Considering renouncing US citizenship? @Expatriationlaw information sessions Fall 2018

A series of information sessions (some formal presentations and some informal discussions); for information concerning the content of the programs please see here.

John Richardson is a Toronto citizenship lawyer, the co-chairman of the Alliance for the Defence of Canadian Sovereignty as well as the Alliance for the Defeat of Citizenship Taxation. He is a member of the ACA Taxation Advisory Panel. He holds the degrees of B.A., LL.B., and J.D. He is a member of the Massachusetts, New York and Ontario bars. His law practice focuses on “Solving the problems of U.S. citizenship” including relinquishing and the “Exit Tax”. He gives programs for expats (and Green Card holders) all across Canada and Europe. He writes extensively at citizenshipsolutions.ca.

Bangalore, India – October 22

Brisbane, Australia – October 25
with Karen Alpert
THU, OCT 25 AT 7 PM UTC+10
Information session – Brisbane
12 Payne St, Auchenflower QLD 4066, Australia
MAP

Karen Alpert founded the website Let’s Fix the Australia/US Tax Treaty and its associated Facebook group. The purpose of the group is to lobby and educate the Australian government regarding the impact of extraterritorial US laws on Australian citizens and residents and the cost to Australia of surrendering its sovereignty in these matters. Karen has a Ph.D. (UQ, Finance) and lectures in Finance at the University of Queensland.

Auckland, New Zealand – October 31

Sydney, Australia – November 1

Thursday, November 1
7:00 – 9:00 p.m.
The Rex Centre – Baroda Room
58A Macleay Street
Entrance near Baroda Street
Potts Point NSW 2011
MAP
Cost: Free, but preregistration is required for all sessions except the October 25 session in Brisbane (where you can just appear)
Registration: please send an email to: citizenshipsessions at citizenshipsolutions.ca or nobledreamer16 at gmail.com

  • Kings Cross train station is within walking distance.
  • Bus route 311 stops on Macleay Street, near Orwell Street.
  • Bus routes 323, 324, 325, 326 and 327 stop on Bayswater Road, near Darlinghurst Road.
  • Limited on-street parking.
  • Kings Cross parking station is nearby.

Dubai, UAE – November 4

Limassol, Cyprus – November 7
 

 
Information presented is NOT intended or offered as legal or accounting advice specific to your situation.
 
 

CANADIAN FATCA IGA LAWSUIT UPDATE: October 3, 2018 Plaintiffs’ Memorandum of Argument Has Been Submitted to Canada’s Federal Court

cross-posted from Brock.

by Stephen J. Kish

CANADIAN FATCA IGA LAWSUIT UPDATE
 
 
 
 
 
 
Here is the Memorandum of Argument of our Plaintiffs (Gwen and Kazia) for our FATCA IGA legislation lawsuit that was submitted on October 3, 2018 to Canada’s Federal Court. [Note that text is limited to 30 pages.]

The Memorandum can be found HERE.

The gist of our argument (page 12) is that the FATCA IGA legislation is inapplicable to Provincially regulated institutions and violates Sections 7, 8, and 15 of Canada’s Charter of Rights.

The word “sovereignty” is used many times in the document.

Some Excerpts:

“Section 8 of the Charter states: Everyone has the right to be secure against unreasonable search or seizure…The Impugned Provisions authorize both a search and a seizure…The plaintiffs and other reasonable hypothetical individuals have a reasonable expectation of privacy in their Accountholder Information…Canada pleads that because the plaintiffs and other US Persons have pre-existing obligations to report certain information to the IRS under US law, their privacy interest in that information is minimal…Canada cannot demonstrate that the searches and seizures authorized by Impugned Provisions are reasonable because (a) they are warrantless and lack any judicial supervision of any kind, (b) it is impossible to test their reliability in achieving their objective, and (c) they almost certainly capture an inordinate number of individuals who have no US tax and reporting obligations…”

— “The state objective underlying the Impugned Provisions is to assist the United States in implementing FATCA and finding US tax evaders and cheats.57 This is not an important Canadian objective.

