US expats given hope of lower tax bills
Republicans edge towards eliminating need to pay levies overseas and at home
published in the Financial Times
by Demetri Sevastopulo and Barney Jopson in Washington
You can read the article by answering a simple question that appears when the page loads. I cannot post the entire article due to copyright restrictions.
Here are some excerpts:
Millions of US citizens working overseas could see their tax bills lowered by an overhaul of the tax system as Republicans edge towards eliminating a requirement for American expatriates to pay taxes both overseas and in the US.
Kevin Brady, the Republican head of the House ways and means committee, which is drafting a tax reform bill, said lawmakers were considering the measure, which has been the focus of lobbying by Republicans Overseas, a group of party donors around the world.
“It is under consideration. They have made the case,” Mr Brady said in response to a question from the Financial Times at a Christian Science Monitor breakfast. “Lawmakers representing that area of the tax code have made that case.”
The US Chamber of Commerce, a business lobby group, has urged policymakers to consider US-only taxation for individuals, too, arguing that taxing foreign income hurts American managers at the overseas affiliates of US exporters.
Mark Mazur, who was the top tax official in Barack Obama’s Treasury department, said he supported the change, arguing that it was necessary to address the “inequity” of an expat paying tax on the same income to both the US and a foreign government.
“If you take two people, one works in London, one in New York, working for the exact same US multinational — if they make the exact same amount of money you might think they should be taxed exactly the same,” said Mr Mazur, who heads the Tax Policy Center.
Solomon Yue and Michael DeSombre are also mentioned in the article.
There are quite a few comments with JC doing Yeoman’s Duty.
“I’ve heard of some European banks demanding proof of compliance.”
Can you recall any more details? It seems very odd, because the IGAs don’t require or allow the FIs to ask for proof of tax compliance.
I’d be interested to hear more. Good case to draw to the attention of Sophie in’t Veld.
I can only recall that I’ve seen it mentioned a few times here and elsewhere. Generally in high-enforcement sorts of countries, like Switzerland.
Ah, Switzerland – yes, could be different there.
Might have been other countries too. I don’t specifically recall. I just remember thinking how silly that is, because all you can really prove is that you’re filing something. It’s not even clear how one would define “compliant” since the IRS doesn’t send you back a confirmation.
Maybe it’s an urban FATCA myth. As you say, it would be meaningless, and not a protection for the bank in any way. And surely most customers would refuse to co-operate, at least in EU member states.
I wonder if there’s been some confusion around having to show a CLN, which theoretically implies 5 years compliance.
@Plaxy
A few years back, several folk reported that Swiss bank Postfinance was demanding ‘proof’ of US tax compliance from its known US-person customers. It seems they were vague on what constituted actual proof. Most people appeared to take this as a request for copies of any FBAR or similar.
No recent reports that I could find, though. Perhaps Postfinance stopped the practice. Or maybe they purged US persons from their customer base.
“Here an article written by a US citizen in Japan regarding complying with the US tax code from Japan.
https://www.finance.senate.gov/imo/media/doc/Todd%20Stoudt1.pdf”
Someone should tell him about Brock. There might be someone here who could commisserate with him, though would be at a loss for any advice to give him.
Oh no, I wonder if this typo will kill his submission:
“a yearly salary of \30,000″[*]
which surely should have said $30,000. I wonder if he can amend his submission.
[* I’m not sure if the yen sign will appear properly on Brock as it did in the PDF. Of course the point is that the yen sign was a typo and it should have been a pesos sign.[**]]
[** When the US was revolting, some states and then the national government issued currency notes promising to pay the bearer in Spanish-Mexican silver dollars. Eventually the US copied the word dollar, but copied the Mexican pesos sign to use for its dollars sign.]
“I had to ask my husband to assist in stapling my final dual status return together because the pile was so thick and I could not get the staple through it the first time.”
My employer used to have a giant stapler. I could really lean on it (I weigh 105 kg) and could push a staple through about 2/3 of the stack, turn the stack over, and push another staple through 2/3 from the back, so it hanged together.
The stapler got lost when my employer moved.
One time I stapled a bunch of stuff together by starting with middle pages, then adding around 10 pages on each side and stapling from both sides, then adding around 10 pages on each side and stapling from both sides, etc. It hanged together but looked weird.
