Category Archives: Issues regarding US persons abroad

Foreign Bank Account Report (FBAR), FATCA, Citizenship based taxation, the exit tax, $450 renunciation fee, the requirement to certify five years tax compliance, long lines at US Consulates to renounce, the threat of permanent exile and ten years further taxation after expatriation (Ex-Patriot Act; Reed Amendment), these are obstacles that hinder many so-called Americans from asserting their mobility rights and their fundamental right to change nationalities. Relinquishing US citizenship should be as natural as taking a breath, and so these obstacles fly in face of the freedoms for which early Americans were willing to fight and die:

We hold these truths to be self-evident, that all men are created equal, that they are endowed by their Creator with certain unalienable Rights, that among these are Life, Liberty and the pursuit of Happiness.

These days the Obama vanguard will mercilessly mock you if you mention a Creator, natural law and how the IRS violates constitutional rights like the Fifth Amendment. But when the young country called the USA was still trying to assert its independence from Britain and the Crown, Americans had another view of the right to expatriate. They called it a natural right. Today, referring to natural law may flag you as a tax protestor. For early Americans, hindering expatriation was to make a man a slave. In this light, Badger found this in an article by Nancy L. Green:

Justice James Iredell left one of the more memorable expressions of the principle of expatriation, still quoted today: “That a man ought not to be a slave; that he should not be confined against his will to a particular spot because he happened to draw his first breath upon it; that he should not be compelled to continue in a society to which he is accidentally attached, when he can better his situation elsewhere, much less when he must starve in one country, and may live comfortably in another, are positions which I hold as strongly as any man, and they are such as most nations in the world appear clearly to recognize.” [Source: “Talbot v. Jansen, 3 U.S. 3 Dall. 133 (1795) at 162].

From: Nancy L. Green, ‘Expatriation, Expatriates, and Expats: The American Transformation of a Concept’ The American Historical Review 114 (2) (2009) 307-328.”

Today’s Toronto Star Commentary Section has our good friend, Jim Jatras, commenting on the situation in Canada:

“Canadian visitors to Washington sometimes wonder why their embassy stands at the foot of Capitol Hill.

The answer? To be close to where Canada’s laws are made.”

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Finland 1940

We are now refugees
in Finland.

My little daughter
Returns home in the evening complaining that no child
Will play with her. She is German, and comes
From a nation of gangsters.

When I exchange loud words during a discussion
I am told to be quiet. The people here do not like
Loud words from someone
Who comes from a nation of gangsters.

When I remind my little daughter
That the Germans are a nation of gangsters
She is glad with me that they are not loved
And we laugh together.

Bertolt Brecht

Politico’s Rachel Bade reports on the renewed efforts by Carl Levin and John McCain to pressure Senator Rand Paul into ratifying a long-delayed 2009 Swiss-U.S. Protocol that would allow the release of even more names of U.S. account holders at Swiss banks.  As Bade reports in this excerpt,

Paul, a libertarian Republican widely believed to be eyeing a 2016 presidential run, says his hold stems from concerns about Fourth Amendment protections against “unreasonable search and seizure.”

“These are people that are alleged, not convicted of doing anything wrong,” Paul said a few weeks ago. “I don’t think you should have everybody’s information from their bank. There should be some process: accusations and proof that you’ve committed a crime.”

Paul’s protest is also linked to his abhorrence of the soon-to-take-effect Foreign Account Tax Compliance Act, which will force foreign banks to disclose U.S. account information to the IRS, and domestic banks to reciprocate to other nations’ revenue departments.

A Treasury official recently told Paul’s staff that FATCA “doesn’t work” without the treaties — though there seems to be disagreement on that point, even in the executive branch.

That sent up red flags anew to Paul because the senator has legislation to repeal FATCA and hesitates to support a treaty that enables a law he views as U.S. government overreach.

Read more: http://www.politico.com/story/2014/03/rand-paul-tax-swiss-banks-104148.html#ixzz2usQjnrMo

 

This article could really use some commentary from Brockers – I encourage everyone to get over there. This is Politico, and it’s a great chance to educate some more of those “rich tax cheats sitting on the beach” Kool-Aid drinkers.

Thanks to noone for spotting this significant new article from the South China Morning Post. This may be one of the first examples of non-FFI’s applying full 30% withholding directly to the salaries of overseas Americans – in this case, US pilots working for Cathay Pacific.  Until now, most attention has been focussed on the role of foreign financial institutions, but now we see the first tangible signs of how FATCA will permeate the entirety of international business relations and reporting practices. How soon before NO Americans can work outside the compound, completing the self-destructive process whose beginnings Roger Conklin remembers so well from his days as a Telecoms executive?

Cathay to withhold US pilots’ wages for taxes

Airline says new laws are forcing it to hand over 30 per cent of salaries to American authorities

Cathay Pacific Airways is to start withholding about 30 per cent of its American pilots’ salary every month and pass the money to the US tax authorities together with the pilots’ personal information this year.

