cross-posted from Tax Connections

UPDATE February 2,2018
For more on how an expat can have higher U.S. taxes than a comparably situated Homeland American, please see here.
 
After the latest IRS Medic podcast, Tax Connections published a post by Anthony Parent.

Perhaps the most unifying statement of the post is:

A part of our interview that really stands out to me is when Attorney Richardson referred to the current system of global taxation and compliance as immoral.

John Richardson answers:

 
With the respect to the following excerpt as evidence of the “immorality”:

“Taxes due are usually nothing because of the foreign income exclusion and foreign tax credits or incredibly high because of that the type of income is one that was disfavored by Congress.”

Two general thoughts:

1. It is true that many Americans abroad do not have to send a check to the IRS to pay U.S. taxes. This does NOT necessarily mean that U.S. tax is not owing. Remember that FTCs are a mechanism to pay taxes that ARE ACTUALLY OWED. One pays a tax that would otherwise be owed by using the FTC. What is astonishing about the situation of Americans abroad is that:

Absent the tax mitigation provisions afforded by the FTC rules and the FEIE (“Foreign Earned Income Exclusion”), their U.S. tax bill might be higher than the tax bill of a comparably situated Homeland American!! In other words, the rules of the Internal Revenue Code operate so that Americans abroad (because they have a non-U.S. financial footprint) will have higher U.S. taxes than a comparably situated Homeland American.

A good example of this would be the sale of a principal residence. The fact that their mortgage is in foreign currency frequently means that Americans abroad would pay a tax on the sale of the principal residence even if there is no capital gain on the property.

2. Americans abroad are subject to all kinds of things that I would call fake income. Again this is due to the fact that they live outside the United States. I define “fake income” as income that is specifically created where there really isn’t any. Examples would include:

– phantom gains on foreign currency transactions (see the example of the discharge of the mortgage above)

– Subpart F income because they carry on business through small business corporations that are in their country of residence (but foreign to the USA)

– PFIC “taxation” (interpreted to apply to non-U.S. mutual funds)

– the consequences of using the “married filing separately” category (because they are frequently married to non-U.S. citizens)

– more expensive divorce (because of the rules governing marriage to a non-U.S. citizen)

– and probably more

The bottom line is this:

U.S. citizens who attempt to live outside the USA will be punished for it by the Internal Revenue Code.

cross-posted from citizenshipsolutions

by John Richardson

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

Part I is here.

Part II is here.

Part III is here.

Part IV is here.

*******

Taxation of #AmericansAbroad in the 21st Century: “Country of birth” Taxation vs. “Country of Residence” Taxation- Part V (Final)

What the U.S. calls citizenship-based taxation is actually a U.S. claim that it has the right to impose “worldwide taxation” on the residents and citizens of other countries.

Specifically the U.S. claims the right to impose taxation on:

1. Who: residents and citizens of other countries; and on

2. What: income earned in other countries or property situated in other countries.

(The U.S. also taxes U.S. corporations on profits earned in other countries when those profits are taxed by those other countries. This has led to “inversions” which are the corporate equivalent to renouncing U.S. citizenship. Note that the 2017 “Tax Cuts and Jobs Act” has resulted in “partial territorial taxation” for certain U.S. corporations.)

Under the guise of what the U.S. calls “citizenship-based taxation, it actually taxes people who are neither U.S. citizens nor people with an actual residential connection to the United States and are “tax residents” of other countries.

The two obvious examples are:

A. Permanent residents of the United States (AKA Green Card holders) who do NOT live in the United States (having either moved away or in some cases having never moved there – see the story of Gerd Topsnik); and

B. Non-citizens who are NOT Green Card holders. The obvious example are people who have lost their U.S. citizenship for immigration purposes but are still treated as taxable U.S. property for tax purposes. The S. 877A Expatriation rules clearly contemplate this reality. Furthermore, there are certain U.S. tax treaties that specifically allow the U.S. to tax people who were but are non longer U.S. citizens. (Furthermore, the “savings clause” found in all U.S. tax treaties “saves” the right of the United States to impose full taxation on its citizens.)

