Broader context of US dollar and sanctions: Describing #FATCA as one (of many) example of how the US uses control over the US dollar as a way of sanctioning other countries. "Uncle Sam just used its financial nuclear weapon again" https://t.co/xVa8jhI8fc via @thesovereignman

— U.S. Citizen Abroad (@USCitizenAbroad) January 16, 2020

Introduction

There have been many articles on Brock and other sites about FATCA. The above tweet references a recent article at Sovereign Man which mentions FATCA in the context of a series of financial sanctions the U.S. has imposed on the world. In general, the article explains that it’s the dominance of the U.S. dollar and NOT it’s nuclear weapons that gives the United States the global power that it has. Interestingly the article pegs 2001 as the time when the United States began to use the world’s dependence on the U.S. dollar as a mechanism to impose sanctions on other nations. The “Sanction Principle” has been (unintentionally) reinforced by Juan Zarate in his book “Treasury’s War” (in which he proudly describes the relationship between the U.S. dollar and financial sanctions). Of course U.S. citizenship-based taxation, (and the power given by the FATCA IGAs to allow the U.S. to designate any individual as a “U.S. Person”), is the ultimate sanction against the rest of the world.

The U.S. Dollar As The Dominant Reserve Currency

Episode 553: The Dollar At The Center Of The World https://t.co/9WeBWPhedj

— U.S. Citizen Abroad (@USCitizenAbroad) January 16, 2020

The root of the dominance over the world financial system was the 1945 Bretton Woods Summit (well described in the NPR episode) in which the U.S. dollar became the world’s reserve currency. One wonders whether the use of a nuclear bomb to end the second world war was what placed the U.S. in a leadership position that allowed the U.S. dollar to become the weapon that it is today. Does military dominance reinforce the dollar? Or does the dollar reinforce military dominance. Or is it both?
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This will be one of the most interesting tax residency problems in the modern world. Tax residency is usually different from immigration status. What should Harry do? https://t.co/CvlcbbGJxC pic.twitter.com/Xbh49A74e0

— U.S. Citizen Abroad (@USCitizenAbroad) January 9, 2020

It appears that Meghan, Harry (and Archie) are moving in a new direction. This includes creating a new life (where they become financially independent and cease the day-to-day activities of assuming the responsibilities of being “Senior Royals”).

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The family has released a new website to discuss their plans.

The most interesting part of the announcement is that they will spend significant time in North America (Canada and/or the United States). Along with this decision comes the question of “tax residency”. Along with the question of “tax residency” comes the question of taxation of foreign income and the reporting of foreign assets.

All indications are that Meghan plans to remain a U.S. citizen and that Archie (whether by accident or design) will be treated as a U.S. citizen. This leaves Harry. At present (as far as I know) he is a British citizen.

In light of all of this, should the family become tax residents of Canada, the United States or even both?

Will they remain tax residents of Britain?

Should Meghan live in Canada (U.S. property temporarily staying in Canada)?

Should Harry count the number of days he spends out of the USA to avoid becoming a U.S. tax resident?

Will somebody convince Harry that he should get a Green Card?

Might Harry conceivably eventually become a U.S. citizen?

Will the Royal family become Canadian citizens?

Will Canada be designated as a tax haven by the OECD?

The plot thickens.

All of this and more.

An opponent of @citizenshiptax is somebody who understands what it actually means: From 1985: "The Experience of the Phillipines in Taxing Its
Nonresident Citizens" https://t.co/Ip6y5VLzpz

— U.S. Citizen Abroad (@USCitizenAbroad) January 8, 2020

The article referenced in the above tweet – published in 1985 by Richard Pomp of the University Connecticut School of Law – was posted at one of Facebook groups here. The Facebook post includes some interesting commentary and begins with:

The Experience of the Phillipines in Taxing Its Nonresident Citizens:

I’ve often wondered about the process the Philippines went through when adopting a CBT system then going to one based on residency.

This study was written in 1985 to help determine whether CBT would be effective in deterring “brain drain” from less developed countries (LDCs). Although it was written prior to the Philippines adoption of residency-based taxation, it demonstrates very clearly the problems the Philippines had with enforcing CBT, problems that are strongly mirrored in the US today (complete with amnesties, passport revocation and the like). Unfortunately the US at this point doesn’t know there is a problem that needs to be addressed like the Philippines did as long as 50 years ago! I do think though the biggest difference between the Philippians then and the US now, is that the Philippines valued it emigrants in ways that the US does not.

As it began in the Philippines, they only taxed on citizenship because the US did!

