Page 2 of the @SophieintVeld letter to Mr. Gentiloni includes: https://t.co/kY4hDTLrPN pic.twitter.com/GyMbxACXJy
— U.S. Citizen Abroad (@USCitizenAbroad) April 11, 2020
This is the fourth post in which I have discussed the plight of Accidental Americans in Europe. In my first post I discussed the message from the Homeland, delivered by Chip Harter to the European Union. The message was that Accidentals should Either file U.S. taxes or renounce U.S. citizenship. In my second post I discussed the message from the Home country, by Mr. Gentiloni – the European Parliament’s message to Accidentals. This message was: Nationality ties come with obligations including paying taxes to America. These messages came only days apart. (To say that European Accidentals are having a bad month would be an understatement.) The third post discussed the fact that European Accidentals are under attack from both sides of the Atlantic.
The fourth post – Identifying the component parts of the message …
The bulletins (discussed in the previous three posts) from Mr. Harter and from Mr. Gentoloni underscore seven important points.
1. The European Union accepts that the United States is free to define a citizen of any European country as a U.S. citizen. (Violating European sovereignty)
2. Once defined as a U.S. citizen, the rights of citizens of EU countries become subordinate to their obligations as U.S. citizens. In other words, their rights as citizens of European countries have been diminished (effectively stripping them of those citizenships). (Violating European sovereignty)
3. The EU accepts that the United States is free to change the definition of U.S. citizen at any time (expanding the number of U.S. citizens who are citizens of European crountries). (Violating European sovereignty)
4. In it’s essence U.S. citizenship is a property interest that the United States has in its citizens. (There is a reason they are called “U.S. Persons”). The fact of U.S. citizenship being a property interest is reinforced by the simple fact that individuals wishing to NOT be U.S. citizens are required to pay the United States for that privilege.
5. The consensus view (which I have some doubts about) is that the the acquisition of U.S. citizenship for those born outside the United States is automatic and involuntary. (The number of individuals who are identified as U.S. citizens born abroad is unknown.) Once identified as U.S. citizens by European banks, many individuals behave as though U.S. citizenship has been forcibly imposed on them. (Violating European sovereignty)
6. Once defined as a U.S. citizen, that individual is subject to the U.S. vast regulatory apparatus found in the Internal Revenue Code and other statutes. Shockingly, the mere fact of having been born in the United States has become a major disability (financial and social) in their lives. (Violating European sovereignty)
7. The cost of formally relinquishing U.S. citizenship (and receiving a Certificate Of Loss Of Nationality) is significant. It’s important to note that this cost must be borne regardless of whether an individual has ever sought the “benefits” of U.S. citizenship.
This state of affairs is a “Perfect Storm” caused by a toxic mix of the erosion of European sovereignty coupled with willful blindness on the part of politicians who seek political expediency over the defence of their national sovereignty and the rights of individual European citizens.
The nature of US citizenship and U.S. tax policies are without precedent in the modern world. There is no other country that claims the right to impose worldwide taxation (according to domestic tax rules) on people who are tax residents of other countries. Accidental Americans are tax residents of the countries where they actually live.
The situation of “Accidental Americans” caught in this “Perfect Storm”, gives concrete meaning to Professor Kochenov’s claim of “The Punishing Arbitrariness Of Citizenship And Its Effects“.
As Professor Kochenov explains:
As I explain in a recent MIT Press Book (Citizenship, 2019) anyone who claims that the allocation of citizenships worldwide is logical and clear would be incorrect. The key feature of citizenship is randomness. Consequently, at the macro level, such a claim equals seeking logic in perpetuation of rigid pre-modern caste structures: is it not logical that a son of a brahman is a brahman, just as the son of an American is an American? At the micro level, such a claim is problematic too. For example, tenured professorship is irrelevant to citizenship in Germany, but was a key to immediate citizenship in Austria until 2008; “being active in the diaspora” is irrelevant to Austrians, but can make you a Pole; having a Lebanese mother is irrelevant to Lebanese citizenship, but having a Jewish mother, even without an Israeli citizenship, can make you Israeli. Examples of this diversity in the rules of citizenship are countless: what is taken for granted as best practice in one country can seem almost outrageous in another. All in all, however, it is crucial to realize that there cannot be a “worse” or a “better” method of assignment to a caste. It is the repugnant assumptions underlying the very rationale of a caste system that are intolerable, especially in modern democracies.
How should the value of US citizenship be assessed according to this … https://t.co/aLtO95vwOA pic.twitter.com/YNY291g0wI
— U.S. Citizen Abroad (@USCitizenAbroad) April 11, 2020
The next (Fifth) post in this series will consider the question of:
US Citizenship-based taxation – An incident of US Sovereignty or a violation of international law?
CIRCA 2012: "Is US citizenship-based taxation a violation of international law?" – Fantastic Brock discussion and must reading for members of the EU Parliament https://t.co/mn9MV8i3iE
— U.S. Citizen Abroad (@USCitizenAbroad) April 12, 2020
The comments to the post reference in the above tweet are fascinating.
I am usually not one for optimism but I think Sophie In’t Veld latest response back to the Commissioner which literally came after one day from the Commission’s original response is very much on target and has dramatically reduced the Commission’s room for maneuver. To give some background I am a huge fan of Sophie’s and acknowledge she has been involved in this issues for a better part of 10 years(almost as long as me personally) however, she is not directly related to these issues on a personal level like we are and it has taken some time up until recently for her and her staff to understand this stuff the way “we” understand it. Thus I feel her latest response is an important sign that there is at least someone in elective office somewhere that truly understands these issues the way “we” understand it. (To give some background much of Sophie’s early work on these issues was passed on privacy law and data protection which is her bailiwick more than taxation or nationality which is not. You can see however she has become much more educated on taxation and nationality in recent years).
In terms of what comes next I think there are a couple possibilities. At this point the Commission has some real decisions to make with real political consequences.
1. The Commission can simply decide to respond back to Sophie and blow her off. This might be the “Safest” option but they have not taken this option to date in previous rounds of questioning and institutionally they might feel that pure insubordination is non viable.
2. Say the US can impose CBT but no other “third” country can. Again I am not sure how successfully this can be spun without looking like complete stooges of the US. Also there is not any legal justification I can think as to why the US can impose CBT but no “other” state can under international.
3. Say everyone can impose CBT and define “their” citizens however they wish under international law. This is the logical followup to Commissioner Gentiloni previous response and one that has the most sound basis under international law if you believe the US is entitled to impose CBT under IL however, it would obviously be a practical, political, and logistical nightmare. I will discuss later what are some of these implications.