay to bash Jack, by saying, “Did you not learn that in law school.”
Most professionals know of the inequities of the US tax code. But doing nothing is not the same as doing something, no matter how you attempt to comply. For e.g., you might just choose to give up your US citizenship, or try, at least to file the right forms, no matter how late they are, whether or not they are in any sort of disclosure programs. Hint, hint buddy.
Peter W. Dunn
@Milan, Since you are CPA, perhaps you are not well-versed in law theory. I approach the matter not as a lawyer but as an historian and theologian. Theology has much to say about law, and the morality thereof. I am critical of the IRS implementation of unjust laws in ways that would destroy the lives of my fellow Canadian citizens and I regularly recommend civil disobedience.
If laws are not just, then civil disobedience is morally acceptable. We are living in an age when politicians are so corrupt that they pass laws which result in implementations that destroy basic fundamental human rights.
Since I’ve never gone to law school, I actually wonder if Jack did learn that disobedience to unjust laws is justifiable. But it seems to me that forcing unjust laws on clients instead of helping them to realize their basic and fundamental rights is not providing a service.
For your information, I have expatriated. I have also chosen civil disobedience with regard to certain Form crimes. And there you have it. Form crimes are actually an assault to the civil liberties of the citizen–including the right to privacy (4th Amendment), the right not to incriminate oneself (5th Amendment), the excessive fines clause (8th Amendment). To disobey them is proper, and the only proper means by which I can refuse to waive my Constitutional rights. I have to protect my family from the financial crimes of the USA. The assault against my family by Congress and the IRS, I was forced to give up my Right of Return, and now the US may penalize me via the Reed Amendment for having expatriated for tax reasons (if it so choses). So your “hint” is quite besides the point. My fundamental rights as a native born American have been destroyed by acts of Congress, because I have to pay for my continued citizenship via accounting fees and time wasted filling out forms, and by the destruction of my liberty to live my life as a free person in my country of choice (Canada)–RRSPs are just one significant issue–What about TFSAs, RESP, PFICs, RDSP, capital gains on primary residence, etc.?
Finally, withdrawing from citizenship, as you and Jack have suggested, is not always a good solution. Some of the people I speak with only wish to see their loved ones in the USA, but they cannot come into tax compliance, as it would mean for them financial ruin. This means that the USA, with the threat of the Reed Amendment, of the Ex Patriot Act (proposed) and the tax enforcement at the border, is effectively using family as hostage to collect unjust taxation. And the USA has condemned Eritrea for its extortionate tax collection techniques. I just see too much hypocrisy in my former nation, which is now bankrupt morally and financially.
I understand the concept of civil disobedience, but that does not mean that we are entitled to only obey laws of our liking and disobey the rest. All of society would be in shambles if that were the case -‘- we may not like tax laws, hence we don’t report or pay, we may not like laws that say we cannot have nuclear weapons, hence we stock up on nuclear weapons, and so on. That is pure anarchy.
Specifically, in a tax context, in your imagination, every tax protestor in the world would be honorable to disobey the law. Yet, tax protestors routinely suffer society’s civil and criminal consequences of disobeying the law. All you are saying is that you and others with similar views are just tax protestors. I do not see any honor in that.
If you don’t like the system the U.S. has, then do what you did — expatriate and surrender your U.S. citizenship and then go somewhere else that has laws that you are willing to honor. (Although, I guess your theory is that, you can pick and choose which laws of Canada you will obey, as well; maybe at some point the citizens of Canada through their government representatives may have something to say about that).
And, to close the loop, I do know about civil disobedience. Depending on context, conduct which you call civil disobedience can be honorable or not honorable. I think you know where I stand on someone making the unilateral choice not to report and pay U.S. tax. The U.S. tax systems gives U.S. taxpayers plenty of opportunity to vet their complaints to Congress (the proper focus) or even in the Courts where in a civil or criminal case the jury could be asked to exercise its power of jury nullification to bless such civil disobedience. My experience with juries is that no jury — let me repeat, no jury — of U.S. citizens would find the sympathy required to exercise its inherent power of jury nullification.