— “Finally, the court should recognize a novel principle of fundamental justice that Canada will not deny its citizens the protection of Canadian sovereignty…the principle of non-intervention between states is a cornerstone of the international order and intrinsically connected to state sovereignty;88 it is undoubtedly considered by all Canadians to be fundamental to their notion of justice that Canada will not expose them to enforcement of another state’s laws…”

NEXT STEPS:

— Canada responds to our Memorandum of Argument by November 21, 2018.

— We reply to Canada by December 7, 2018.

— Trial is held in Vancouver beginning January 28, 2019

FATCA Repeal Update: The action to take right now!

From Global Advocate for the American Overseas, Keith Redmond is this important message:

ATTENTION AMERICANS OVERSEAS!

There is a SERIOUS bi-partisan push for an updated FATCA hearing to address the sharing of personal financial data and the lock-out of Americans overseas from foreign financial institutions (i.e. their local banks).

As a result of Suzanne Iclef Herman’s hard work and tenacity in establishing and cultivating a relationship with her Congressman and his staff, we have succeeded in building bi-partisan momentum in an updated FATCA hearing. Suzanne requested to Congressman Posey’s office that I get involved in order to have as many Americans overseas as possible contact their respective Congressmen/Congresswomen.

The attached letter has been sent to Members of Congress (MOC) in a bi-partisan effort to have the House Ways & Means Committee hold another FATCA hearing. In conjunction with the request, MOCs have been sent a letter (in the same aforementioned attachment) which each MOC can send to House Ways & Means Committee showing their support for another hearing. Americans overseas are asked to write their Congressmen/Congresswomen to sign the letter.

Therefore, I am requesting that you contact your Congressman/Congresswoman via e-mail and/or fax AND FOLLOW-UP WITH A TELEPHONE CALL.

I have attached the THREE STEPS to be taken in order to contact your representative via e-mail as well as the link to find your representative’s fax number. Please follow the instructions.

Continue reading FATCA Repeal Update: The action to take right now!

Legislative History Reveals FATCA Had Nothing To Do With Collecting Tax Revenue From U.S. Persons With Foreign Accounts Evading Taxes (Part I)

reprinted with permission from Tax Connections

Prior to the enactment of FATCA, Congress and the Executive were in possession of concrete-evidence revealing FATCA would fail to collect any meaningful amount of tax-revenue from U.S. persons evading tax through offshore financial center holdings. Congress should have halted enactment of HIRE – if in fact, FATCA’s purpose was to collect tax-revenue from offshore tax evasion by U.S. persons.

The United States Congress used estimates from the Joint Committee on Taxation (JCT) as the foundation for supporting the Foreign Account Tax Compliance Act (FATCA), contained in the Hiring Incentives to Restore Employment Act (HIRE).

HIRE was a tax expenditure designed to encourage U.S. small business to hire new employees. HIRE included two tax expenditures of note: a payroll tax exemption to employers and a one-thousand dollar tax credit for employers hiring employees between February of 2010 and January of 2011. [1] FATCA was included in HIRE because the tax revenue collected from FATCA was supposed to offset the tax expenditures authorized by HIRE. [2] The tax revenue FATCA was said to be targeting was from U.S. persons with foreign bank accounts who were evading tax.

In July of 2008, and around the time of the UBS scandal and the Global Financial Crisis the U.S. Senate Permanent Subcommittee on Investigations held a hearing and issued a report entitled “Tax Haven Banks and U.S. Tax Compliance”. [3] The underlying justification for FATCA as a substantial revenue raiser rested on a single statement found in a footnote in the 2008 hearing report: “Each year, the United States loses an estimated $100B in tax revenue due to offshore tax abuses.” [4] In a 2009 follow-up report, the Ways and Means’ Subcommittee on Select Revenue Measures held a hearing entitled: Banking Secrecy Practices and Wealthy Americans. During this hearing, the Senate increased the U.S. tax revenue loss-estimate by 50 percent stating: “Contributing to the annual tax gap are offshore tax schemes responsible for lost tax revenues totaling an estimated $150B each year.” [5] The estimates entered into the record during these hearings measured the offshore tax gap, or the amount of tax revenue[6] that would be collected if offshore tax evasion by U.S. persons holding foreign bank accounts was ended. One month, before HIRE was signed into law by President Obama, new evidence revealed the offshore tax gap was nowhere near as large as previously thought.

