From JC:
I nominate ,,, for a IBS feature.
The ACA RBT plan got a feature so this should as well. Karen wrote the into there. I don’t think much intro is needed. Just post as a feature and to highlight for comment.
Democrats Abroad survey report now out.
Can We Please Stop Paying Twice – Tax Reform for Americans Abroad
They get it, they just don’t get it:
“However, if the implementation model for
RBT contains provisions that make it difficult or disadvantageous for Americans abroad to achieve eligibility, the issues listed in these appendices would continue to afflict these citizens living abroad.”
Their proposal is nothing but a long description of “how to make opting in just as difficult, complicated, and expensive as (if not more) renouncing”.
@UnforgivenToo:
Yep. THAT has always been their problem.
It is very simple: IF you have lived outside the US for many years, have no connection to the US , have no business, no home, have not traveled to the US in decades… You were born there and that is it.. you are a Resident of another country for tax purposes, PERIOD.
None of this nonsense. They insist on convoluting and obscuring the utter simplicity of the solution.
I just wish they would get out of the way.
“Two left feet and butt ugly shoes”
IMO, this is mostly good news. It provides facts that will support a move to RBT with plenty of statistics to show that most expats are not “Fat Cats” and quotes to show that CBT causes real hardship.
They could have chosen a better title, though. As demonstrated by their survey results, the issue isn’t so much paying tax, it’s preparing tax returns and jumping through all the hoops to comply with laws that were designed for homeland Americans with no thought of their impact on expats.
What the report doesn’t draw out enough is the opportunity cost of not being able to take advantage of any normal tax planning – what one country’s tax system gives, the other country’s tax system takes away. They have bits of this in their discussion of pensions and “foreign” government benefits, but they haven’t really made the point that US tax law is undoing tax benefits from our home/host countries (and is, therefore, an affront to the sovereignty of every country that expats live in).
Unforgiven and FuriousAC – this really isn’t an RBT proposal – it’s more of an argument as to why RBT should be enacted. It is completely agnostic about the form of any RBT proposal – which is why the appendices list the current provisions that must be fixed.
When they do come up with a concrete proposal, I’ll be one of the first to criticise it if it isn’t as simple as RBT as practiced by the rest of the world.
Commendable. Seems to me to be aimed mainly at the Democratic Party leadership.
FATCA remains the elephant in the room.
i kinda like the title. I find it pointed. Because I repeatedly think that homelanders just dont get that this has nothing to do with paying your “fair” share. They somehow dont get that it is NOT fair. ( Then the question becomes whether they even care about being just. )
“What the report doesn’t draw out enough is the opportunity cost of not being able to take advantage of any normal tax planning – what one country’s tax system gives, the other country’s tax system takes away.”
Because this is the justification for CBT: that it contributes to the US capital-import policy by putting pressure on US citizens to invest in the US rather than elsewhere. Retirement planning is seen purely as a form of investment; the social good is completely ignored.
“FATCA remains the elephant in the room.”
You’re right, it is now. But it originally started out as the ass in the room, so don’t let them forget it.
🙂
I think that’s what DA is trying to do – get it acreoss to the Democrats that they now own CBT.
Not bad at all. They got the message much better than ACA who were supposed to be at the forefront of our plight. How? DA just listened! ACA has become another political organisation feeding off Washington and will try to solve our problem by adding 1000 pages to the law.
Clever as well that all the comments used (bar one) were from “voters”. Yes, there is a cost in annoying people (or torturing them).
Interesting statistics in general, although, of course, accidentals still try to stay under the radar at all costs so are probably under represented.
We will still not forgive them about FATCA, of course, which remains a textbook example of how to bully your partner countries into hating you.
“We will still not forgive them about FATCA, of course, which remains a textbook example of how to bully your partner countries into hating you.”
The rival tax havens may hate the US a little bit more because of FATCA, but non-tax-haven countries probably just wish their US citizen residents would stop complaining and sign the W-9s.