So, if you are looking for sympathy or support for such notions, you won’t find it from me. There are any number of other blogs where you can get the echo feedback chamber you seek, but I hope the bulk of my readers do not sympathize with these notions.
This must be the way a US tax lawyer says: “and don’t let the door hit you on the ass on the way out”.
Jack said: “That is a complaint they are entitled to make and, if they feel strongly enough, withdraw from citizenship.”
So very interesting that the US purports to value US citizenship so very much, yet at the least challenge prove that it is fair, just or ethical, its Homeland yes men are quick to subordinate its sacredness in order to protect any criticism of its revenue collection – even when the revenue cannot be assessed, or is only possible to assess by force and without regard to fairness. In other words, if and when the US system itself puts citizenship in direct conflict with taxation, we’re told that taxation is far more important than the concept of citizenship – no matter what the harm is being done to the individual being harmed and their family. Preserving the hodgepodge and inequities and glaring contradictions of the US system is more important apparently than all those academic BS musings about us being part of a ‘politea’ or members of US society and community. And, though we reside outside of US borders, and pay a full share of taxes where we live, which they very well know, Jack and other US tax apologists do NOT ever give us recognition or acknowledgement of that fact. How is it fair for Jack to criticize Peter when Jack only complies with one tax system, yet he knows that he is demanding that Peter and all of us should comply with two? And the only remedy Jack proposes is that we should give up what is a birthright protected in international human rights principles. And because it is in response to the threat it poses to us, then it is a violation because we are being forced to do it.
And in the instance of the RRSP example, the US agreed to acknowledge the legitimate role of the RRSP in the treaty. There is no good reason to make us jump through hoops to claim the benefit of a treatment that it has already acknowledged should exist. To suggest that we should be grateful to the US that our legitimate local legal savings for our time of infirmity is not treated as badly as the same plans in other countries without the same treaty terms is so offensive that it just underscores how important it is for our challenge to succeed, and the international human rights complaint.
This thread refers to the obvious “injustice” of laws that are applied to those who accept they are “U.S. persons” by allowing the U.S. to designate them as such when they live outside U.S. jurisdiction.
That said, on the issue of “just laws” what we see time and time again is this.
The U.S. defines “justice” as the equal administration of the laws to all. The content of the law is completely irrelevant. So, to put this in obvious context:
Leaving aside the question of citizenship-based taxation per se, the U.S. version of citizenship-based taxation, means that all U.S. citizens abroad are treated in an unfair and punitive manner. People like Townsend (and he is representative of the views of all U.S. “tax professionals”) do NOT see the treatment of Americans abroad as unjust. In fact, it’s the exact opposite. He (and his ilk) believe that it would be UNJUST to NOT apply the PFIC rules (and others) to Americans abroad.
To NOT confiscate the retirement plans of Americans abroad (as per what Neil suggests above) would be UNJUST. To NOT confiscate the retirement plans of Americans abroad would violate the principle of the equal application of the law.
Those who are having their “so called OMG” moment need to understand this principle. They also need to understand is that this is exactly what they will be told when they call their “trusted” adviser for help.
I am gong to say this again. Two ways of putting it:
Because justice requires the “equal application” of the law, irrespective of content, which U.S. culture defines as “identical treatment”:
1. It is just to apply the Internal Revenue Code in its full force, with its confiscatory intent, to Americans abroad; and
2. It would be unjust to NOT confiscate the savings of Americans abroad.
I suggest calling this “The Townsend Principle”.
By the way if any reader of this comment thinks this is going too far I invite you to read the heading in the Internal Revenue Code which describes the taxation of PFICs. The penalty is actually called:
U.S. Code › Title 26 › Subtitle A › Chapter 1 › Subchapter P › Part VI › Subpart A › § 1291
26 U.S. Code § 1291 – Interest on tax deferral”
The section goes on to describe how the U.S., in the interests of justice, is going to charge you interest on the “tax deferred” component of your Canadian retirement plan.
Justice American style!
This comment thread has made all kinds of references to “civil disobedience”, morality and justice. I highly recommend that Townsend and others read that great American classic:
Civil Disobedience by Thoreau.