“The early Philippine reliance on citizenship as a basis for tax jurisdiction reflects more the country’s colonial legacy from the United States than a carefully developed policy. Initially, Philippine citizens were taxed under the U.S. Revenue Act of 1913. This Act, adopted shortly after ratification of the sixteenth amendment in the United States, taxed the worldwide income of U.S. and Philippine citizens, regardless of their residence. Thus, early in its history, the Philippines incorporated citizenship jurisdiction into its own law following the U.S. model.”

When that didn’t work for reasons similar to what the US is currently experiencing, they went to a flat rate system one can compare to Eritrea’s, but with a deduction for taxes paid where one lives. It still didn’t encourage compliance.

The article is lengthy and the pdf is too big to upload here. But, you can download it yourself at this link.

I haven’t had time to read the article in any detail. But, if you look at the conclusion you will see all kinds of discussion about enforceability and the co-operation of other countries in enforcing the tax. The article was written in 1985 in a Pre-FATCA world.

This is an interesting article that may well shed light on why the Phillipines abandoned citizenship-baed taxation.

It would be interesting if Brockers were comment on:

1. Aspects in which you think the Phillipines situation is different from the U.S. situation.

2. Assuming automatic information exchange (FATCA and CRS) existed in 1985, how might the author have included this into the analysis.

For those who like to read the conclusion before reading Professor Pomp’s article, see:

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A re-run from MapleSandbox …

From an anonymous donor come the top ten reasons NOT to donate to ADCS lawsuit

The Top 10 List To NOT Donate to the ADCS-ADSC.ca lawsuit:

10. You don’t like Canadian citizens of U.S. origin..

9. You want to help tax compliance vultures become wealthy.

8. In Congress you trust and Congress has spoken.

7. You are a shareholder in one of the big Canadian banks.

6. You are a shareholder in all the Canadian banks.

5. FATCA will give me grounds to divorce my U.S. spouse.

4. You believe in the Obama administration instead of believing in freedom and justice.

3. You believe that U.S. law should be imposed on Canada.

2. You are pretending to be a Canadian but are really a member of “Homelanders Abroad”.

and the NUMBER 1 reason to NOT donate is …

1. You believe that FATCA should be the Supreme Law of Canada.

Do NOT let American law become the Supreme Law of Canada. Donate now! Donate often. Donate as much as you can.

Top 10 Reasons Not to Donate To ADCS FATCA Lawsuit

BREAKING: Happy Holidays! https://t.co/AJ8RC4YHhb

— U.S. Citizen Abroad (@USCitizenAbroad) December 21, 2019

In 2019 Helen Burggraf suggests Santa Claus may be an Accidental American – owing millions of dollars of back taxes. In 2011 Petros (writing one of the first and most important posts coming from the Isaac Brock Society) suggested that Santa may indeed be a U.S. citizen (possibly naturalized). Either way, it’s clear that:

Unless you can prove that you are NOT a “U.S. Person” you are subject to life problems!

That’s the bad news. The good news is that with or without the U.S. Government, the Holiday Season comes every year at this time. A good moment to include a recent comment from Embee:

Brock commenters (past & present), Brock post writers, Brock moderators, trial plaintiffs, legal teams (then & now), ADCS board members, trial fund donors (near & far) and so on …

I started to try to name all of them in order to wish them a Merry Christmas and Happy New Year BUT the list got very long and then I worried I’d miss someone.

Soooooo … MERRY CHRISTMAS and HAPPY NEW YEAR to EVERYONE who makes the Brock forum helpful, supportive and informative and to EVERYONE who made it possible for Canada to be the first country to challenge FATCA in a courtroom. SURGITE!

and response from Badger:

@Embee, may I heartily second your best wishes;

“..MERRY CHRISTMAS and HAPPY NEW YEAR to EVERYONE who makes the Brock forum helpful, supportive and informative and to EVERYONE who made it possible for Canada to be the first country to challenge FATCA in a courtroom. SURGITE!”

(Hope this message is considered an acceptable diversion from the main post. I believe that even little things like this can be powerful – to foster and maintain human connections – creating and cementing important bonds – particularly important when our contact and interactions here are only virtual. The early connections and sharing in a cooperative way forged strong bonds which are a large part of the reason IBS was so successful, in addition to the information sharing and problem solving re USextraterritorial CBT, FBAR and FATCA and is part of what keeps people reading and following here even when their US status and its concomitant burden was excised.)