My point is that the U.S. has long since separated the idea of being “taxable U.S. property” from being a U.S. citizen for nationality purposes.

Therefore, although birth in the U.S. makes one a U.S. citizen, a U.S. birth should NOT make one taxable U.S. property for life. Surely citizenship should mean more than taxation.

The U.S. is laying claim to people because they were born in the USA. There is no reason why it has to. They just do it because they think they can. The U.S. is the only developed country in the world that attempts to control the lives of its citizens (under the guise of taxation) when they move from the United States. This is an intolerable and grossly unfair policy.

The discussion and debate at the Toronto Conference on “U.S. Citizenship-based taxation” demonstrated that citizenship should be neither a necessary nor a sufficient condition for taxation. Taxation should be based on some kind of voluntary connection to the United States. It is submitted that those in Categories:

(A) Border babies

(B) Those who move from the U.S. with their parents as children

(C) Those non-U.S. residents who were born outside the U.S. to U.S. citizen parents

(D) People who left the U.S. as young adults, have never returned to the U.S., and have accumulated all of their economic assets outside the U.S.

do NOT have any connection to the U.S. that could possibly justify U.S. taxation. In each of these cases, taxation is NOT based on a connection to the U.S., but only on the circumstance of a U.S. birthplace! Can it really be that the United States of America is the only advanced country in the world where:

The circumstances of your birth determine the outcome of your life?

To tax those who are not residents of the United States solely because they were born in the United States:

Is unjust and is inhumane. People do NOT choose where they were born!

What about the person in Category (E) above? This is the U.S. citizen and resident who leaves the United States temporarily with the intention of returning. This is the ONLY kind of U.S. citizen that could rationally be subjected to U.S. taxation while living temporarily outside the United States. But, to tax even this person is incompatible with the realities of the modern world.

Citizenship imposed vs. citizenship chosen

The current practice of U.S. “place of birth taxation” is much more analogous to a “property interest” that a country has in it’s citizens than a voluntary commitment to the engagement that should characterize good citizenship. It is respectfully submitted that “citizenship” should imply a voluntary connection to a country and not a form of “ownership” where the citizen exists only to serve the government.

John Richardson

 

The following comment appeared today at Brock. It is unbelievably shocking to see how this miserable situation is evolving-I have yet to hear anything like this. We have reached out a couple of times to try and link to the expat community in Mexico without results. I guess back then, this situation had not yet fully developed…………

escaped slave says
December 3, 2017
To whom it may concern, at,
calgaryfouroneone at gmail.com
and at, isaacbrocksociety.ca

¡Hola community!

Thank you for your fight against CBT on behalf of my family and those throughout the world who this affects. I will not sign any petitions until my minor children have renounced, but I would like to add a concept that so far, may not have been addressed in your UN human rights violation complaint and this is the purpose of my message.

Some Background on my grievance –

My family and I live in Mexico, a developing country. You may or may not know that since candidate Trump was put fourth, the Mexican peso nearly crashed against all currencies. It was already on its way down due to the price of oil declining, but when President Trump was sworn in, the peso value compared with the USD literally crashed. Its current more stable rate (for now) remains a 75% devaluation against the USD since before candidate Trump tossed in his hat to run for president in late spring of 2016. With this said, I am not making any statement for or against President Trump, but how his presence in politics has affected the exchange rate between the Mexican peso and the US Dollar.

Mexico, as you know is the birthplace of many immigrants (tens of millions) that have entered into the USA over the last several decades. Many immigrant Mexicans were born here (not in US) and are living illegally in USA. They are working in USA and most are paying into employment taxes, sales taxes and social security, disability, state, local, etc unless they are being paid under the table in cash. Many of these same people brought small children with them who have now grown up in the USA and are referred to as “Dreamers”. Many of these Mexican immigrants and dreamers have themselves given birth in the USA, making their children US citizens.

Mexican immigrant workers are an important labor pool in the USA used to fund social current and future security recipients while these same Mexicans, mostly young adults, will likely never see any of the benefits that the current generation of recipients enjoy. Young USA people have not kept up the birth rate to maintain and care for the aging “baby boomer and silent” generations. Low paid unskilled immigrant populations working in the USA have been introduced to boost the birthrate (future taxpayers).