But, that “outdated” classic no longer applies. Morality and freedom are no longer concepts that matter in America. There is no longer a duty to fight, disobey and oppose unjust laws. There is no longer any assumption that law and morality need to be linked. In fact, in the America of today:
Law has become a substitute for morality:
In a just and free society, law and morality are linked. But, this linkage is NOT the case in the confiscatory culture of the United States of America.
As Ronald Reagen, in his “Freedom Is One Generation From Extinction” once said:
@The_Animal-thank you for your summary which indeed would save 16 hours of reading. I will apply this same principal of elegance in my professional written work!
@Petros-“the brave one” I thought of this quote when I saw your thread
““Our own heart, and not other men’s opinions, forms our true honor.” -Samuel Taylor Coleridge
and here is one specially for Homelanders who don’t “get the CBT thing” (with honourable exceptions), and the Jack-boots of the world
““The liar was the hottest to defend his veracity, the coward his courage, the ill-bred his gentlemanliness, and the cad his honor”
We need a handbook of quotations from this blog. I went to Vancouver BC from Seattle in 1973, and I bought Mao’s red book (I now live in Vancouver for 20 years). I lost the red book a few years later being a loyal citizen of USA. I wonder the comparison to other radical movements.
Also the homelanders were not allowed to buy Mao’s book. Another example of American exceptionalism. Only Nixon fixed that, he repaired relations with China. And then Reagan did that for Germany. This is why I all in a sudden got interested in Republicans. What is wrong with democrites? My name for the other party is repugnants. Good thing I renounced!
And as for “unjust”- CBT was brought into legislation as a punishment for people dodging the draft during the Civil War.
PUNISHMENT. CBT is punishment!
So now everybody who is being a pioneer and seeking a life elsewhere is subjected to a punishment? Expats are not draft dodgers and don’t deserve any punishment.
IRS = Imperial Revenue Service
“US Person” = Colonial Subject
Badger wrote: “And in the instance of the RRSP example, the US agreed to acknowledge the legitimate role of the RRSP in the treaty. There is no good reason to make us jump through hoops to claim the benefit of a treatment that it has already acknowledged should exist.”
And that was my original point to Jack and his readers. RRSPs are treaty protected. The IRS creates procedures. The IRS destroys the intent of treaty that is law by creating rules that are not law to destroy the life savings of Canadians. But their concern may be to get unreported income (RRSP withdrawals)–but their method destroys the legitimate savings of Canadians under the treaty. It is unnecessary aggravation and useless reporting requirement that helps cross-border specialists make nice living at the expense of his hapless clients.
@Petros, I don’t think many of these people like Jack and Roy Berg understand the very nature of citizenship outside of a US Centric context.
It amazes that in America you have people who describe themselves as half Dutch and half Irish but in fact they are solely US Citizen. Though they may be of Dutch and Irish heritage…..
All Foreign Law is purely voluntary as it must be. The entire legal system of Cameroon has no effect in Canada just as the entire legal system of Canada has no effect in Cameroon.
I also think these guys do not understand it is impossible to have dual or simultaneous citizenship. You can only have a single and effective nationality at one point in time.
What happens to the Canadian Citizen with clinging US nationality, living in Manitoba, who mails in the Canadian Renunciation form with $100?
Once the renunciation is effective, that person MUST leave Canada and if they want to come back must apply as a new immigrant. They were only lawfully residing in Canada because they were Canadian.
Jack and Roy Berg MIGHT have a point for US Citizens who are permanent residents with a visa in other countries.
The US has a lawful point in that they require a person born in the USA to enter the US solely on a US Passport.
Could the USA require all persons deemed US Citizens to solely travel worldwide on a US Passport? What would the repercussions be of that?
The US mindset….
I was in France recently for the Tour de France and the French Air Force did a flyover with smoke that came out red-white-blue.
American tourists nearby………..
They thought that was in honor of the United States……
@George, to my knowledge before 1986 US law deemed traveling on a non-US passport or voting in foreign elections as relinquishing acts.
