We have discussed how the USA’s extraterritorial laws are a bad precedent, precisely because one day in the future, other powers may seek to imitate the USA. A new law in China does this. But according to the author, Mary Hui, China’s extraterritorial legal ambitions are unprecedented:
The new law is also expansive in another unprecedented way, even by the standards of China’s opaque legal system: it covers not just Hong Kong residents, but also anyone living abroad. That means foreign nationals, the Hong Kong diaspora, and Hong Kongers studying or working abroad.
The new law is “asserting extraterritorial jurisdiction over every person on the planet,” wrote Donald Clarke, a professor of law at George Washington University. Alarmingly, the law has an even broader reach than mainland Chinese criminal law, which only holds a foreigner liable for a crime committed outside of China if the effect of that crime occurs in China. Hong Kong’s nationals security law has no such limitation, Clarke explained. “If you’ve ever said anything that might offend the [Chinese] or Hong Kong authorities, stay out of Hong Kong.”
Apparently, Ms. Hui hasn’t heard of FATCA.
I had suggested that China would create CHATCA, but I guess they decided to start with a law making it illegal for anyone to criticize the government of China (which I am not doing, if anyone asks).
“Critics fear the law is a significant power grab on behalf of Beijing that will severely curtail the political freedoms of Hong Kong citizens. They fear its four areas of criminal activity are so ill-defined that the law could be used as an excuse to round up anyone critical of the Chinese government.”
Indeed US extraterritorial outreach sets a bad example although China appears to be going this way by a different approach with their new national security law.
@Petros – thank for posting this important news. Here is a fascinating Twitter thread discussing this … Interestingly one of the tweets links this to a response to the Meng Wanzhou case …
The thread begins by asking the question:
I would point that the US Internal Revenue begins with the US claiming tax jurisdiction over every individual on the planet. It then exempts nonresident aliens. So, I think China has a way to go before it catches up to the United States.
Does this mean that the nonresident alien exemption exemption could be someday removed?
The way the US law is written to (1) include the whole world and (2) then provide an exemption. It’s much easier to get rid of the exemption than to rewrite the law.
But, we are talking about a US tax law that is to a large extent based on definitions under the immigration laws. Certainly, (and I would expect) the USA to allow fewer and fewer people to meet the test of “nonresident alien”. So, there is a larger number of ways that the expansion of the US tax based can be achieved.
I would think that the process would be to:
Step 1. Confer US citizenship on the every individual in the world world (retaining citizenship-based taxation); and then
Step 2. Move to resident based taxation where US residents would be exempt from US worldwide taxation
Doesn’t this make sense?
It’s the US empires fault. You eliminate the problem, others may not think about copying. The US has came up with more bad ideas through history then any country.
Meanwhile, the US government responds with threats of sanctions, not only against individuals responsible for the repression in Hong Kong, but by again using American hegemony over the international financial system to sanction banks who do business with such individuals.
As someone with deep, long-running personal ties to Hong Kong I am of course horrified, saddened, outraged, and driven to tears by the new law. I support the US blocking entry to the soulless, evil culprits behind the new law. But I also have strongly mixed feelings about the US again weaponizing the dollar in response. It only strengthens American use of the dollar to bully everyone everywhere, which brought us FATCA and CBT.
From an article in Canada’s Globe and Mail (the general theme is the desire many individuals have to leave Hong Kong):
In other words many want to leave NOT because of China but because of the United States.
Yes, the United States now has the perfect excuse to sanction Hong Kong.
Clearly the world must pay the short term painful price of disconnecting from the U.S. dollar, the U.S. financial system and the United States generally.
“Clearly the world must pay the short term painful price of disconnecting from the U.S. dollar, the U.S. financial system and the United States generally.”
I think that day will come. It may be a long time coming but it will come. Bad handling of the US coronavirus response plus the border closures between the US and Canada along with the EU not welcoming US travelers will also play a role here.
As the US falls so FATCA will fall. It would be nice if someone would stand up to the US bully in the meantime.
Pat did you know when OECD and EU wanting to stop EU citizens and corporations moving to tax havens it approached the Obama administration which gladly obliged by passing FATCA in which EU citizens and corporations can move their offshore accounts and corporations not paying anything to US and US not reporting anything back to their respective govts while wanting to stop its own citizens from using EU and other tax havens as it wanted to become the only tax haven for all foreigners. That is why US never signed up for CRS as its banking lobby was very strong in Congress and they wanted all the money in the world to be parked over there. Do you understand the politics and hypocrisy involved in here? The world is blindly looking away at such things as they all want their business to continue with USA as its the most powerful country in the world. China is the only one to stand up to US these days but it too is dependent on US economy to feed its gigantic economy. Its suffering badly due to US tarriffs (Yes tarriffs were needed by US government a long time ago as jobs and economy in USA started suffering badly due to it). Some things should have been introduced as a double standard existed. But FATCA was like a bully to US citizens residing in other countries who are living there and paying taxes there. You are not using the US govt and if you are renewing your US passport you are paying the fees for it. Why do we have to suffer being locked out of investments and bank accounts, brokerages if we are living overseas not doing a thing to US govt except be their slaves on a plantation. Yes we are all tax thieves as we are all living overseas away from US. That is the blind approach of a US congress and only US attorneys and CPAs are making money from US citizens residing overseas if they are reporting as I am doing but I do hate the filing fees and all the unnecessary hoopla involved as I cant get a decent bank to open up my account living overseas and I am shut out every time I tell them that I have connection from US. The bank where I have an account as a resident told me please do not tick off the US citizen form as their compliance team will not accept it as they are terrified of any US connection. You can file your taxes if you want to or not but our compliance team will not let you keep an account. Why this blackmailing threats to citizens living overseas ? Yes FATCA is affecting our lives and needs to be revoked asap by ACA and it needs to be done right away but for past 10 years it seems its getting more tough than before.