The threat of deportation weighs heavily on on undocumented Mexican USA families who have established roots in their communities. The Mexican government has actively pushed its citizens into going up north where “they will make a better living”, and will be able to “send money to their family in Mexico”. The decades long push to the north has been caused by neoliberalism, regional violence, land disputes, a horrible education system, a huge wealth disparity, corruption and a decades long weak national economy (mostly due to NAFTA). Dollars that are sent South from the USA into Mexico are called remittances here or “remisas” and this money is the SECOND most important contributor to the Mexican economy. International financial institutions enrich themselves greatly on these one way cross border wire transfers, on the backs of poor working class immigrants.

Mexico’s elite NEED this money to keep coming because it has so far prevented widespread civil unrest. Mexico’s elite own ALL forms of the media and continue to push this very visible and viable option on its young people to “leave Mexico” and settle in USA (now Canada!) if they want a better life. Our own government and corrupt elite have failed to warn our young citizens as to what will happen after they become owned by the IRS. Thousands and thousands of young Mexicans receive no advice and no help with such important facts that are for all intents and purposes being hidden from their view; just “go North and send us the money!”

This dangerous programmed sentiment to go north where there’s “more money and freedom”, is pushed endlessly in telenovelas (Mexican soap operas), children’s shows, in the “news”, blogs, advertisements, social media and the like. When the deported come back to live in Mexico, either self deportees or forced deportees, those with obvious US indica showing they were born in USA will be screwed. At this point in time, very few have comprehended this serious life-changing concept, very few are bilingual and can follow isaacbrocksociety.ca and the other information that’s out there.

The Human Rights Violation Related in Mexican Terms –

In Mexico, the minimum wage has just risen to $88 Mexican pesos per day. Even this small increment of less than 8 Mex pesos has caused our central banker, Augustin Carstens to say that we are likely to see an economic recession and inflation for 2018! Everything in Mexico revolves around the federal minimum wage. All laws, fines, tariffs, fees, appraisals and the like here are based on and state the number of work days at the federal minimum wage as to what they cost. Most productive (sane) people in Mexico are small business owners, because they know that they will never “get ahead” on this embarrassingly low minimum wage AND in addition~ in Mexico it is widely practiced and LEGAL to discriminate based on AGE (and sex, and marital status, and looks!) for hiring. Most people once they reach 35 years of age are unemployable unless they posses a highly sought-after and marketable special skill.

Considering all that I have written, my family’s input to the UN complaint is how the US state department is violating every Mexican citizen’s human rights! Here’s why ~

For a Mexican to pay the $2,350 US Dollar renunciation fee as a worker being paid the federal minimum wage of $88 Mexican pesos (which is is LESS THAN $4.88 US Dollars) .… It will take

481 and a half days of full time work!

If they also need to eat, pay rent/housing, school fees, pay for basic medical expenses then of course it will take much longer to pay the renunciation extortion. Imagine, regular Mexicans being ENSLAVED for 481.5 days of their already difficult lifetimes to pay an inhumane and probably internationally illegal extortion fee to imperialist USA!

ONE AND ONE THIRD YEARS!!!!! Of SLAVERY to pay the US Government to be FREE again! Slavery is a violation of human rights and this is our complaint, one and one third YEARS to pay this onerous and unjust renunciation fee. We refuse to be enslaved any longer.

I thank you for your time in considering this and perhaps using this information to help add evidence to the US human rights complaint.

Thank you Canada and isaacbrocksociety.ca

Addenum –

PLEASE DO NOT consider this a “heartbreaking letter” because it is not. This letter is intended to strengthen the UN human rights complaint. Thank you!

 

cross posted from Association of Américains Accidentels

Let’s Unite to Defeat FATCA!

The “Association of Américains Accidentels” (Accidental Americans Association) is a legally formed entity under the French law of 1901.

