reblogged from Allison Christians’ Tax, Society & Culture with permission
"The Offshore Tax Enforcement Dragnet" – how adversely affects immigrants, #Americansabroad #AccidentalAmericans https://t.co/7rqEzYYpqy
— Patricia Moon (@nobledreamer16) April 1, 2017
Shu Yi Oei (Tulane) has posted an important new paper on U.S. offshore tax enforcement, of interest. Here is the abstract:
Taxpayers who hide assets abroad to evade taxes present a serious enforcement challenge for the United States. In response, the U.S. has developed a family of initiatives that punish and rehabilitate non-compliant taxpayers, raise revenues, and require widespread reporting of offshore financial information. Yet, while these initiatives help catch willful tax cheats, they have also adversely affected immigrants, Americans living abroad, and “accidental Americans.”
This Article critiques the United States’ offshore tax enforcement initiatives, arguing that the U.S. has prioritized two problematic policy commitments in designing enforcement at the expense of competing considerations: First, the U.S. has attempted to equalize enforcement against taxpayers with solely domestic holdings and those with harder-to-detect offshore holdings by imposing harsher reporting requirements and penalties on the latter. But in doing so, it has failed to appropriately distinguish among differently situated taxpayers with offshore holdings. Second, the U.S. has focused on revenue and enforcement, ignoring the significant compliance costs and social harms that its initiatives create.
The confluence of these two policy commitments risks creating high costs for the wrong taxpayers. While offshore tax enforcement may have been designed to catch high¬-net-worth tax cheats, it may instead impose disproportionate burdens on those immigrants and expatriates who have less ability to complain, comply, or “substitute out” of the law’s grasp. This Article argues that the U.S. should redesign its enforcement approach to minimize these risks and suggests reforms to this end.
The paper provides a thorough review of the panoply of offshore enforcement programs and mechanisms and documents the harms of their dragnet approach, especially on the most vulnerable and least likely targets. A significant contribution to the literature.
Thanks for that. Will read that paper when I am more awake.
On a somewhat-related topic, there were interesting papers presented at a recent conference at the Saint Louis University School of Law:
http://law.slu.edu/event/sanford-e-sarasohn-conference-critical-issues-comparative-and-international-taxation-ii
William Thomas Worster – International Law and the Taxation Consequences for Renouncing Citizenship
http://law.slu.edu/william-thomas-worster
This paper will discuss whether taxes imposed on expatriation (renunciation of citizenship), sometimes referred to as “exit taxes”, are in compliance with international law. Under international human rights law, every person has a right to leave any country including his own, and everyone has a right to freely change their nationality. These rights can only be limited by restrictions that are provided by law and necessary to protect national security, public order, public health or morals, or the rights and freedoms of others. This paper will look into the most recent understanding of these rights and determine whether exit taxes satisfy them.
Henry Ordower – Taxing Others in the Age of Trump: Foreigners (and the Politically Weak) as Tax Subjects
http://law.slu.edu/henry-ordower
Critical tax theory identifies systemic imbalances in taxation that impose disproportionally high tax burdens on groups who lack or fail to exercise political power. This article focuses on foreigners as an ideal taxpaying group because it does not vote. The article identifies some ways in which the Trump administration might seize the opportunity of that political weakness to capture tax revenue from that group without compromising an otherwise anti-tax agenda.
Montano Cabezas – Migration and Taxation in the Public Imagination
http://law.slu.edu/montano-cabezas
The article will examine how the media informs popular conceptions of the tax issues related to migration.
Ha ha ha ! Excellent April Fool’s. The US trying to tax people worldwide. LOL. Like they are actually going to submit Americans abroad to 2 tax systems, the country they live in and the US. Give me a break. And what, they will make you report all your accounts to a financial crimes website? And they will make banks the enforcers? Are you going to tell me they will threaten the banks with 30% withholding on US a Source funds? LMAO! 😀
And what’s next: 100 countries lining up to agree to give info to the US in exchange for empty promises? Jeez.
Well, kudos for the imaginative, if a bit far fetched, April Fool’s post! In fact this whole website seems devoted to the hoax. Unbelievable!
CBT, being unenforceable, is indeed a hoax.
FATCA, sadly, is not, and for people born in a bad place, even renunciation won’t completely make it go away.
I guess this sums it up pretty well what needs to change if ever anything will improve for expats :
”…..imbalances in taxation that impose disproportionally high tax burdens on groups who lack or fail to exercise political power. This article focuses on foreigners as an ideal taxpaying group because it does not vote.”………….
I think I’m being a bit slow. Is it meant satirically?
Foreigners residing in the US, or residing elsewhere but receiving US-source income, already get taxed. ???
Great paper confirms what many of us already know, that anything foreign is toxic in the eyes of the US government, and the US government treats its expats like garbage because of it.
