Hands Down this is the Worst Academic Piece About FATCA ever Written

 

 

Profesor Paul Caron, on his TaxProfBlog posted the following article:
CONSIDERING “CITIZENSHIP TAXATION”:
IN DEFENSE OF FATCA
20 Fla. Tax Rev. 335 (2017):
by Young Ran (Christine) Kim

 

If any description could possibly be demonstrated over & over in this piece it would be the term “offensive.”  I confess to a hard-edged bias against academia, likely for the same reasons as most people; i.e., the rather noticeable and consistent lack of everyday common sense. Even in my own field (piano performance, where a doctorate is called a DMA not a Phd) there is a prevalence of people who may be perfectly schooled in the accuracy of Baroque ornaments, precise methods of articulation in Classic-period pieces or any number of other tedious accomplishments yet their actual playing (which is the whole point of a performance degree vs an academic one) is so devoid of vitality and inspiration it is enough to make one weep. I don’t know if the same exists in all disciplines but one thing that does apply here is a complete (and I mean complete) lack of awareness on the part of the author, of the harshness of how these theories play out on the lives of REAL people. What would make much more sense would be to address these problems head-on rather than justify “concepts” through a lot of theoretical jargon.

 

The following comment says it well:

 

The people affected by “citizenship-based taxation” are U.S. citizens and Green Card holders who live outside the USA and are “tax residents” (and often citizens) of other nations. The paper discusses (sort of) “citizenship-based taxation” as an abstract concept without considering the brutal effects that it has on the people subjected to it. The acknowledgement of the difficulties with pensions, retirement planning, foreign spouses, mutual funds, CFC rules, etc. (the reality of citizenship taxation) is most notable in its absence. And no, FBAR and Form 8938 (as obnoxious as they may be) are reporting requirements and not the specific tax rules (PFIC, etc.) that affect Americans abroad. I suspect that this paper will be subjected to the criticism that it so richly deserves.

Posted by: John Richardson | May 26, 2017 1:14:02 PM

While this criticism can be equally leveled at the members of Congress who passed FATCA, the Treasury Department personnel who wrote the regulations and last but not least, the heartlessness of many tax compliance practitioners, there is something especially repugnant about those pontificating from their ivory towers, proclaiming that FATCA, citizenship-based taxation, global transparency and all the rest of it, are worth the grief being caused.

Ms Kim indicates her paper finds its origins in Ruth Mason’s recent article, Citizenship Taxation, [89 S. Cal. L. Rev. 169 (2016),

A major difference between the two is that Ms Mason basically sees citizenship taxation in a negative light while Ms. Kim attempts to find it as a natural basis to support FATCA.

She addresses three main arguments; the fairness argument, the efficiency argument and the administrative argument.
 

I.) THE FAIRNESS ARGUMENT

 

Individual taxpayers’ obligations to file Foreign Bank Account Reports (FBAR) or report under the Foreign Account Tax Compliance Act (FATCA) are not seriously onerous. The fact that citizenship taxation along with FBAR and FATCA enhances global transparency further supports the case for citizenship taxation……..because the rules have been improved through various exceptions and substantially high reporting threshold amounts.

Ms. Kim asserts that the obligation to file FBARS is not “seriously onerous.” The very real threat of a non-willful penalty of $10,000 per account per year (or worse for “willful) is certainly enough to strike the fear of God in even the most reticent individual. The idea that this reality is not considered when evaluating FBAR is beyond reasonable. Articles about FATCA often cover only the reporting done by the FFI’s. However, the other component is the requirement to file 8938’s which duplicate information from the FBAR and can incur serious penalties. The average person is not able to complete an 8938 and will have to pay to have a professional do it. Nowhere in this article does the author address the issue of compliance costs for individuals which can easily be $2500 a year for someone owing no tax and involve 50 or more pages of returns. Not onerous? Furthermore, there are simply NO FIGURES yet, to make any claim that FATCA “enhances global transparency.” Professor William Byrnes describes
the oft-quoted figure of $10 billion. This amount has absolutely NOTHING to do with FATCA; it is largely comprised of penalties and interest collected through the OVDI programs (and does not even represent actual tax recovered). While the FATCA thresholds are higher, please, the threshold for FBAR remains at $10,000, the same figure when the Act was created in 1970 – 47 YEARS AGO!
 