Thinking back to the beginning of Brock in November and December of 2011:

This is a reposting of one of Brock’s first and best posts. It was written by Petros and was posted on December 24, 2011. If you go to the original post you will comments from some of the original contributors at Brock. In any case, it’s just as valid today as it was exactly eight years ago. This is also a good moment to recognize and thank the original founders (as in December 2011) of Brock (who I believe include) in no particular order: Petros, Pacifica, Deckard1138 and Calgary411. I don’t know whether Patricia Moon was an original founder, but she surely – for many years – provided the foundation upon which Brock rested, as the Premier forum for educating “U.S. Persons Abroad”.
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U.S. Federal agents arrested Santa Claus earlier today at the North Pole. Special Christmas Edition (Merry Christmas to all and to all a good night!)

A police composite sketch of man arrested today at the North Pole known as Santa Claus

The United States Department of Fish and Wildlife has arrested Santa Claus, an elusive figure with many aliases (e.g., St. Nicholas). On the morning of 24 December, 150 heavily armed Fish and Wildlife special agents raided Claus’ North Pole compound, seized several tons of exotic woods forbidden by the Lacey Act, arrested Santa Claus and a female accomplice identified only as Mrs. Claus, and liberated thousands of diminutive slave labourers known only as “Elves”. Claus has been charged with multiple counts of money laundering, illegal exportation of currency, illegally importing into the United States toys made of contraband–rare woods, ivory and other banned substances. He has also been charged with violations of slave labor and child labor laws, hundreds of patent and trademark violations, and illegally entering and exiting the United States. Indeed, Fish and Wildlife agents also seized an unidentified aircraft called a “sleigh” which had numerous secret compartments holding the contraband. Fish and Wildlife agents charged Mr. Claus with animal cruelty with regard to the caribou that he used to launch this “sleigh”.

Special Agent Hugo Smith, Department of Fish and Wildlife

Special Agent Hugo Smith said, “We arrived just in the nick of time. A moment later, and the caribou would have launched the sleigh and Claus would have escaped with the illegal materials. By now, he would be in the United States, breaking into people’s houses and selling this stuff.”

The United States Department of Immigration and the Internal Revenue Service have also had their eyes on Mr. Claus. An immigration official who also attended the raid said that they were able to obtain several dozen passports. He said, “It seems that this Santa Claus character has a different name in every country–his EU passport says, ‘Father Christmas’ and his Canadian passport says, ‘Père Noël’. We have, however, determined with certainty that Santa Claus is a United States citizen.” Apparently Claus worked in Hollywood during the 1940s and 50s making autobiographical films, such as Miracle on 34th Street. During that time he applied for and received U.S. citizenship.

Douglas Shulman, Commissioner of the IRS, has released the following statement:

IRS Commissioner, Douglas Shulman

At long last, the notorious tax cheat, Santa Claus, has been apprehended. He has been living in a foreign country for the last 50 years and during that time he has not filed his US taxes even once. It has become clear, however, that he has run a lucrative business at the North Pole and has never reported any of the income. In addition to criminal tax evasion, we intend to charge Santa Claus with 190 counts of criminal failure to file Foreign Bank Account Reports (FBAR), as we found evidence in his papers that he is operating or has signing authority on bank accounts in 190 different countries. It is our contention that the fines alone could help us bring billions in revenue into the United States government.

According to United States law, all United States Citizens are required to pay taxes to the IRS and to report any foreign bank accounts. Failure to obey these filing requirements may result in civil and criminal penalties including imprisonment.

The Obama administration declared that they were very pleased with the news. “It is about time,” Obama said from his Hawaian retreat, “that the United States returned those who have fled the country just because they don’t feel like paying their fair share anymore.”

The Republican candidate for president, Ron Paul criticized the raid, “The United States has neither the authority nor the right to go into another country and enforce its laws. Santa Claus is a citizen of the North Pole and it is overreach for us to go there and arrest him.” Also running for president, former Speaker of the House Newt Gingrich responded to Paul, “The United States must reserve the right to arrest terrorists and to violate the rule of law in order to provide safety for the People of the United States.” Prime Minister Stephen Harper of Canada said that his government did everything that they could to help the United States, even to the point of allowing the use of Canadian air space. “We are cooperating with the good faith efforts of the United States to eliminate terrorists in order to maintain the safety and security of all Canadians.”

Introduction and background …

As reported by Helen Burggraf of American Expat Finance with a general description of the problem …

Does Congress hate all Americans or only #Americansabroad who married an alien – AKA the #FBARMarriage: "Potentially significant error in 2018 IRS tax guide for 'certain married taxpayers filing separately' in Expatland" https://t.co/fHyFyaflhv

— U.S. Citizen Abroad (@USCitizenAbroad) December 19, 2019

As reported by Virginia La Torre Jeker of US-tax.org with a more technical description of the problem …

It's not that Congress doesn't care. It's that it doesn't care that it doesn't care! #Americansabroad get ZERO concern/attention from Congress: "ATTENTION! Married Filing Separately? $5 of Gross Income? Must File US Income Tax Return!" https://t.co/kp3kkb0PlZ via @VLJeker

— U.S. Citizen Abroad (@USCitizenAbroad) December 19, 2019

The TCJA created a situation where every “resident” member (nonresident aliens excepted) of America’s unique “Tax Form and Penalty Club” who is foolish enough to use the “Married Filing Separately” filing status, is required to file a 1040 even if they have no income.