Excellent discussion. Thank you all. Townsend and Berg just don’t “get it” … willfully or due to arrogant cultural bias.
Too true! I’ll add those to my list. My husband also refers to the IRS as that Infernal Revenue Service. I wrote that on an envelope once — deliberately.
Peter, your message is right on; there’s just a lot of homelanders whose experience is so different, they just can’t get it. So here is a long post but it is my attempt to explain why this concept is hard to get across. Feel free to put it on Townsend’s blog or anywhere else.
Let’s compare two middle-aged, middle-class, good men:
“Jack” lives in America, acquiring strictly U.S.-assets, income, and savings with his dear wife. Filing taxes with the IRS is never a problem.
“Joe” lives in Canada, acquiring strictly Canadian-assets, income, and savings with his dear wife. Filing taxes with the CRA (Cdn Rev Agcy) is never a problem . . . until 2014 rolls along. Should their local bank discover that Joe’s wife was born in the U.S., due to FATCA, their bank account data will be detailed to the CRA, which in turn will pass on this data to the IRS. Their days of being treated like other lawful, upstanding Canadian citizens are over.
From now on, the IRS will expect the couple to report each “foreign bank and financial account” (FBAR) over $10,000 such as retirement funds to the Financial Crimes Enforcement Network (finCEN). Dealing with finCEN is like dealing with the Mafia. Make a mistake and you can lose 50% of what is accrued in a particular account. “Forget” to file a form and it’s an automatic $10,000 penalty. Even the latest scheme is booby-trapped with questions to see if you truly deserve “non-willful status” for not coming into compliance with the IRS earlier.
Of course, this means you have to pay for a professional. One Canadian success story is the guy who managed to have only 5% of his modest savings taxed by the IRS–$3,000. The money he had to shell out to the professional? A whopping $21,000!
Let’s be clear: the IRS expects Joe and his wife to play this game for the rest of their lives. The only way they can end the game is for Joe’s dear wife to “renounce” the “citizenship” the U.S. assigned her at birth by advancing to the space where they “only” have to file six years of past FBAR account information with finCEN, among other costs and forms that could evoke further penalties. It ain’t cheap.
Joe is not amused. “To hell with this!” Joe cries. “We’re Canadians! Why should the American IRS be allowed to us screw over just because of where my spouse or I happen to be born?”
Jack has no clue why Joe and other people outside the U.S. are enraged about FATCA. Why? In his experience, of course, filing taxes with the IRS is never a problem.
Of course, you are describing a human being who cannot see beyond his own wrist.
Excellent way to illustrate the disparity and the desperation involved with U.S. CBT and its partner in crime, FATCA. Even Jack Townsend should get it but then he tries so hard not to these days. He’s like a horse with blinders on.
Berg has the nerve to adopt a Maple leaf as an avatar on Jack’s blog recently. As if.
This is for you Petros, but, there isn’t any tour date for a stop in Canada:
“UnFair: Exposing the IRS” is the feature-length documentary investigating the alleged cover-ups and abuses of power at the Internal Revenue Service………”
“Even Jack Townsend should get it but then he tries so hard not to these days. He’s like a horse with blinders on.”
I hope I’m not duplicating anyone else’s comments but I have this to say to Mr. Townsend:
If my ancestors (and his, presumably) had not exercised civil (and not-so-civil) disobedience 240 years ago every resident living today in what is now the USA would still be paying taxes to Great Britain.
And Barack Obama is in the White House today because Rosa Parks said one word, “No!”, and went to jail for it.
This bunch of old Washington D.C. Pukes have had their backs scratched by everyone wanting a favor for so long that they consider it a right to have everyone in the world eager to scratch their crusty, barnacled backsides scratched. Senators and Representatives of both U.S. parties have commented on FATCA and seemd to think it was outrageous when then saw Eritrea, Africa, trying to enforce the same law, but when the IRS just tries to enforce the same law that they passed, they think it is quite normal, based of the privledged existance they think they are entitled to, and have enjoyed much too long..
I think the Russians military does the same thing. Isn’t that nice of them. 😉
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