FOCUSING ON THE ABILITY TO PAY PRINCIPLE

First, consent theory argues that taxing nonresident citizens is justified because retaining citizenship represents consent to such taxation.

 
One cannot consent to something one doesn’t even know about. Is the author completely unaware of the history underlying the persecution of expats once Treasury/Justice went after the Swiss banks in 2008? There are still likely more Americans abroad who remain unaware of the obligation to file taxes and worse yet, the oppressive information returns with penalties simply for not filing a piece of paper (i.e. no tax due). For those who do know and who retain citizenship, keeping it is much a matter of confusion and fear and could hardly be described as “consenting to taxation.”

 

Second, benefit theory attempts to justify citizenship taxation as an obligation of nonresident citizens in return for the benefits they receive from the government.

This argument is so ridiculous at this point it is hard to believe it remains part of the discussion. Cook v Tait is nearly 100 years old and does not address the large changes globalization has produced. There is the endless  nonsense of hearing how “The Marines will come to rescue you,” after which you receive a full bill. How many living in first-world countries have any need for “rescue?” And last but not least we “owe” the U.S. for consular services (for which we pay, dearly in the case of renouncing – $2350 or $50 USD to notarize a single page). All tiresome and nowhere near justifiable for being taxed “the same” as Homelanders.

 

Third, social obligation theory

the underlying assumption of this theory is that people have an obligation to pay taxes to support the members of the society to which they belong in accordance with their ability to pay taxes, which should be measured by their worldwide income.

I remember my reaction to Prof Michael Kirsch’s comments (at the ACA Program in Toronto, May 2014, “CBT vs RBT”)regarding polity and such. It seemed ridiculous to me to consider those of us living outside the United States as being a member of that society in any meaningful way. In my own life, now 35 years outside the U.S.(over half my life), the only times I identified as a “member ” of U.S. society was when defending against strong anti-American sentiment (the first few years away) and national tragedies such as 911. I cannot see any way that those infrequent occurrences defined me as being an American more than being a Canadian.  I would say a more meaningful and valid way to apply the social obligation theory is whether or not I support policies that promote the social welfare of those around me, whether or not I give the homeless guy I see everytime I go to the bank, a bit of money so he can buy some lunch. IOW, except in an idealistic or nostalgic way, one can really only measure his/her “social obligation” based upon what they come face-to-face with, i.e., where they live.

 

Due to the different factors affecting the ability to pay, such as difference in the standard of living or amenities between places, “it would be fairer to calculate a person’s ability to pay by reference to the place where she lives rather than to the place where she holds her citizenship.”

“actually tax them alike,” which would require the repeal of the foreign-earned income exclusion and the allowance of unlimited foreign tax credits, including foreign consumption taxes, as well as the implicit taxes and subsidies to compensate the differences.

 

While all expats readily understand the reality that they are NOT “taxed the same” as Homelanders, the idea of being able to adjust all these factors to the number of foreign countries with all the differences in structure etc., absolutely discourages any realistic notion that this could ever be accomplished. Current retirement-oriented plans such as the Australian Super; the lack of recognition of tax-deferred vehicles registered by governments being treated the same as their US equivalents; requiring capital gains tax on the sale of principle residences which are tax-free in the countries where they are located ; and above all else, the obscene “savings clause,” all speak to the built-in bias the US has for anything “foreign” and its pronounced tendency to punish people for making use of non-US instruments. Add the effect of the Patriot Act, which makes it impossible to even open a US account with a foreign address and a non-resident American understandably lacks the will to try and weave one’s way through all these complicated, impossible-to-delineate requirements and procedures. The fact that the IRS does not clarify ambivalent sections such as §877A as well as the fact that no two compliance professionals can be counted on to give the same opinion is proof positive that disparate tax systems simply cannot be adjusted “fairly.”
 

when its critics condemned the new obligations to file FBARs and FATCA as an excessive compliance burden for nonresident citizens created by the Bank Secrecy Act.