Before moving to the main point of this post, two technical observations are in order:

1. The “married filing separately” status is generally the most punitive filing category there is (America does have a tax penalty for marriage) and is generally a separate tax on Americans abroad; and

2. The “married filing separately” status is particularly common in an “FBAR Marriage” (the type of marriage where a “nonresident alien” marries an American citizen).

As the post by Virginia La Torre Jeker (in particular) notes, Americans abroad are more likely to use the “Married Filing Separately” category because they are more likely to be married to an alien (grounds for special punishment perhaps?). The “alien” spouse can file jointly with the American (See Internal Revenue Code 6013(g). Although possible, and although there may be good tax reasons to do so, generally it would not be good for the health of the marriage to invite the “nonresident alien” spouse into the U.S. tax system. For examples of what this all means from a tax perspective read here. For an example of the problems this can cause see here. (Thanks to Virginia La Torre Jeker for all of these posts.)

Main point – Does equal protection require the “equal concern and respect of the legislature”?
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Someone wrote me that, ‘FATCA is a problem for residents of Canada only because the United States sticks to its outdated policy of citizenship-based taxation.'” Although there has been some political movement to end the worst effects of citizenship-based taxation, a recent article from American Expat Finance by Helen Burggraf, suggests that the politics of changing U.S. tax policy for Americans abroad may – with the possible retirement of Congressman Holding – become more difficult.

Democrats Abroad has been questioning prospective nominees about their positions on each of FATCA and citizenship-based taxation.   It has phrased its question in a way that assumes that a move to citizenship-based taxation to residence-based taxation would result in no loss of tax revenue to the United States Treasury.  John Richardson, Karen Alpert and Laura Snyder explain why they feel this is an inappropriate and dangerous assumption in the following article, reprinted with permission of TaxConnections.
Democrats Abroad (DA) recently reached out to the Democratic presidential candidates to ask them about issues relevant to Americans living overseas. The questions DA posed and the responses it received can be accessed here.

We strongly applaud DA for this valuable initiative. But we believe that it is important—indeed, vital—to call out the framing of this question:

“Most Americans living abroad think that the time has come for Residency-Based Taxation, the principle guiding all other countries’ tax systems and a fix for numerous unjust burdens on Americans living and working abroad. There are bi-partisan, revenue-neutral proposals to implement RBT that include robust provisions to protect the law from abuse by tax evaders. All we need is a moment of leadership to get this done. Will you be that leader?”

We believe that it is a grave error to condition a move to residency-based taxation (RBT) upon a demonstration of revenue neutrality. Doing so would serve to perpetuate the immoral and unjust system in place today.

These are the reasons why:

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“The Department of Homeland Security is proposing a rule that would allow the government to use facial recognition data to identify everyone traveling to and from the country, including U.S. citizens.

Non-citizens traveling through U.S. airports have been required to get their fingerprints scanned and have their picture taken since the mid-noughties. American citizens have enjoyed the choice of opting out of this requirement. However, in a recent regulatory filing, DHS is pushing to require all international travelers — including U.S. citizens — have their photograph taken.

“To facilitate the implementation of a seamless biometric entry-exit system that uses facial recognition and to help prevent persons attempting to fraudulently use U.S. travel documents and identify criminals and known or suspected terrorists, DHS is proposing to amend the regulations to provide that all travelers, including U.S. citizens, may be required to be photographed upon entry and/or departure,” the filing continues.”

Read more at

https://amp.dailycaller.com/2019/12/03/dhs-to-use-facial-recognition-on-citizens?__twitter_impression=true&fbclid=IwAR1v_ncsVG2LguKF50Eu_klmfAh1GOQqY6F4hA7SIpTQg6Wqda9tXrwOJa0

Note that any citizen of any country in the rest of the world had been required to register their biometrics, now US citizens outside the razorwire must be identified also.

https://isaacbrocksociety.ca/2016/09/30/fatca-came-last-to-eu-but-mandatory-fingerprinting-was-first/

Currently, the only people not assumed to be guilty of crimes are US citizens living inside USA, but that’s not stopped most other stompings on the Bill of Rights