The liberal market economies outside the US are beginning to realize that the US is not the country it claims to be, but it’s not FATCA that’s causing the light to dawn, it’s the dangerous two-year-old in the White House.
DA’s latest “campaign in a box” is pretty good, I’d say. I remember DA meetings before the last presidential elections where people stood up and said they’d felt stabbed in the back by FATCA. The anger was not general, many Dems being quite the resigned obediant homelander, even abroad, but it was very strong. Including by faithful voters. So yes, DA listened, and knows. Now if they could only convince the DNC.
True that they don’t mention modalities for RBT in this campaign; I learned recently that France has an exit tax of sorts, to mitigate RBT somewhat. I think it’s likely the US would impose an exit tax on residents that leave the country. This could be a form of territorial taxation or taxing capital gains. France did this because many wealthy people moved 2 hours north to Belgium where they pay no capital gains. France also imposes CBT on Monaco. A Belgian can live there tax free. A Frenchman cannot. In the end it’s all about power. It probably shows that France would impose CBT elsewhere if it could. The US does it because it can.
Aside from the exit tax hassle, probably politically necessary, RBT should be simple. It should also immediately exempt people already abroad with no finances in the US. These people should immediately be left completely alone.
Personally I think FATCA is moot the day RBT is implemented. There will be no point in knowing the finances of US persons abroad in the context of RBT, especially if that RBT means no more filing.
However if the Republicans manage to repeal FATCA, that’s second best to a simple rational RBT scenario (as opposed to complex and irrational RBT as proposed occasionally).
Maintaining FATCA for US residents may have some rationale, i.e. preventing people from hiding money abroad, like CRS does. However even if FATCA were repealed now, its consequences would be long lived. CRS is now here to stay, even without the US, and it seems that most banks and most people are now extremely cautious with “foreign” accounts. Although I may be naïve.
@Karen thanks for sharing the obvious that its not about paying the tax!!!
Its about the cost in professional fees and personal time to determine what the tax “might be” and then living in ABJECT FEAR/TERROR of the penalties.
These are financial Death Penalty for jay walking penalties!
I now know of many expats in Germany that have had bow out of being members of Vereins because of this abject fear and this idea of simplified disclosure DOES NOT mitigate the fear in the slightest.
@Fred (B)…..morning Fred. Hmmm….I think I should modify my name listing to George (GB)…LOL LOL
Hey, I think Democrats Abroad FINALLY gates it!!!!!
Know whats wierd? Democrats Abroad is moving closer to Republicans Overseas and the two damn parties in the USA are simply blowing up.
DA has this proposal and I think its the best;
“Optional simplified earnings declaration – provide non-resident taxpayers who owe no US federal income tax with the option of a one-sentence, handwritten or printed declaration of earnings, accompanied by a tax return or assessment from the taxpayer’s country of residence”
Assuming you live in a tax treaty country that is all that should matter.
Some of the worst of all this? Putting aside the politics of Brexit…..the USA could really benefit from and the UK could also benefit from the 150,000 UK/US “dual citizen ambassadors” in promoting free trade. But instead you have six figures of very angry people.
You may have had this expereince…..back in the day……when expats would celebrate the 4th July and Thanksgiving day!!! Not no more………and that is sad.
Couple more things I have learned……this idea that welfare payments are being taxed in the USA is absurd!!!
And you know what else……my family has become persona non grata in attempting to get any kind of travel insurance to the USA and we have had a claim denied on my kid because we were in the USA, the kid is a USC with a blue book (also a maroon book), but the claim got denied because of citizenship and it was non-Obamacare coverage.
IF CBT stands then the next battle is we DEMAND Medicare overseas and Obamacare overseas with subsidies.
“It probably shows that France would impose CBT elsewhere if it could. The US does it because it can.”
I don’t think so. Monaco is a bit of a special case really, effectively living in France. Also (correct me if I’m wrong) the French exit tax appears to be a tax on capital gains for leaving the French tax system rather than a huge slice of your entire net worth just to lose the citizenship, even if you never lived there.