There are no “new” obligations to file FBARs; they have been required (and unenforced) since 1970 and are part of Title 31. FATCA was NOT created by the Bank Secrecy Act. It comprises part of the H.I.R.E. Act (2010) and is part of 26 U.S.C. § 1471–1474, § 6038D.

II.) THE EFFICIENCY ARGUMENT

citizenship taxation may distort both Americans’ and non-Americans’ citizenship decisions, is not convincing

American citizenship renunciation rate is not particularly serious compared to other countries

residence-based taxation confronts an additional hurdle on top of enforcement difficulties: determining the residence of the individuals. Determining residence by considering all facts and circumstances creates problems beyond enforcement difficulties. The facts-and-circumstances test itself contains inherent problems when compared to a bright-line test

….and to what extent renunciation is treated as immoral and/or illegal, and so on.

The idea that citizenship taxation does not affect the decisions of Americans abroad concerning their citizenship is patently absurd. Without question, citizenship taxation IS THE MAIN REASON anyone renounces. Not because of tax per sé (don’t even think of trying to scare with the Reed Amendment) but rather, due to all the complications of trying to match two different tax systems. Add the non-financial issues such as the stress on marriages (to “aliens”), passing U.S. citizenship on one’s children, etc. etc. It has become a nightmare not worth living and something to escape if one can.

Ms. Kim devotes a long section to establishing the idea that the renunciation rate of U.S. citizens is “not particularly serious.” Again, we have someone indicating that unless the numbers are large, whether compared to that of other countries, the proportion of renunciations to the numbers of those abroad or to the number of entering immigrants, there is nothing being lost here. If that is the case, then the U.S. has virtually nothing to lose by simply letting these people go without all the forms, swearing under penalty of perjury and so on. One might occasionally consider that Americans abroad were once the best ambassadors the country could have. Now those tables are turned and some are more anti-American than any “alien” could ever be. Nothing like betrayal to warm the heart.

Regarding determination of residency, it is interesting that all 191 other countries of the world are able to surmount this difficult obstacle, which will be even more pronounced once CRS is operative. The “bright line test” which I presume means using citizenship rather than residency to base reporting on, is not truly useful given the fact that only the U.S. (Eritrea does not count) does this. When a U.S. citizen is living abroad with dual citizenship, with no determinant indicia, ask any bank how easy it is to establish whether or not one is a U.S. citizen. If it were clear, one would not see so many institutions refusing to serve Americans.

The Expatriation Act of 1868 gives all Americans the right to give up their citizenship if they so desire. It is not an issue of illegality. When a country treats its own citizens in the manner we have experienced from 2009 onwards (particularly the Accidental Americans who are not American in any normal understanding of the term), who is there to even suggest renunciation is immoral?

III.) THE ADMINISTRATIVE ARGUMENT

ENFORCEMENT DIFFICULTIES

Citizenship taxation has been criticized as difficult to enforce on nonresident citizens abroad….Determining residence by considering all facts and circumstances creates problems beyond enforcement difficulties

Next to failing to point out the outrageous 30% withholding “sanction” inflicted on every other country of the world, this has to be the weakest argument in this paper. The fact that the U.S. cannot effectively collect anything outside of the country is the number one reason people feel safe in remaining “under the radar.” After the initial scare of 2009/2011 seeing that the people hurt the worst were those who tried to do the right thing, people started considering the reality that being identified (“caught”) may amount to virtually nothing for a number of reasons. First of all, the majority of expats who are not compliant are NOT wealthy tax cheats with foreign accounts in order to deprive the U.S. of tax revenue. They are first of all, compliant where they live, which speaks volumes. Secondly, they have these “foreign” accounts in order to live their lives. This is in no way comparable to Homelanders who are guilty of tax evasion when they stash money in tax havens (and let’s not forget Delaware, Nevada, South Dakota and Wyoming, shall we?). The Revenue Rule still stands; even the 5 countries with Mutual Collection Agreements (Canada, Denmark, Sweden, France and the Netherlands)WILL NOT collect on those who were citizens of their countries at the time the tax was incurred. Canada WILL NOT collect FBAR penalties. With regard to fear about crossing the border, if one is not in the U.S. system, there is nothing for the IRS to report to DHS or CBP etc. All these things may change over time but as it stands now, the most IRS can do to most people, is send them a letter asking them to pay. EXACTLY WHAT IS THE POINT OF HOLDING ON TO CBT IF THERE IS NO WAY TO COLLECT?