Error:
“A group of Americans living in Canada has sued Canada in the Federal Court of Canada for violating Constitution Act of 1867 and the 1982 Canadian Charter of Rights and Freedoms by releasing financial information and breaching financial privacy, but that suit was recently dismissed.” 172
The author mentions false positives relating to the type of information that FATCA turns up, but what about the false negatives that allows a great swath of people to go undetected, which are those US persons who lack indicia?
What’s the expression?…oh yes; When the only tool you have is a hammer, everything begins to look like a nail.
The Treasury Department and its’ goon squad, the IRS, roams the world like a raging lion looking for US “persons” it can devour. Ok, I know that’s plagiarized from the bible and refers to Satan, but since there’s not much difference when it comes to malevolent intent, I thought it would be okay to modify it a bit to describe FATCA and the US Government.
And where’s Trump in this debacle? Personally I never had one iota of hope that he would even look at the abortion called FATCA. If anything his entire populist/nationalist political philosophy reinforces the idea that us expats are seditious tax dodging scum.
The only way to kill FATCA, to truly put a stake through its’ heart, is for each and every country that signed an IGA to tell the US that’s it’s unworkable and an attack on national sovereignty. I won’t hold my breath, at least not here in Switzerland. Bern is way too timid to take on Washington. For the time being the US says “jump” and nearly the entire world says “how high”?
@FredB
Forgive me but are you for real? You must be writing from the insular safety of America somewhere to make such an offensive posting.
Why are you so incredulous about the destructive power and reach of the US government in, at least, the matter of CBT (citizen based taxation)? You scoff at reality. FATCA and all its’ alphabet derivatives are firmly encrusted in scores of countries and is being enforced with a vengeance. Countless thousands of “US Persons” living abroad have had their peaceful lives utterly turned upside down by their host governments from Japan to Australia to Sweden.
I can and have given a half dozen examples on this site of friends, family and acquaintances, none of whom are remotely rich, who’s personal and financial lives were hit by a tsunami of IGA enforcement. My accounts are just a fraction of what has been posted on this website by other, real people, who have been put through hell by CBT.
FATCA has wreaked havoc on every single continent and you call it an April Fools joke and accuse this courageous and instructive website of being a hoax. Either you’re a despicable troll or an immature fool…or both, Fred B
Shu Yi Oie did glom onto the fact that it might not make sense to collect information about assets if you are pretending to only be after taxes owed on the income derived from assets. (We know it’s all about control and mostly about penalties, but whatever.) The suggestion is to “Move from Gross Reporting to Form 1099-Style Reporting” (page 69). Interesting, however I see that as being an unwelcomed paper burden for FFIs too and it wouldn’t stop the refusals to take on US citizen clients. Also I can’t see FinCEN happily giving up its search for buried offshore account treasure under the mistaken premise it has all been ill-gotten. I’ve always had it in the back of my mind that FATCA and FBAR reports were clearing the way for imposing an offshore asset tax and, who knows, maybe inshore too someday. They could expand FBAR to include US accounts and evoke some wails of protest from homelanders but they could ignore those protests as much as ours. April 1st — good day to look under rocks for possible slimy things to poke at.
@ Eric in Switzerland
I think Fred (B) was just using hyperbole to accentuate the hypocrisy and hegemony of the USA with its whole screwed-up tax system. I think everyone here, including Fred (B), knows this whole screwed-up tax system has produced a great deal of pain.
Asset tax … If it sounds like paranoia on my part it could be due to having read this article last night.
http://www.independent.ie/business/now-laptop-ipad-and-pc-users-will-have-to-buy-a-tv-licence-35567457.html
It seems like there are people out there straining their brains to figure out new ways to increase the government take. This particular politician is smugly trying to redefine what a “television set” is.
It’s recently been changed in the UK also.
There doesn’t seem to be any particular reason why people watching live BBC programmes over the air should have to pay while those watching the same programme being simultaneously streamed over telephone lines get it for free.
Funding public broadcasting by licence fee is not ideal, but no one seems to have been able to come up with a satisfactory alternative in the UK, so far. I suppose Ireland has a similar problem.
@EmBee,
Thanks for the clarification and my apologies to Fred. I generally pick up on sarcasm very quickly and without the “sarc off” qualifier at the end but FredB’s post had me fooled. He wrote so well that I was convinced he was a stalker from the US. He sounded every bit like one of those, er, patriots, that sees nuthin’ wrong with CBT and that ever murcan gotta pay his fair share of taxes… one of those types.
I’m a bit embarrassed really but good job Fred.
@ Eric in Switzerland
How I wish CBT was just a very bad April Fool’s joke and not an entrenched reality. Can you imagine the USA being RBT all along and then someone saying the government had come up with a “new improved” system called CBT? Can you imagine how jaws would drop? No matter what day of the year Americans everywhere would take it to be an April Fool’s joke. It’s just that crazy.
@ iota
I see your point. I was just amazed at how they will twist and turn to keep the tap flowing. In this case, to keep the BBC funded.
