We’ve only just begun to appreciate how differently U.S. citizenship/taxation law affects Americansabroad, based upon their country of residence. This is perhaps the most bizarre I have come across so far; dual citizenship denied on account of apartheid (i.e., a white South African could be dual at birth but not a black South African).
NB: Please be sure to read the response of Mr. Ferszt to this post on the citizenshipsolutions site
cross-posted from citizenshipsolutions dot ca
Introducing this “guest post”
This guest post is written by Dominic Ferszt of Cape Town, South Africa. I first became aware of Mr. Ferszt when, in October of 2014, his post: The Accidental Tax Invasion” was published in Forbes. I have discussed various aspects of “citizenship-based taxation” with him since. I am very pleased that he has accepted my invitation to write this “guest post” for publication at Citizenship Solutions. His post exposes an aspect of “citizenship taxation” and the S. 877A U.S. expatriation tax that has not (as far as I am aware) been discussed before. Those who did NOT acquire “dual citizenship” at birth because of discriminatory laws (example British and Canadian laws saying that citizenship could be passed down from the father but not from the mother) will find this post extremely interesting and relevant.
Without further ado …
Apartheid and the Accidental Taxpayer
How the United States Congress has passed legislation which imposes a tax obligation in accordance with the discriminatory policies of foreign nations; and how this might offer a glimmer of hope to millions around the world who feel unjustly targeted by FATCA or the IRS.
By Dominic Ferszt, Cape Town
In 2010, the United States Congress passed FATCA, or the Foreign Account Tax Compliance Act. Since that time, anyone with a bank account outside the U.S. has suffered some consequence.
FATCA requires all financial institutions outside the USA, notably banks and insurance companies, to review their records to identify possible evidence that customers may be U.S. taxpayers. Once identified, the financial institutions are required to report certain financial information; ultimately to the IRS.
This seemingly simple task has proven to be a complex compliance exercise costing the banks billions of dollars every year; and such perpetual expenses inevitably reflect in our bank fees. Perhaps the more brazen face of FATCA has been the requirement, by millions around the world, to go into a bank and sign a form declaring to the U.S. government (under penalty of perjury) that they either are, or are not, a U.S. taxpayer.
However, there is one group of people, likely numbering in the millions, whose lives have been unexpectedly and disproportionately shattered by the passage of FATCA. Some call them ‘Accidental Americans’, but what they have in common is some formal connection with the United States which they long ago abandoned. Perhaps they were born in America to foreign parents or overseas to U.S. parents, perhaps they studied or worked there in their youth, perhaps they emigrated long ago. Many of them do not even speak English. The problem they all share is that they (unknowingly) carried with them a perpetual obligation to pay U.S. tax after they returned home; unless they had performed some obscure and punitive expatriation process known only to a few U.S. tax scholars in ‘white shoe’ law firms. These individuals continue to be U.S. taxpayers (regardless of where they live in the world) because they are U.S. citizens. In the case of ‘foreigners’ who, under U.S. law, inadvertently acquired citizenship at birth, their tax obligation is arguably discrimination based on “national or social origin” or “birth” as articulated in the Universal Declaration of Human Rights.
Continue reading