Is the Compliance Burden Actually Onerous?

the IRS has provided the OVDI that a U.S. taxpayer can utilize to avoid criminal sanctions for the failure to report the existence of, and income earned on, a foreign account on tax returns as well as for the non-filing of the FBAR. In exchange for avoiding criminal sanctions, taxpayers will generally be subject to a 27.5% penalty on the highest aggregate value of their undisclosed offshore assets.86 In addition, for non-willful violators, IRS provides Streamlined Filing Compliance Procedures (SFCP), a program that was expanded in 2014 to cover a broader spectrum of U.S. taxpayers residing abroad and to provide penalty relief. Therefore, nonresident citizens who no longer have a strong economic and social connection with the United States or happenstance Americans are no longer likely to be subject to the severe FBAR penalties.

To suggest that OVDI and Streamlined “make everything alright” is to avoid the real issue altogether which is that citizenship taxation is simply wrong. No other country on earth “claims” its citizens for life. (Eritrea does not count). No other country on earth taxes its citizens after they abandon residence. No other country on earth applies an Exit Tax on assets that were acquired prior to obtaining residence in that country. There are reasons why no other countries do any of the things associated with citizenship taxation. It’s high time the United States stop this appalling abuse of human rights.

THIS ARTICLE FURTHER AIMS TO DEFEND the administrability of citizenship taxation in conjunction with the Foreign Bank Account Reports (FBARs) and the Foreign Account Tax Compliance Act (FATCA).

FBAR-absolutely not the way it is being conceived of now. FBAR, created in 1970 was aimed at uncovering money being laundered in smuggling, the drug trade and terrorism. It also was not originally conceived of being applied to those outside the U.S. Once the DOJ/Treasury departments went after the Swiss banks, they realized they could stretch the intent of FBAR to apply to non-resident Americans and the penalty regime thickened.

The criticism… has continued even after the U.S. government committed to enter into Intergovernmental Agreements (IGAs) in an attempt to address those concerns

A huge oversight on the part of the author. FATCA was without question an extraterritorial imposition on other countries. Only the United States would be as uncivil as to suggest imposing a 30% withholding charge on their allies and trading partners. The U.S. appeared not to understand that other countries could not comply even if they wanted to as privacy laws prevented the level of reporting required by FATCA. Banks would be sued were they to comply. To suggest that the US committing to the IGAs was a gracious act is revolting. Under the guise of being rooted in tax treaties, the IGAs simply bypassed what should have been required; that Congress ratify such agreements and implement legislation to do so. There is nothing in FATCA that warrants the creation of the IGAs. The U.S. downloaded ALL of the costs of compliance to the other countries. There is no mention of any penalties for the U.S. failing to comply. The U.S. made only the vaguest promises of reciprocity. It is simply unbelievable that the immorality of taking capital out of other nations is considered acceptable by the United States.

IV>) FATCA:MERITS AND CONCERNS

The OECD’s AEOI and the U.S. FATCA are two important developments, but FATCA plays a more important role.
First, FATCA provided critical momentum
Second, FATCA facilitates multilateral implementation of AEOI by creating an extensive network with more than 100 countries in the world, at the center of which is the United States.

This is unsubstantiated nonsense. First of all, it is bizarre to say FATCA “plays a more important role” Who gains from FATCA other than the United States? So far, nobody. The United States is at the Center of AEOI/CRS? The US has not even signed on to CRS. There are huge differences that matter greatly. The OECD AEOI/CRS agreements are determined by the countries involved; the terms of residency are established by those exchanging the information. FATCA is vastly different in that the United States alone determines who is/is not a “US Person” “US Citizen” irrespective of the status of such a person to the other country. And so far, the U.S. is not “paying its fair share” by requiring its banks to implement the same systems and legislation required (imposed) by FATCA. The IGAs do not constitute “acceptance” by other countries. To think otherwise is ridiculous. One could not possibly view such stipulations as reasonable.

criticism that…. FATCA exposes taxpayers’ private information to potential abusive use by foreign tax authorities.