On February 23, 2010, the JCT released a report estimating that FATCA would instead, only collect $8.7B over ten-years or $870M per year; a huge difference from last-year’s estimate of $150B per year.[7] Assuming this latest estimate was accurate, the 2008 and 2009 estimates were drastically overinflated – to the tune of over $149B annually! At that point, a reasonable person puts on the breaks and asks questions. At the very least Congress should have engaged in some due diligence to determine why there was such a huge discrepancy. After all, there was plenty of time remaining on the legislative clock,[8] and the report invalidated the policy justification for FATCA. Instead, Congress and President Obama steamrolled FATCA into law in less-than a month after the JCT estimate – almost like, they wanted to hurry to get it in, before someone caught wind that the FATCA had nothing to do with closing the fictitious $150B offshore tax gap, because there was really no tax revenue outstanding. (Part I….To Be Continued)

*******

[1] The Hiring Incentives to Restore Employment (HIRE) Act of 2010 (Pub.L. 111–147, 124 Stat. 71, enacted March 18, 2010, H.R. 2847).

[2] HIRE was originally a $150B dollar incentive package, but the package was reduced to $15B before enactment. It would be interesting to take a look at the timing of the reduction in the HIRE economic incentive package (from $150B to $15B), and compare it with the JCT’s February 23rd estimate, to determine if the reduction in the spending package was a result of learning FATCA would not collect any meaningful amount of tax revenue from offshore accounts, because there was none to collect.

[3] Tax Haven Banks and U.S. Taxpayer Compliance, Senate Permanent Subcomm. on Investigations, Comm. on Homeland Security and Governmental Affairs, 110th Cong. (2008).

[4] Ibid.

[5] Banking Secrecy Practices and Wealthy Americans, Senate Ways and Means Subcomm. on Select Revenue Measures, 111th Cong. (2009). Emphasis added.

[6] In the U.S., we have a 1099 system, where banks are forced to report interest and dividends. Unless there is some income from the account, it follows that there can be no income tax due from that account. The way to determine whether there is income from an account is to require the accountholder’s financial institution to report on the income from the account.

[7] The 2010 JCT report estimate of $8.7B in offshore tax evasion tax-revenue to be collected over ten-years or $870M per year (median average). It should be noted that the report breaks down the estimate by year. Therefore the median average is not the best number to use in every case. Individual calculations based on empirical data from a particular year proving the current validity of the report will incorporate the amounts listed on the report for each relevant year in question to preserve the integrity of the proposition for which the calculation was intended to support.

[8] The House Ways & Means Committee held the Hearing on Banking Secrecy Practices and Wealthy American Taxpayers on March 31st, 2009. The House passed the original version of HIRE on June 18th, 2009. The JCTs estimate was released on February 23rd, 2010. HIRE passed the Senate the following day on February 24th, 2010 (with amendment). The House followed by adding an amendment on March 4th, 2010 (with amendment) which was approved by the Senate on March 17th, 2010. March 18th, 2010, President Obama signed HIRE into law, and thereby FATCA into law as well. Therefore, there was a full month from the time the JCT report was issued, and the day President Obama signed HIRE (containing FATCA) into law. (Part I….To Be Continued)

U.S., U.K., Canada, Australia and Netherlands form international tax enforcement group

According to an article by Michael Cohn in Accounting Today, a multi-lateral tax enforcement group has been formed. TThe Joint Chiefs of Global Tax Enforcement (or J5 for short), intend to “collaborate in fighting international and transnational tax crimes and money laundering.”

Membership of the J5 includes the heads of tax crime and senior officials from Internal Revenue Service Criminal Investigation (IRS CI), Her Majesty’s Revenue & Customs (HMRC) in the U.K., the Australian Criminal Intelligence Commission (ACIC) and Australian Taxation Office (ATO), the Canada Revenue Agency (CRA), and the Dutch Fiscal Information and Investigation Service (FIOD).