I think plenty of countries like to tax where they can, but it does not take much thought to see that CBT is an unworkable and counter productive human rights abuse, which is why they don’t do it.
In a global economy, no country will ever gain by crippling their citizens ability to get out there and compete. The danger of course is a population that like the idea of CBT because it punishes people who leave and stop paying taxes….
@Mike
There was talk a few years ago that president Holland was planning to introduce CBT in France.
http://www.overseas-exile.com/2012/09/will-french-start-taxing-their-citizens.html
“Also (correct me if I’m wrong) the French exit tax appears to be a tax on capital gains for leaving the French tax system rather than a huge slice of your entire net worth just to lose the citizenship, even if you never lived there.”
The US exit tax does not tax your net worth. It assesses your net worth and if over 2,000,000 it then charges a 15% tax on any UNREALISED GAIN, above a 650,000 allowance. Of course,’ the never lived there’ would not apply to France…I think!
@Mike and Heidi,
Canada and Australia also have a tax on unrealised gains when you terminate your tax residence. The main difference between these exit taxes and the US version is that they apply when you change residence, and therefore they apply only to assets you held/acquired/earned while you were tax resident in that country. The reference time period for the US exit tax includes years (perhaps decades) when the taxpayer was not resident in the US and, therefore, taxes gains earned while resident (and paying tax) in another country.
In Australia, your tax basis (cost) for assets acquired before becoming an Australian resident is the value when you moved to Australia, not the original cost. So the unrealised gain that would be taxable on leaving Australia would be only the gain that accrued while you were an Australian resident. The US makes immigrants pay capital gains tax on the appreciation of an asset since its original acquisition date, even if the asset was acquired decades before becoming a US taxpayer.
heide – I’ve seen citizenship based taxation proposals in several countries now, but I have seen none go beyond the suggestion stage. I presume it’s because they actually then think about the ramifications.
As to countries like France, the solution is simple. If you are approaching exit tax levels and don’t intend to stay in France, go to a neighbouring EU country.
The day the UK announces citizenship based taxation is the day I renounce. No country will ever own me.
Hey George (UK, the Original) —
“You may have had this expereince…..back in the day……when expats would celebrate the 4th July and Thanksgiving day!!! Not no more………and that is sad.”
Funny because driving to work this morning I was wondering where all the excitement about America had gone. I used to go to those parties and talk to my children about the US, etc. It really has nothing to do with who is President. For me, even though I was not truly impacted, FATCA was a blow. I had never expected to wish that my birthplace could be somewhere else (I should ask the UK city of New York to give me a birth certificate), or that it would be a pain to file taxes yearly or open a bank account. They have truly sabotaged the informal ambassadorships we all held. And for what? No taxes owed in my case, as for most of us. And an email this morning too from the Financial Crimes Enforcement Network acknowledging receipt of a bunch of zero-sum account information that is absolutely useless to them.
Loved your other remarks too.
Cheers
@Mike
“The day the UK announces citizenship based taxation is the day I renounce. No country will ever own me.”
That’s the day I renounce UK citizenship too!
Unfortunately, I think that day may be fast approaching, the UK will be broke after Brexit.
@Karen
I thought I read that if one owned real estate outside the US, then one would take the difference between its value when one first resided in the US (not its original purchase value) and its current value to assess the gain?
@George
As a Brit/Swiss, I used to hang a US flag outside my door on July 4th, I would also have my Swiss neighbours over for a BBQ. No longer, no flag, no cookout!
@Karen. I’m no expert, but in the case of Canada’s departure tax I believe there is a way a departing Canadian taxpayer can legally avoid some (or all) of that tax on unrealized gains. The problem with taxing unrealized gains is that the imposition of such a tax often forces a sale of those assets at an importune time if enough cash to settle the tax bill is not immediately available.