Its aim is to defend and protect Franco-American binationals against the nefarious effects of FATCA. The consequences of this Inter Governmental Agreement (IGA) between France and the United States have been manyfold and tragic for binational citizens: French banks have refused to open accounts or have closed them, payments of inheritances have been suspended, insurance policies and mortgages have been cancelled among other bureaucratic hassles binationals have had to endure. This has resulted in feelings of great anxiety, anger as well as the feeling that French Authorities has abandoned them to their fate.

The Association has two goals: First, to seek legal opinions in French, European and International law to defeat FATCA in France or better yet in the European Union altogether and secondly to undertake the necessary judicial actions to exclude binationals from the FATCA IGA’s once and for all. Preliminary conversations with highly qualified lawyers have been promising and we think that there may be solid legal grounds to achieve this goal whether at the French or European Union level or both. But legal opinions by good lawyers are not free.

To this end we have started a fund raising drive and we need you.

In advance, many thanks for your help and Let’s Unite to Defeat FATCA!


 

Fabien Lehagre
Président de l’Association des Américains Accidentels (AAA)

DONATE


Published on Jun 6, 2017
1ère réunion de l’Association des Américains Accidentels le 29 avril 2017 à Gourin (56).
Les Américains « accidentels » ont répondu à l’appel de Fabien Lehagre qui a lancé son collectif qui regroupe ces Franco-Américains, nés sur le sol français d’au moins un parent américain ou nés sur le sol américain d’au moins un parent français. Les États-Unis, ils n’y ont passé que quelques semaines ou quelques années d’enfance…
Et pourtant, depuis 2014, le fisc américain leur court après. Depuis que la France a signé avec les États-Unis l’accord Fatca, qui oblige les banques françaises à transmettre les informations bancaires de leur client présentant un « indice d’américanité » à l’IRS, le fisc américain.
Depuis, ces Américains Accidentels subissent une effroyable injustice…

 


 
This post is based upon a comment made at the Isaac Brock Society concerning American Citizens Abroad’s new (Febrary 2017) proposal on replacing citizenship-based taxation with residency-based taxation.

See the bottom of the post for information on how you can join the discussion.
 
carve out
 
USCitizenAbroad says:

The ACA proposal is painful to read. But, it is an opportunity to dialogue with ACA and others who are engaged in the process of tax reform and its application to Americans abroad. I wonder if a separate site/Facebook group or something could be dedicated to the specific issue of “Tax Reform and Americans Abroad”. But, anyway …

The specifics of the proposal are a diversion from what I believe is the real issue. The real issue is the assumptions that ACA (and to be fair) the vast majority of Americans abroad bring to the table.

ACA proceeds from the operating assumption that American citizens are nothing but slaves to the U.S. Government and the IRS. ACA has absolutely bowed down to the United States of America and acknowledged the absolute servitude of Americans to Congress and the IRS. ACA has done this NOTWITHSTANDING THE FACT that most Americans abroad do not (and apparently will not) file U.S. taxes, FBAR and the other components that have stripped Americans of their liberties. (Donald Trump would probably say that those who do not file are “smart”. Why? Because the rules of U.S. style CBT are so punitive that in most cases it is safer to not file at all. Well, assuming you can even understand what is asked of you.)

Because ACA begins by accepting the principle of slavery, they then begin by asking for a “carve out” for certain slaves. These are slaves who have been particularly good and compliant slaves. The principle of “carve out for exceptional slaves” was last seen in the FATCA same country exemption proposal.

Understand the following two points:

1. FATCA SCE was a proposal that was absolutely in support of FATCA, but asked for an exemption for ONLY those Americans abroad who could demonstrate compliance with their tax slavery.

2. The current proposal (RBT not) ABSOLUTELY ACCEPTS CBT AS THE OPERATING PRINCIPLE, but asks for an exemption for those who have been particularly compliant with CBT. Because of the emphasis on “compliance, compliance, compliance” there is NO relief for Accidental Americans (and similarly situated people). The proposal makes NO mention of dual citizens and to what extent dual citizenship should play a role. As the Titanic is going down, ACA is proposes to save “tax compliant” (the good slaves) Americans from going down.