Leaders of the group met Thursday in Montreal to formulate their plans. The J5 plans to work together to gather and share information and intelligence, as well as conduct operations and build capacity for tax crime enforcement officials. Areas of focus include cybercrime and cryptocurrency, data analytics, and enablers and facilitators of tax crimes. The alliance will concentrate on building international enforcement capacity, as well as enhancing operational capability by piloting new approaches and conducting joint operations, to bring perpetrators who enable and facilitate offshore tax crime to justice

While it sounds like the planned operations will be aimed at bigger fish, what will be interesting to see is how Canada and the Netherlands proceed. Both countries have Mutual Collection Assistance provisions in their tax treaties with the U.S. (as do France, Sweden and Denmark) that indicate they will not collect from their own citizens if they were citizens when the tax was incurred. And of course, in the case of Canada, no collection of FBAR penalties. Unless I misunderstand, it sounds like the J5 intend to move into enforcement, which sounds like collection to me.

It appears that in addition to provisions in any number of DTA’s, we now have several “information exchange” programs/policies/statutes such as Foreign Account Tax Compliance Act (#FATCA) , the Common Reporting Standard (#)CRS and the OECD’s CONVENTION ON MUTUAL ADMINISTRATIVE ASSISTANCE IN TAX MATTERS . It is difficult enough to read ONE treaty and comprehend what is covered. How is one to evaluate ALL of the aspects that are touched upon by these different programs?

Up to now the one principle that protected one from extraterritorial collection was the revenue rule. A
paper I came across years ago (dated 2004) by Professor Vern Krishna was already predicting the fall of the “revenue rule.” This paper was written a few months after the U.S. passed the American Jobs Creation Act, (see page 154 from link) while removing the issue of intent* to avoid paying tax when renouncing, also created the notion of “tax citizenship.” When relinquishing or renouncing, the requirements of notifying the State Department and filing information with the IRS were added to the process. Four years away from the H.E.A.R.T. Act (the Exit Tax 877A) and 6 years from
H.I.R.E. Act ( FATCA).

In tax law, absent special enforcement treaties, sovereign countries do not enforce the revenue laws
of other countries (the “revenue rule”).

To overcome this rule, many countries negotiate bilateral treaties for information disclosure and
mutual enforcement assistance to counter tax evasion.

In theory, the common law revenue rule reflects the principle that a country has exclusive
sovereignty over its tax policy. However, Lord Mansfield’s rule has limited scope in a world of
increasing regulatory supervision and information exchange between countries on money
laundering and terrorism financing.

The traditional rule that a country will not enforce the revenue laws of another country
and that no country is under an obligation to disclose financial information to foreign governments is very much on its way to extinction.

What do you think? Will all these actions eventually result in a system where there are no privacy laws concerning one’s finances, every bloody dime one earns will be owed to someone as tax?

*****

*removed the intent issue of renouncing for tax purposes by establishing 3 tests (income, asset, certification of tax compliance for 5 years on form 8854) to determine

March 22, 2018 Canadian FATCA IGA Litigation in Federal Court Update: New Timetable

Canadian FATCA IGA litigation

UPDATE March 22, 2018

The attorneys for our side (our side are Plaintiffs Gwen and Kazia, the Alliance for the Defence of Canadian Sovereignty — the “client”, and our supporters) and the attorneys for Mr. Justin Trudeau’s Government have just agreed on the timing for the next steps of our Canadian FATCA IGA lawsuit in Canada’s Federal Court.

It is always possible that the Court might change some of the dates but here is the new timetable:

— Defence [the Government] evidence, except one expert report, filed April 16, 2018;

— Last defence expert report filed April 30, 2018;

— Notice of any objections to expert reports provided by June 15, 2018;

— CMC to discuss scheduling of any applications to strike all or portions of affidavits in

— Cross-examinations completed by July 31, 2018;

Plaintiffs argument served and filed by September 28, 2018;

— Defence argument served and filed by November 16, 2018;

— Plaintiffs’ reply served and filed by December 7, 2018;

Hearing the week of January 28, 2019, subject to the Court’s availability.