Finally I found a hardware store with a giant stapler. It cost 4,000 yen.
“Surprisingly, despite the current compliance situation going on for years, the majority are unaware of their reporting obligations. This point really hit home for me when I was at the US consulate recently to renounce and several young couples – where only one parent was a USC – were there to claim citizenship for their newborns.”
And had you tried to inform them of what they were unwittingly doing, they wouldn’t have believed you.
Watcher – “A few years back, several folk reported that Swiss bank Postfinance was demanding ‘proof’ of US tax compliance from its known US-person customers. ”
Wow – I just googled Postfinance and compliance and this is what came up:
https://www.englishforum.ch/2050580-post151.html
OVDP – that is horrific.
@ Norman Diamond
The person who made that submission is here at Brock.
“The person who made that submission is here at Brock.”
That’s how I knew he wouldn’t be able to give himself any useful advice. But he didn’t give me permission to “out” him.
Difficult is raising biracial children in a monoracial, zenophobic society. Working hours cut by 80%, that’s difficult. Wages for the remaining hours reduced by 40%, that’s difficult. Paying off college debt while living in the world’s most expensive city for expats is difficult. Getting up and going to work on five hours or less of sleep each night, that is difficult.
Moving a family (back for me) to the US without money, credit, employment and residence is not difficult, it is impossible.
““I’ve heard of some European banks demanding proof of compliance.”
Can you recall any more details? It seems very odd, because the IGAs don’t require or allow the FIs to ask for proof of tax compliance.
I’d be interested to hear more. Good case to draw to the attention of Sophie in’t Veld.”
I have read this too but not recently. It was one of the first parts of this puzzle I ran across, maybe four years ago. Just a feeling, they may have been demanding proof of compliance not to satisfy any actual IGA requirement but as an excuse to rid themselves of the risk of keeping USC clients. I am also thinking that I read this before the IGAs were signed, so it may have been done to sweep out all the potentential problem accounts.
@JapanT
Well one thing you can do is ignore the student loans, if you’re already an outlaw who can never return to the US. Not hard to do, if you don’t mind burning yet another bridge. Berlin is full of college-debt exiles.
My hunch and/or vague recollection is that the banks demanding proof of US tax compliance were in Switzerland, where they must have all been totally gun-shy about American clients after several of their number were (more or less deservedly) kicked in the nuts by the US government for facilitating actual tax evasion.
Somehow I got on an e-mail distribution list. This was sent on 26 October. Posted here with permission.
Hi everyone,
Last night I saw a statement of Brady published in Politico on his latest on tax reform. The last sentences is truly encouraging. The article is below. I understand “letting them pay taxes only where they live” to indicate RBT. Since the Ways and Means has announced that it will publish its legislative draft next week, the language is most likely already determined. There have been several proposals for tax reform of Americans abroad from various organisations. Let’s all get behind whatever Congress comes up with and show a united front. This is a one chance in a lifetime to improve the situation of Americans abroad. Please activate your networks in this sense.
Best,
Jackie Bugnion
This was at the end of a POLITICO e-mail, sent 25 October.
He[Brady] said the committee is considering an issue dear to U.S. citizens living abroad — letting them pay taxes only where they live — though no decision has been made.
Some additional e-mail trail, I will not disclose sender:
Just listening to Ari Fleischer on TV about the tax reform bill and he said something that I wasn’t aware of, but some of you might be: He said that once the bill comes out of W&M Committee it goes directly to a floor vote. There are no floor amendments or changes permitted. Thought this is something to look for.
@Plaxy et all
“Watcher – “A few years back, several folk reported that Swiss bank Postfinance was demanding ‘proof’ of US tax compliance from its known US-person customers. ”
Wow – I just googled Postfinance and compliance and this is what came up:
all started with a letter that my wife read to me over the top of noisy kids while I was trying to cook dinner…
Wife: We got a letter from PostFinance today saying something about disclosing our accounts to the IRS.
Me: What does it say?
Wife: Something about that they recommend that we participate in a “voluntary disclosure program”. It says we should email them if that we do.
Me: We file FBARs, pay taxes, and disclose everything, so I guess just email them saying we do.