To be clear (as the “Change you can believe in” guy used to say):

This is NOT a proposal for residence-based taxation. This is a proposal for “taxation-based citizenship” with an exemption for certain groups of people. Therefore, under NO CIRCUMSTANCES should this be referred to as an RBT proposal. This is a proposal to worship at the altar of taxation-based citizenship, but exempt the “high priests” from the burdens.

That said, as a practical matter, if you can fit yourself into the one of “taxation-based citizenship” exemptions, it does provide benefits. But, as @Eric notes, this proposal will institutionalize “taxation-based citizenship”.

More, on the specifics later.

FURTHER INFORMATION ON THE ACA PROPOSAL AND DISCUSSION:

The document is here
 
Discussions are happening at Brock and
at the ACA Facebook page
https://www.facebook.com/americancitizensabroad/posts/10154429235779072
 
ACA is soliciting everyone’s questions and comments and ADCT encourages ALL expatriates, their families and friends (especially if living in the Homeland) to read the proposal and to provide feedback

info@americansabroad.org and/or

here

 
 
I originally wrote this piece over a year ago. It comes to mind when considering the hideous practice of citizenship-based taxation. No other country on earth practices this archaic concept and without a doubt, the enforcement of #CBT since 2008 and onward, most definitely has resulted in the new movement of renunciation of American citizenship.

Recent discussions with a friend have me wondering whether Americans abroad are indeed the “property” of the US government. At first I considered this a bit exaggerated but am coming to appreciate that there is a great deal of truth in it. Perhaps reflecting a bit on the past might provide valuable insight on how we might approach this ongoing, changing situation. The idea that a human being could be considered “property” is initially strange to me. The only obvious parallel would be that of being a slave. In spite of growing up in a somewhat racially-tense city, I was largely unaware that the very foundation of the U.S. included slavery. I was 10 years old in 1965 when the riots in Watts occurred. Two years later, there were 159 riots during the “Long Hot Summer of 1967. The next year, following the assassination of Dr Martin Luther King Jr, more riots. By then I was 13 and able to understand some of the reasons: poor schools, lack of employment, overcrowding in filthy ghettos, pollution, discrimination by police, etc. MLK described it as “humiliation for decades, for centuries.” Along with the other assassinations, Vietnam, etc, it did not yet occur to me that the problem was rooted in a very underlying hypocrisy. In spite of the U.S. being the “Land of the Free and the “American Dream” supposedly available to all, the fact was the U.S. was a place where gross abuse of human “rights” was visible in daily life as long as I had been alive.

There are some interesting CBC Radio “Massey Lectures” given by Dr. Martin Luther King Jr that John Richardson wrote about recently on the ADCS wordpress site. As I listened, I was struck by the fact that intellectually, it was obvious enough that “rights” had been violated in a perverse way for so long. But I was more horrified by the immorality of it. I was much too young to really appreciate what he was and am overwhelmed by his intelligence, clarity and devotion to non-violence. The issue of race in America is clearly an ethical issue, no doubt about it. One could go on and on about social, economic and other mitigating factors but at its root, the problem truly is that one group of human beings is denied the basic respect, dignity and consideration others receive due to discrimination of what they are from birth. The recent incidents in Ferguson, Cleveland and other cities show not much has changed in the last 50 years.

I was taught that America was born due to the brave actions of those who left England because of persecution due to religious beliefs; later attempts to tax the colonists who had no representation in the parliament etc. In recent years, having learned my ancestral roots, I have been proud of the fact that my family has played an integral role in that beginning. Yet at the same time, for the last three years, experience of the treatment at the hands of the US government definitely casts a different light on it. Americans abroad (and even people who are not truly “American”) are not given the same respect as those who live in the Homeland. What’s at the root of this? Does the U.S. view us as if they “own” us? Are we their property and are we not free to leave the country? We may be able to buy our way out but fundamentally, what difference is there between that and a slave from the past doing the same? In the modern world there is a tendency to minimalize emotional or mental suffering as if it is not valid since it is not as severe as say, physical torture. That may be true to a certain degree yet I fail to see how that removes the immoral forces that can be responsible for both. In fact, the only way to see it may be to draw parallels between them.
Continue reading “Is an American a Piece of Property?”