The key update is the hope/expectation that the Federal Court hearing will take place in January 2019.

Since the beginning of our lawsuit, many, many Canadian citizens (we have not been provided with the numbers) have been rounded up and turned over by Canada CRA to the United States IRS.

Yes, I know that our litigation has been moving at a glacial pace. Sorry…

FOI CHALLENGE – Calling all MODEL 1 IGA COUNTRIES

 


Over at FixTheTaxTreaty! we wanted to know how much FATCA data was
being sent from Australia to the IRS, so we submitted a Freedom of Information request to the Australian Tax Office.
We found that the numbers were much higher than we had expected. As much as 6%(!) of the non-retirement financial assets of Australian households and businesses was reported to the IRS for 2016, along with A$ billions in interest and dividend income.

by Karen Alpert

FATCA requires Australian financial institutions (very broadly defined) to report account holder details as well as account balance, dividends, interest and other income paid, and gross proceeds from sale or redemption to the ATO for transmittal to the IRS. It is evident from the graphs below that the amount of data going to the IRS has exploded since the initial data transfer of 2014 data (transferred 30 Sept 2015).

Once we had the data, we wrote a blog post and sent out a media release . The story has been picked up by the Sydney Morning Herald .Increased visibility of the sheer volume of data and exposure of local assets to US taxation can only help gain sympathy and support in the countries where we live. With this visibility, we can start to move the conversation to the costs and benefits of FATCA, and a discussion of how to protect the sovereignty of our home countries.

Clearly the IRS must be drowning in data. We would like to get a better idea of the global scale of this data dump. So, we’re challenging the rest of the world to try the same thing. If you live in a country with a Model 1 IGA (where the data goes to your country’s tax authority for transmission to the IRS), submit your local equivalent of a FOI request. Let us know in the comments at Fix The Tax Treaty when you submit your request and when you receive a response. If the response is not easy to analyse, we can help, just email us admin at fixthetaxtreaty dot org.

Taxation of #AmericansAbroad in the 21st Century: “Country of birth” Taxation vs. “Country of Residence” Taxation- Part I

 

cross-posted from citizenshipsolutions by John Richardson

Update January 2018: This post has been updated with some new links and discussion.

Prologue – The “Story Of The Century

Since July 1, 2014, the United States via threats threats of the FATCA Sanction, has begun a “world wide hunt” for people born in the United States
(or are otherwise deemed to be “U.S. tax subjects”). A compilation of my posts describing the mechanics, effects and costs of FATCA and the FATCA IGAs is available in “The Little Red FATCA Book“. FATCA has spawned litigation against both the U.S. and Canadian Governments. A discussion of the “Alliance For The Defense Of Canadian Sovereignty” FATCA lawsuit against the Government of Canada is available here. Some thoughts on the “U.S. FATCA Legal Action” lawsuit against the U.S. Government are here. Both lawsuits have been vigorously defended by the respective Governments. The U.S. lawsuit may have reached the end of its viability (lack of standing and various procedural issues). The Canadian lawsuit continues.

With respect to those “Born In The USA”, the U.S. legal “claim of tax jurisdiction” is two-fold:

1. Those born in the United States (unless they have relinquished U.S. citizenship” for both tax and nationality purposes) are U.S. citizens.

2. Citizens of the United States are subject to the provisions of the Internal Revenue Code regardless of where they live in the world. The Internal Revenue Code (“IRC”) includes but is not limited to the obligation to pay taxes according to U.S. tax rules. The “IRC” also includes a wide range of “penalty laden reporting requirements“. The “IRC” also strongly discourages (through penalties and sanctions) participation in non-U.S. pension plans, non-U.S. investments (including non-U.S. mutual funds), the use of “non-U.S. business corporations” and (incredibly) non-U.S. spouses. (Even the divorce of a U.S. citizen and non-citizen is likely to be significantly more expensive.) As a result, the “extra-territorial application of the “IRC”) has the effect of exercising U.S. “control” over the lives of it’s citizens who do NOT live in the United States. Therefore, it is clear that the “extra-territorial” application of the “IRC” both (1) imposes the full force of the “IRC” on the resident/citizens of other countries and (2) has the effect of imposing the U.S. cultural values mandated in the “IRC” on those other countries. One can identify a list of the “10 Commandments” which are imposed on Americans abroad in an FBAR and FATCA world.