Canada has a provision whereby departure tax can be avoided as long as the assets are left in Canada. The government is, in effect, granted a lien or a claim on the assets in order to guarantee that tax presently deferred will eventually be paid. An example of where this would be useful is when a Canadian plans to leave the Canadian system to work in another country for a number of years with the intention of later returning to Canada to resume Canadian tax residency. No need to blow up your retirement savings in order to work abroad and no need to file Canadian taxes in the meanwhile.
The main concern of the government is that the deferred taxes will eventually be paid which is a legitimate concern. I think this is a fair deal for all the parties.
I wish that the DA report had provided more emphasis on the hardships imposed on the education, disability and retirement savings of those outside the US and mentioned that the US government and politicians have trumpeted the US resident equivalents (which we cannot access or enjoy) which even the IRS urges actual US residents to use to save on taxes ( ex. https://www.irs.gov/newsroom/for-ada-anniversary-irs-spotlights-tax-benefits-and-services-for-people-with-disabilities ), while continuing to impose extraterritorial US taxes and layers of confiscatory penalty regimes on our local legal taxpayer funded government blessed versions.
Why as a US citizen living in Canada was I not entitled to benefit by being able to set up and be a signatory on my child’s registered education savings plan (RESP) to help me send my child to post-secondary education, or save for a family member’s disability (RDSP) or keep my Canadian taxfree savings plan (TFSA) without punitive US extraterritorial reporting, penalty threat or taxation like US homelander residents do – even if they aren’t citizens?
Why can’t the DA and the ACA make more of the disadvantaging of those responsible for educating children and supporting those with disabilities? Isn’t that undeniable and obvious discrimination? Neither of those two groups can vote, neither can renounce/relinquish, both are being supported by our local taxpayers and not the US.
Aside from the fact, that the some of the content of this report appears to have been inspired by ACA’s, it does contain a collection of excellent testimonials which should give the Senators and Congresspersons serious pause.
I have received comment that DA is a big entity. They are not all singing from the same song sheet.
For example, they did not tweet the recent DA letter to the Senate Finance Committee. I pursued them and received comment such as ‘the intern was transiting continents’ and ‘gun control was the priority for the week.’
@CrossBrit had a nice response here that may be emulated in responding to DA:
https://twitter.com/CrossBriton/status/917328516714258432
Finally a number of days after the Senate Finance Committee hearing they tweeted:
https://twitter.com/DemsAbroad/status/917437220864380929
Twitter has a feature whereby one may pin a tweet at the top of the list of tweets for an address. Currently they have pinned an Oct 7 tweet (no doubt relating to events in Las Vegas) on gun control: DEMOCRATS ABROAD REJECTS THE NRA’S RADICAL AGENDA. We’re raising the alarm. You can too:
The same is happening on the DA website. They could pin an issue there such as support for Residence Based Taxation on the homepage (and not several clicks in). or list it under “who we are”. Yet they don’t. Right now the 2017 Non-Resident Taxation Research report, “Can We Please Stop Paying Twice? is prominent on their home page, yet the site format only shows two main NEWS issues and new ones are posted perhaps two per week. So in another week the Tax survey result will not show in NEWS and RBT will be off the home page.
I am not a member so I don’t get their e-mails, yet I imagine that any Congress person, congress staffer, press, DA intern, or anyone else who may go to the DA website may perhaps on 95% of the days of the year get impression/message that DA = The Democrats on issues and that there is no difference between the two.
If they were genuine about shift to RBT then this should be reflected across all their communications including boilerplate on all press releases and NEWS items.
Nonetheless this research report is quite significant. The report will be important in helping highlight, among both Democrat and Republican members of Congress, the injustice of CBT and the need to shift to RBT. RO does not have a similar research report.
In the FATCA Hearing the DA FATCA research report was referenced, not by the Democrats but by Bopp.
https://www.finance.senate.gov/imo/media/doc/Att%202%20Democrats%20Abroad%202014%20FATCA%20Research%20Report1.pdf
I forwarded comment to DA that all the comments on the survey would be interesting and not just a select few that made it to the report.