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.
@Norman
Are you taking the position that the IGA’s allow US law to override all Canadian laws? The IGA allows the banks to report previously non-reportable financial information to the CRA. Does the IGA define what US citizenship is and how it is conferred? I don’t recall that.
Just for accuracy, the statement that “Congress has spoken” was made by a US person in response to then MP Mike Allen.
“1. What is the U.S. law? Does U.S. law automatically make a person born outside the USA a USC?”
Doesn’t matter what US law says, the US doesn’t follow US law.
“2. Does/can U.S. law apply outside the USA and therefore to people born outside the USA?”
Japanese banks are implementing FATCA and reporting on not only USCs but also Japanese citizens who spend too much time there. So, yes, US law IS being applied outside the US.
“3. Does Canada have to accept a claim by the USA that a person born in Canada (as a Canadian citizen) is a USC for the purposes of Canadian law?”
Doesn’t matter if Canada ‘has to accept’ a claim by the US or not, what matters is, IS Canada accepting or going to accept US claims, or more importantly, are or will Canadian BANKS do so?
There seems to be an intense focus on what governments are doing or going to do and an almost complete dismissal of what non governmental entities are doing.
I do not think IGAs define US citizenship. This is a problem. Countries signing IGAs agreed to report US persons to the US but did not get a definition of who are US persons leaving it up to the US as the sole definer of US personhood and US citizen.
Japan’s IGA is different to Canada’s. JFIs report directly to the US. All residents in Japan now have a suped up national ID number which is used for ALL aspects of life, including nationality of parents. Think of it as “Big Data” applied to your life.
If the US tells your bank to provide any bit of data on a person, it will be provided. Perhaps through a filter such as the CRA, or without, but with the threat of the 30% fines, it will be provided.
‘Are you taking the position that the IGA’s allow US law to override all Canadian laws?’
No, not me. I wrote: ‘When other countries sign IGAs, THEY say that US law overrides their own. CANADA’S PARLIAMENT did the same when saying that Congress has spoken.’ I don’t take the same position they take.
‘Just for accuracy, the statement that “Congress has spoken” was made by a US person in response to then MP Mike Allen.’
Sorry, when I saw the quotation on this site, I thought an MP was being quoted. (Now biting my tongue off to avoid saying that the US person might have been an [] (except in Australia).)
“Doesn’t matter what US law says, the US doesn’t follow US law.”
They do if they can harm someone by doing so.
@Norman
I don’t believe Canada indicated that the IGA overrides ALL Canadian law. It is a Canadian law that a child born on Canadian soil is Canadian. I do not believe the IGA addresses that at all.
It was a US staffer in D.C. who said it. It has been endlessly misquoted for years.
I don’t get this:
USCitizenAbroad – I have replied to the Australian portion of your comment on another thread http://isaacbrocksociety.ca/2017/08/14/citizenship-showdown-coming-has-australia-ceded-control-of-its-sovereignty-to-foreign-countries/comment-page-2/#comment-8036406
““Doesn’t matter what US law says, the US doesn’t follow US law.”
They do if they can harm someone by doing so.”
True. Change to, “Doesn’t matter what US law says, the US is not bound by US law.”
“It is a Canadian law that a child born on Canadian soil is Canadian. I do not believe the IGA addresses that at all.”
Right, under the IGA Canada agrees that the person is a US citizen, without addressing other citizenships. Neither Canada nor the US stops the person from being dual.
“I don’t get this:”
OK, I’ll glue my tonge back together.
The US person who said “Congress has spoken” might have been an MP (except in Australia).
USCitizenAbroad – “I have never heard of a single instance where the U.S. has attempted to impose citizenship on a person born outside the United States.”
I’ve read more than one account of a child travelling on a non-US passport being harrassed when trying to enter the US accompanied by a USC parent.
USCitizenAbroad – “I have never heard of a single instance where the U.S. has attempted to impose citizenship on a person born outside the United States.”
How about such persons being locked out of banking?
JapanT – under a Model 1 IGA a person not born in the US wouldn’t be treated as a USP unless they had other indicia.
plaxy, JapanT – “under a Model 1 IGA a person not born in the US wouldn’t be treated as a USP unless they had other indicia”
One of the main forms of indicia for “foreign-born” US citizens will be answering truthfully on the paperwork for a new account. Under CRS, all banks here are now asking about citizenship when you open a new account. Of course, if you (or your parents) haven’t provided the US with proof of your citizenship, then you can truthfully answer that you are not a US citizen.
“Of course, if you (or your parents) haven’t provided the US with proof of your citizenship, then you can truthfully answer that you are not a US citizen.”