(Note that with the exception of U.S. citizens and “permanent residents”, as per Internal Revenue Code Sec. 7701(b), an actual physical connection to the United States is required to establish U.S. tax residency.)

As the article referenced in the above tweet makes clear, many people “claimed” by the United States as “tax residents”have never had any connection to the United States except that they were born there. The article includes:

Awad Al-Zahrani, whose son has US citizenship, said he would give it up.

“My son got the passport since he was born there while I was studying in the country back in 2000. At the time, the Saudi embassy had told me that it would not be a problem for him to hold two passports. Now that we have to pay taxes, though, we’ll be giving the US passport up.”

Abdulrahman Al-Habib, head of journalism studies at KAU, argues that Saudis who were born in the US should be exempt from paying taxes.

“We should establish a unified center to help Saudis clear their former tax registers,” he said.

US Consul-General Todd Holmstorm,however, confirmed that US citizens should pay income tax and called on their international counterparts to help them eliminate tax evasion.

“The tax law is designed to combat evasion through increasing transparency in the financials of US taxpayers,” he said.

Mr. Holmstorm’s bio indicates that his career has had a Canadian connection in Ottawa, Canada. His comments in the above article imply that he believes that those (1) born in the U.S. who (2) do not live in the U.S. and (3) do not pay taxes to the U.S. are guilty of “tax evasion”. Strong language indeed. Yet, these are his words which clearly reflect the attitude and policy of the U.S. Government.

 
 

Treasury Department Responds, so to speak, to Rep Bill Posey’s #FATCA letter

 
Rep Bill Posey

Last September, due to the efforts of Suzanne Herman,
Representative Bill Posey (R-FL) sent an
excellent letter to Treasury Secretary Mnuchin,
asking him to deal with #FATCA.

 
 
This post included the text of the letter and some 60+ comments from Brockers. What Rep. Posey received is a stark contrast to the expectation expressed in this comment:

Bubblebustin says
October 16, 2017 at 2:12 pm

@plaxy

According to RO on its FB page:

“At Republicans Overseas’ request, RNC Co-Chairman Bob Paduchik personally delivered Rep. Mark Meadows’ and Sen. Rand Paul’s joint letter on the Foreign Account Tax Compliance Act to Treasury Secretary Steven Mnuchin’s office. Secretary Mnuchin is fully aware that 9 million overseas Americans have been suffering under FATCA tyranny.

As a result, FATCA is included in the 2nd Report to the President on Identifying and Reducing Tax Regulatory Burdens by the Treasury (https://www.treasury.gov/press-center/press-releases/Documents/2018-03004_Tax_EO_report.pdf).

In the report to the President recommending actions to eliminate or mitigate burdens imposed on taxpayers by eight specific tax regulations, the Treasury indicated that it is considering possible reforms of regulations issued pursuant to FATCA. Thank you Co-Chairman Bob-Paduchick.

This is the response Rep. Posey received from the Treasury Department:
 
 
clean letterhead  treasury
 
November 8, 2017

The Honorable Bill Posey
U.S. House of Representatives Washington, DC 20515

Dear Representative Posey:

Thank you for your letter regarding the Foreign Account Tax Compliance Act (FATCA). As you are aware, Congress passed FATCA legislation in 2010 to strengthen the integrity of the U.S. voluntary tax compliance system and to combat the use of foreign financial accounts and foreign entities to facilitate tax evasion. FATCA provides the IRS with information about U.S. taxpayers’ use of foreign financial accounts and certain higher-risk foreign entities, so that these foreign accounts and investments are subject to disclosure to the IRS, similar to the disclosures for accounts and investments held or made inside the United States that the IRS already receives.
Continue reading Treasury Department Responds, so to speak, to Rep Bill Posey’s #FATCA letter