This is a matter of real concern to Americans abroad living in some of the more troubled areas of the world-or those living Colombia in South America and particularly in some of the Middle East countries. Ironically enough, the U.S. has had some of the worst breaches of security and leakage of private information; certainly this is disturbing and worrisome.

Ms. Kim’s discussion of the Bopp FATCA lawsuit I will leave to someone else.

Second, opponents of FATCA and EOI argue that an EOI system removes a country’s unilateral control over its own tax policy, resulting in the forfeiture of sovereign autonomy. Although such argument has withered since the U.S. government entered into IGAs with other countries, it was strongly asserted by Canadian opponents of FATCA when the IGA Implementation Act included in Bill-31 was debated in Canadian Parliament.

How outrageous to suggest a foreign country does not have the right to have unilateral control over its own tax policy. The proof is in the pudding. The U.S. would never allow the equivalent. The IGA’s are the proof.
I have watched the video of the Canadian FINA hearings on FATCA many, many times. It is not possible to convey the absolute disgust we have for the majority Conservative government which minimized completely, the capitulation that occurred with the implementation of the IGA. It was nothing more than protecting the banks, without any regard to the effect it would have on Canadian citizens resident in Canada.

However, a government’s control over its tax policy is more severely harmed when a country segregates itself from the global community and loses the ability to enforce effectively its own tax laws against its taxpayers with interests in foreign jurisdictions

More unsubstantiated nonsense. This is an opinion completely unsupported up by any facts.

A Case for American Exceptionalism

conclusion, if FATCA makes the world better off by enhancing global transparency on tax information, then this may serve as another support for citizenship taxation, as well as an example of constructive exceptionalism.

While all of us raised in America understand unconsciously what exceptionalism is, it truly takes living outside the country to appreciate how incredibly arrogant and offensive it is. It is questionable whether FATCA “makes the world better off….” that a questionable tenet should “serve as a support for the imposition of citizenship taxation.” It is nothing short of reprehensible that the author should suggest what the U.S. has done is “constructive” or in any way justifies the gross aberration of power demonstrated by the creation of FATCA.

Irony-“Because it’s the Law” – For once, NOT applied to non-willful expats but a “citizenship” Lawyer

While this particular post is not about a tax-compliance professional per sé, it IS about a person with whom many of us have had interactions and from whom we have been assured we WILL BE CAUGHT in one way or another. Given that, I find it extremely ironic to come across what follows in this post. How many of you who have paid a retainer or left any other type of funds when using a lawyer, ever worry about that person absconding with it?

David S Lesperance used to post comments on Brock. Here is an example of the first of many on the post “Americansabroad in Canada may soon be unable to receive payments from Government by USCitizenAbroad, September 16, 2013.

First comment Continuing to ignore the issue; yell at your foreign banker for closing your account; hoping and praying that FATCA and the Qualified Intermediary Regime will be revoked; etc. are all a waste of time. It is time to either comply with the law or expatriate. Complaining is just a waste of time.

I believe my first real exchange with him occurred sometime back on a WSJ article “The Law That Makes U.S. Expats Toxic” October 10 2015 (paywalled-I can’t get around it with the Google News action). Unfortunately, while I have my own comments via my profile, I cannot access the article nor his comments. This limits what I would like to address for the most part. The first set of comments was his reaction to my referring to him as a tax-compliance professional. He did not agree with that label. It was an exchange where I felt constantly challenged at being tripped up especially because I could not (yet) refute the idea that the Qualified Intermediary program (QI) would “out” us hands-down. And I let him have the upper-hand to a certain degree, because he was a professional and I assumed he would know more than I. We seemed to develop a respectful, civil relationship. On several occasions since, I posted comments for him as he could not log on for some reason. I was aware he was in Poland visiting family as he explained it.

Later comments on Brock:

Comment on US Intention to Pursue Enforcement in Spite of Foreign Law

Comment on Do Canadian or Australian etc Tax Attorneys Advising on United States IRS Compliance Typically Comply with the Professional Code of Conduct of their Law societies?