Unless your national ID number is linked to the immigration/naturalization status of your parents. In that case, providing the required national ID number informs your bank that one or more of your parents were a USC at the time of your birth. Lying about it would not only be a bad idea, but would also be pointless.
JapanT – there are residency requirements to be able to transmit US citizenship. How does the Japanese government (or your bank) know that a child born in Japan with a US citizen parent actually qualifies for US citizenship? If the child has not been registered as a US citizen, there’s still doubt as to whether they qualify for citizenship. I’m not suggesting that anyone lie – the point is that you’re not a US citizen until the US government says that you are.
Karen – I would say, if a person opening a new account wasn’t born in the US, and doesn’t see him or herself as American, and has no intention of ever being American, they can truthfully answer that they are not a US citizen even if their parents registered their birth at a US consulate and got a US passport for them. Why should a person be bound by foreign law if they themselves have never agreed to do so?
“Under CRS, all banks here are now asking about citizenship when you open a new account.”
Does CRS really do that, or are banks doing it because of FATCA and falsely blaming CRS?
Do banks separately ask about residence or are they confused?
@Karen
FATCA only requires reporting of USpersons who have more than a certain amount on deposit, yet, my bank is reporting ALL US persons. Why?
The answer to that is not found in any body of law, as no body of law requires my bank to report ALL US persons. The answer, I believe, is the same reason why they will report or lock out my children.
@plaxy
“Karen – I would say, if a person opening a new account wasn’t born in the US, and doesn’t see him or herself as American, and has no intention of ever being American, they can truthfully answer that they are not a US citizen even if their parents registered their birth at a US consulate and got a US passport for them. Why should a person be bound by foreign law if they themselves have never agreed to do so?”
I agree with this, yet my bank does not.
Norman Diamond – “Does CRS really do that, or are banks doing it because of FATCA and falsely blaming CRS?”
It’s FATCA plus “Wider Approach” CRS. They ask the USC question because CRS carefully avoids birthplace discrimination.
JapanT – from what you’ve said, it sounds like it’s not foreign law but Japanese law that requires your children to be identified as children of a parent with a non-Japanese citizenship?
If so, you and they are inevitably subject to that because it’s domestic law.
JapanT –
The Model 1 IGA allows banks to choose whether to apply the threshold; most choose not to, because it would cost more to apply the threshold.
They may not be required to apply the threshold; that’s the situation under Model 1 IGAs, and in my country most banks (all that I’ve heard of) choose not to apply the threshold.
No the banks here and in Hong Kong, Singapore etc are asking for citizenship and both residencies and FATCA form filled out for all citizens of the world whether US citizen or permanent resident or a foreigner. As per bank managers they are now passing all information to their Central authority to decide to report these non citizens based on their true residencies. This is part of CRS/FATCA. Remember CRS is GATCA (global tax compliance) basically FATCA on steroids. President Obama handed over OECD what it wanted for years and US wanted it too but did not agree to sign on to CRS as part of its hypocrisy. We want global money in our banks not in tax havens. For foreigners, US has become the biggest tax haven. So many trust companies moved from Switzerland and other tax havens to US as US offered their clients banking secrecy and protection something it does not want its own citizens and permanent residents.
As I stated before, all roads lead to renounciation. The sooner you get it done the better it is. Look at Patricia Moon the starter of this wonderful blog. Wish I had seen her blog years ago. Don’t wait for ACA and Congress to do anything as they will bring another bag of tricks for expats. You will have to provide some sort of exit tax and five years of non residencies and no foreign income exclusion to even live your life as a non resident US citizen and FATCA/FBARs you will still have to comply with no matter what. I commend all the efforts but I have not seen anything positive still as of yet.
Oh yeah you will still get turned away by banks and brokerages as the damage has been done already by FATCA and they are tired of compliances and hiring extra staff to serve a few thousand or a million Americans (for example in Canada ) scattered through out the globe.
Of course the best solution now is not to comply ever or renounce. If you are ever found out by IGA sweeps then you are out of luck.
After reading all the information from the tremendous work done by people here I still say renounce and be free the sooner the better.
@plaxy, @iota, @Patricia Moon thank you all very much for all your research and hard work. Your advice I took it to a US attorney and he agreed renouncing is the best solution the sooner the better.
They are not looking for thresholds of any sorts. My foreign friend was asked by his bank for FATCA certification even though he has no connection with US. CRS is also looking for real country passports as many Canadian Chinese etc now who are not born in Canada and living in other countries are now acquiring non Canadian passports to avoid banks reporting to Canada even if they live overseas as govts are getting desperate for any tax they can get. Many brokerages are off limits to Canadians too as I found out from a Canadian friend.
@Karen
“JapanT – there are residency requirements to be able to transmit US citizenship.”
I meet these.