Wife: OK. Done. I told them we “voluntarily disclose” everything.
Couple days later we find that our accounts have been blocked until we provide proof of our enrollment into the “Voluntary Disclosure Program.”
https://www.englishforum.ch/2050580-post151.html
OVDP – that is horrific.”
Found a mojor source of my frustion. This story is not new nor unique. I am a realitively new comer to Brock and assume that those here are aware of this. This happened before I was aware of any part of this issue and long before I found Brock. Having learned of FATCA/FBAR/CBT during passport renewal and then finding Brock, I researched the history of this nonsensense and discovered that banks in Europe had bern requiring proof of compliance. I have even commented on this a few years ago here, asking how does one prove compliance and Norman Diamond responded with the form that must be filed requesting confirmation. This is one part of what I mean whn I say you can not just not comply with what your bank demands. This is what I mean by looking at how FIs are responding to FATCA, not just what FATCA and the IGAs require them to do.
I am shocked and amazed that there are any Brockers, save the very newly arrived, that are unaware of this. Not sure which is the more shocking, USCs abroad registering the birth of their child at a US embassy or Brockers not knowing this.
Can we start compliing a timeline of not only legislation and IGAs but also actions taken by FIs?
There is a huge deficit of common knowledge amongst us.
“@JapanT
Well one thing you can do is ignore the student loans, if you’re already an outlaw who can never return to the US. Not hard to do, if you don’t mind burning yet another bridge. Berlin is full of college-debt exiles.”
There are paid off, around a decade ago. Diffucult, that I can do.
The reports of bank lock out, accounts being closed or frozen for not complying with doc demands of FIs have been coming from all areas of the globe for several years. Much of the info demanded is NOT required by any law nor IGA, yet, if it is not provided, the account is closed or worse, frozen until it is provided.
If we are only looking at what legislation and IGAs require, we need to look farther afield.
Nononymous:
“My hunch and/or vague recollection is that the banks demanding proof of US tax compliance were in Switzerland, where they must have all been totally gun-shy about American clients after several of their number were (more or less deservedly) kicked in the nuts by the US government for facilitating actual tax evasion.”
Yes, the forum comments at the link posted by Watcher, and those I found, were from Switzerland, 2012 and 2013.
“more or less deservedly kicked in the nuts”
Entirely deservedly, and look what it led to.
JapanT –“discovered that banks in Europe had bern requiring proof of compliance.”
Only in Switzerland during the banking scandal, it appears.
Once a country signs an IGA its banks can simply ban or eject US customers from non-exempt accounts.
“This is one part of what I mean whn I say you can not just not comply with what your bank demands.”
It depends on circumstances, and also on what the bank is demanding. It would be disastrous to enter OVDI/OVDP in order to comply with a bank’s demands. But it might be quite sensible for a former USC to repond to a FATCA letter by showing a CLN.
JC – “This was at the end of a POLITICO e-mail, sent 25 October.
He[Brady] said the committee is considering an issue dear to U.S. citizens living abroad — letting them pay taxes only where they live — though no decision has been made.”
Thanks for posting this JC. Excellent!
“He said that once the bill comes out of W&M Committee it goes directly to a floor vote. There are no floor amendments or changes permitted. Thought this is something to look for.”
Yes. I wonder how long the Committee stage takes.
This all seems very good news. If nothing else, it shows Brady wasn’t just bounced by the FT journalist, it really is under serious consideration.
“It depends on circumstances, and also on what the bank is demanding. It would be disastrous to enter OVDI/OVDP in order to comply with a bank’s demands.”
Yes it would, but so is having your bank account closed or worse, frozen.
Simply banning US persons from banking is no small matter for those banned.
I don’t think all such cases are from Switzerland. There is at least one of a non USC and non Isreali national having his account in Isreal frozen for failure to provide whatever FATCA related info his bank was demanding.
“I don’t think all such cases are from Switzerland. There is at least one of a non USC and non Isreali national having his account in Isreal frozen for failure to provide whatever FATCA related info his bank was demanding.”
If you come across any cases of a bank in an IGA-signatory-country demanding proof of IRS compliance, I’d be interested to see that. Especially any EU Member States.