Eric: it was sarcasm. Cheers!
A lot of people don’t like paying for the BBC. I understand the resentment but I would be dismayed if the BBC disappeared.
And after all, there’s plenty of things I don’t like having to pay for – nuclear weapons, George Osborne, Michael Gove, Theresa May, Boris Johnson, Jeremy Corbyn, Brexit, Donald Trump’s state visit, the refurbishment of Buckingham Palace…
You win some, you lose some.
@bubblebustin,
re the author’s significant error in describing our Canadian suit as dismissed ( “…“A group of Americans living in Canada has sued Canada in the Federal Court of Canada for violating Constitution Act of 1867 and the 1982 Canadian Charter of Rights and Freedoms by releasing financial information and breaching financial privacy, but that suit was recently dismissed.” 172 …” 172 Jim Atkins, US Expats Launch FATCA Legal Challenge, IEXPATS(Sept. 2, 2014), http://www.iexpats.com/us-expats-launch-fatca-legal-challenge/; J.P. Finet, Canadian
Court Rejects Injunction Request in FATCA Case, 149 TAX NOTES36 (Oct. 5, 2015). ).
The author relied on one older source in determining where our significant lawsuit stood.
Wouldn’t rigour require more research into that?
We will be contacting the author to correct the error.
Have also requested she be asked to refer to us differently, i.e., Canadians, with a great deal of support from expats around the world.
@Tricia;
re; “..Have also requested she be asked to refer to us differently, i.e., Canadians,..”
Thank you for writing to the author to bring attention to those errors/oversights.
All those writing about US extraterritorial citizenship-based taxation should qualify that it is citizens and residents of NON-US countries that the US has arrogantly and unilaterally chosen to claim as UStaxablepersoncitizens without the agreement or acceptance of the individuals in question. And when papers unquestioningly accept the US claim to persons outside its borders, they lend tacit support for that approach – raising US imposed status above the actual physical residence and home and citizenship held and chosen by the persons in question.
It is even more hurtful when Canadian federal politicians CHOOSE to refer to their fellow Canadian citizens and permanent residents as ‘Americans abiding in Canada’ – as if being naturalized or being born here or choosing Canada as home over the US means nothing as soon as the US makes a claim to people and assets totally outside its national boundaries – reaching into Canada and violating Canadian sovereignty and autonomy. As if the Canadian citizenship oath we swore as a social contract with Canada was meaningless on Canada’s part. Oh, was the Canadian federal government’s citizenship judge crossing his fingers behind his back when we swore the oath? Was there a clause I missed that said I was then a Canadian – except if the US claimed first dibs to me and my Canadian assets – and my firstborn?
I haven’t finished reading the paper, but felt dismayed that the depth of commitment to the legal challenge mounted in Canada and supported by others around the world got such short (and inaccurate) shrift.
“There doesn’t seem to be any particular reason why people watching live BBC programmes over the air should have to pay while those watching the same programme being simultaneously streamed over telephone lines get it for free.”
Sure, but…
Anyone who has a TV set capable of showing NHK TV programs has to pay a monthly fee regardless of whether they watch NHK.
NHK TV programs can be viewed on the internet, in all countries that signed onto FATCA (and others).
Trump will read the Republican Party platform and will issue an executive order abolishing income tax of US non-resident citizens.
Every US non-resident citizen will pay a flat tax of US$100,000 per year.
This won’t be a hardship for anyone Trump knows.
If a dragnet is designed with such fine mesh that it catches everything, can it really be said to “have been designed to catch high-net-worth tax cheats”?
I say no! It was not designed to catch high-net-worth tax cheats!!! It was designed to catch everything that got in the way. Please, please, let’s stop letting writers get away with this canard. It is too easy to dispute it.
@ND.
In a perfect world Trump would have read the Republican Party platform BEFORE he ran for President and got elected. Not only did he not read the platform while he was a candidate, I highly doubt he has caught up on his reading since moving into the White house for the simple reason that all available evidence indicates he won’t read anything longer than 140 characters. However, there is always a chance that one of his minions might do the reading and brief him on the bullet points.
Based on their advice, its certainly possible he could decide to issue an executive order which simultaneously eliminates CBT and establishes a 100k per year flat tax on non-resident citizens, but its unclear how that would be any more enforceable than the present system. (Where is Wilton when we need him, anyway?)
The far more likely scenario is that he won’t do anything about FATCA or CBT (or anything else for that matter). This will not be a hardship for anyone that Trump knows, but it will continue to be a hardship for millions of people he doesn’t know.
@Petros:
They want the information on everyone because they don’t know who they might be able to successfully take to court and penalize.
They’ve done exactly the same to Coinbase – using a John Doe summons to demandall information on all blockchain transactions of allCoinbase customers. When one Counbase customer promptly took legal action to challenge this, the IRS immediately said they no longer needed his information. They don’t want this broad-sweep approach tested in court.
Nasty bastards.