While the airline told the South China Morning Post the move was designed to comply with US tax regulations, its decision has been challenged by legal and tax experts in Hong Kong.

They said companies in Hong Kong had no obligation to fulfil demands made by a foreign government because of the two different jurisdictions.

Lawyer Albert Luk Wai-hung said that if the airline observed the US regulations, the affected pilots could sue the airline for underpaying them because part of their salaries would not find its way into their pockets. That could violate the spirit of their contracts.

“The company also cannot pass their employees’ personal information to any third parties without their consent,” Luk said, pointing to the Personal Data (Privacy) Ordinance.

At the centre of the controversy are two US tax regulations – an income tax withholding requirement in the Internal Revenue Code and the Foreign Account Tax Compliance Act.

Patrick Yip, a national financial services tax leader at Deloitte Touche Tohmatsu, said the tax withholding law required overseas companies which hired US citizens to withhold an amount of tax and pass it to the US Internal Revenue Service. It applies to US citizens who make more than US$97,600 a year – about HK$63,000 a month.

“But practically, Hong Kong and the US are two jurisdictions so I have never seen any companies here which comply with this law,” Yip said, adding there would be no penalty even in the case of non-compliance.

“Even the US companies in Hong Kong which have US employees don’t do it … no wonder the pilots have such big reactions because no one has ever heard about it.”

Cathay will start withholding tax from the second quarter of the year, and pilots said it would affect 300 to 500 of them – up to 18 per cent of cockpit crew.

The pilots said they already had to pay Hong Kong and US taxes, but before Cathay changed its policy they could file US taxes themselves once a year.

CPA Australia’s divisional president for Greater China, Ronald Yam, and the chair professor of accounting at the University of Hong Kong, Amy Lau Hing-ling, said they had not heard of a local company withholding US employees’ taxes.

As for Fatca, it was passed into law in 2010 but will only take effect in July this year.

The anti-tax evasion law requires foreign financial institutions such as banks to declare to US tax authorities the foreign holdings of anyone liable under US tax.

“The US Internal Revenue Service is actively seeking airlines flying into the US to ensure they are fully compliant with all US income tax requirements,” Cathay said. “As an international airline flying into the US, we are working with the IRS on this compliance.”

Cathay added that no disclosure of information would be made to the IRS without “notifying” the pilots.

Yip, an expert on Fatca, said that if Cathay did not comply, the US tax authorities would withhold 30 per cent of its US-source income.

He said it was “strange” that the tax authorities had demanded airlines declare pilots’ financial details because airlines were not financial institutions.

Two American pilots employed by Cathay said the plans would create cash-flow problems for them. They also said that filing tax was a complex matter and they were concerned they might pay more than they should.

If you look on Tax Analysts there is currently a pay walled article with this title under the Today’s News/International Tab. It is no joke.

http://www.taxanalysts.com/

If this is what I think it is it means WAR.

See also Jack Townsend, IRS CI Is Looking at Renunciations of Citizenship Just in Case (3/1/13)

At WhiteKat’s suggestion — and, she’s right, I should have posted instead of commented.

Thanks, John Richardson, author, and to Just Me for highlighting it. Another excellent, common sense explanation — no beating around the political bush.

We need a Canadian version of John Richardson’s additional submission to NZ Select Committee.

If every Canadian MP (or other country government representative) would read the document as it pertains to Mr. and Mrs. Middle-Class Countryman, they would understand what FATCA really means for Canada, New Zealand or any other country.

The emotional trauma of FATCA combined with US citizenship-based taxation law for a so-defined ‘US Person Abroad’, as described by Dr. Donald Young and understood by Mr. Richardson, is the missing link and not dealt with anywhere else.

The US tax compliance professionals assisting us in with US tax law or US accounting for our US tax returns OR the media person trying to tell the FATCA story so the general public can understand OR government representatives deciding what to best do for their country OR our family and friends really DON’T KNOW. The only ones who know that aspect are us — the persons living the horror of the US Person round-up.

It is as essential for others to know this aspect of FATCA as for us to somehow effectively deal with our never-ending up’s and down’s of the emotional trauma we experience. There is an IQ needed to understand all this and I think, more importantly, an EQ (the Emotional Quotient of Intelligence).

(Perhaps some of you don’t experience this aspect. I can’t imagine — if so, you are exceptional.)

Who can forget this classic scene in the film Canadian Bacon?

Finance Minister Flaherty has given explicit permission to the IRS to collect taxes from Canadian citizens living in Canada. While this strips them of their protection as Canadian citizens, it nevertheless presents a new challenge to the IRS.  Should we presume that the IRS can operate in Canada while ignoring all the laws of Canada?  Or shouldn’t they have to obey, just like all other government agencies, the laws of our land. One rule that I’d like to see them obey is our official languages law.

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