Look at the bright side: China never followed the rule of law anyway. I mean, it’s not like they weren’t already doing whatever they wanted, like kidnapping people from HK and Thailand and disappearing them without a trial.
Tom it is a horrendous situation. Sorry to hear it sounds like you are still involved in US tax system. My good fortune lies in my renunciation of US citizenship. And it wasn’t money as a motivation on my part, it was mostly to obtain some peace of mind in my retirement here in Canada.
I think US may fall apart before FATCA is revoked but still support the lawsuit.
As I recall from past threads, ACA and Us citizens living overseas tried before Congress many times with all their stories but US Congress was unsympathetic towards the plight of US citizens overseas terming all of them tax thieves as they are paid by powerful CPA and tax attorney firms not wanting their cash cows disappear as millions are living overseas not necessarily Canada. As I recall some stories from Indian citizens who are US citizens residing in India and voted for Obama cursing Obama for passing this hypocritic law. In the end some renounced with their feet. Some Persian gulf countries where some were born as US citizens with their parents who lived as students in USA renounced too. In 2010 there were long cues of Hong Kong residents outside US embassy who become US citizens and realized the impact of this law early on renounced. https://www.sovereignman.com/lifestyle-design/facts-and-myths-about-renunciation-of-us-citizenship-1977/. It’s a parasitic govt not wanting to accept the cold fact that the law is a failure only scaring banks compliance teams and investment to be denied to you and nothing else. The biggest problem is those compliance vultures like attorneys and CPAs who are contributing heavily to lobbying firms to keep this law for their own good. If you have the money you can get a good law firm to design structures that don’t pay any money or reduce taxation bills similar to Mitt Romney or Trump is doing.
Many offshore experts and tax advisers nowadays advise foreigners to invest in USA based banks and companies as they don’t pay a dime to US taxes and get better exposure and virtually tax free in USA with no reporting whatsoever to their respective govts. There are no exchanges of treaties that Obama signed? Why? Think why. Everyone in the world is laughing at double standards by US govt yet our government does not blink twice at this but making the lives of US citizens impossible overseas. Still pursuing US citizens who are dual nationals in Canada or anywhere in the world while not taxing or reporting anyone investing there.
As the discussion veered into specifics of FATCA in Canada and elsewhere, I copied Tom’s comment to the FATCA Discussion Thread and moved the replies regarding that there.
Yes, except I wouldn’t expect it to happen given how destructive such a policy would be to the CBT regime.
Is there any evidence that congressmen or congresswomen actually receive money from international tax preparation firms? I always thought it might be happening but can’t find a definitive answer.
@Robin: A 30-second Google search comes up with plenty. Here are two regarding H&R Block, which does huge business with expat tax filing, and has its own dedicated PAC. Recipients are named.
Contributions to Federal Candidates 2020
2020 Summary Data
Regarding the links I just posted, you’ll see that it doesn’t cost much to purchase a Congressperson. Just $1000 in many cases. That’s $1000 more than any of us are giving them.
Most of the lobbying from H&R Block and others is aimed to prevent simplification of the tax process so they don’t lose business, is nothing to do with expats specifically. It’s really quite evil.
I wonder if political donations fall under the lobbying banner. I would think that they are separate items, and in which much more money is involved .
Gleaning through the pac and superpac donations ,there is nothing new nor surprising as to who is donating to who . You will not find any really pertinent info in this regard on the internet since the donations info been ,most likely, bleached beyond recognition.
Lobbying is more than handing money over and do as you will. Also, a million dollar donation from Microsoft is not much more than coffee money for the folks in Washington and Microsoft.
Chinese CBT or not?
China extends tax dragnet to worldwide income
Barbara almost but not quiet yet like US. It’s still domiciled based law, however the statement I read are very vague and troublesome. When Covid 19 saga ends all govts are going to do implement CBT type law to fill their empty coffers. Offshore advisors selling citizenship programs are always saying to rich clients either to stay out of EU citizenship program or acquire multiple passports as credit cards as EU is bound to try this sooner or later. The world is gearing up for it as soon as this monstrosity called FATCA was shoved down on US citizens who are residents living in their own countries.
I am pleased to see a more critical look at the Hong Kong situation . Like thd Cold War period, the Hong Kong story is certainly more nuanced then the media leads us to believe. The Canadian press finds it easy to China bash but,as always ,is very timid to antagonize our southern neighbor.