I was very surprised to see some of the Tweets on Twitter when Keith Redmond tried to warn Accidentals not to put themselves into the US tax system. It is interesting that without any proof as to the ability of IRS able to collect via QI, he presumes it and treats Keith in a manner I found inappropriate and unprofessional. I believe the point of contention was to prove that actual Accidental Americans had been “outed” due to QI. This was not provided, nor has it been since that time. There were others that ganged up in more “attacks” that I will not put up here. Brock/Wed Rally Tweeps will remember this extremely unpleasant incident. After that, I declined to post anything further on his behalf. What is ironic, is a number of exchanges that took place privately, up to as late as March 16, with no indication of any actions such as this:

Law Society of Upper Canada Files a Notice for Interlocuatory Suspension or Restriction Against David Sylvio Lesperance Filed March 10, 2017
 
or this:
 
Wareh vs Lesperance
  Continue reading Irony-“Because it’s the Law” – For once, NOT applied to non-willful expats but a “citizenship” Lawyer

The ACA RBT Proposal is a “carve out” within CBT

 


 
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

FATCA is NOT about PROTECTING America’s Tax Base

images (1)
 

FATCA is NOT about PROTECTING America’s Tax Base.FATCA is about EXPANDING America’s Tax Base into the Economies of Other Nations

Yesterday an article made the rounds with an interesting idea;

THE ONLY REFUGEES WHO SHOULD BE ENTERING THE UNITED STATES ARE THE AMERICAN REFUGEES WHO FLED OBAMA’S AMERICA…. WE HAVE THAT DUTY TO OUR FELLOW AMERICANS”

In 5 years I have never heard anyone come forward with this attitude. In spite of having no desire to go back myself, I do appreciate that somebody is finally showing some concern for us. It’s refreshing!

But they didn’t give up their citizenship because they all of a sudden became un-American; no, they did it because of a law that has turned living and/or working abroad into an expensive, onerous, bureaucratic nightmare for the ordinary American citizen.

FATCA and its ridiculous system has ensnared law-abiding American expats into a constant battle with the IRS, all over the day-to-day activities all citizens engage in.

A well-known citizenship lawyer clarifies that after years of confusion about tax, penalties, IRS programs and information reporting forms, to add insult to injury, FATCA is not even about tax! Read John’s interesting observation; it is our governments who did not understand what they signed by implementing the IGA’s and they need to reverse this before each country loses too much capital due to unfair citizenship taxation.

A comment from FATCA needs to go but unfortunately the FATCA refugees are never coming back

John Richardson:

Thanks for drawing attention to #FATCA and #Americansabroad.

It has become clear that FATCA is is NOT about identifying American residents who engage in tax evasion. In other words;

FATCA is NOT about PROTECTING America’s tax base.

Rather:

FATCA is about EXPANDING America’s tax base into the economies of other nations.

The United States believes that any person “Born In The USA” (and therefore a U.S. citizen) is required to pay taxes to the United States REGARDLESS OF WHERE THEY LIVE IN THE WORLD AND REGARDLESS OF WHERE THEIR INCOME IS EARNED. This requirement exists with respect to income earned outside the United States.

Think of it: the mere fact of a U.S. birthplace obligates somebody to pay taxes to the IRS for life! Somebody “Born In The USA”, who may have left the United States as a child, has a lifetime tax obligation to the United States.

The United States is currently expanding it’s tax base into other nations. It does so by hunting for people who (1) were born in the United States and (2) live in other nations. How is “FATCA Hunt” taking place? How does “FATCA Hunt” actually work?

In practical terms, the USA is forcing non-U.S. banks to “hunt” for people with a U.S. place of birth. Once identified their existence is reported to the IRS. The vast majority of people identified are actually citizens and residents of other nations. For example, on or about September 30, 2016 the existence of approximately 315,000 Canadian bank/brokerage accounts of (mostly) Canadian citizen/residents were reported to the IRS. Why? Because the account holder had a U.S. place of birth or were otherwise under suspicion of having a “U.S. connection”. Most of these reported do NOT consider themselves to be U.S. citizens at all.

Citizens of some European countries (example France) are not able to maintain bank and financial accounts because of a U.S. place of birth.

So, yes people are severing any possible ties to America. Believe me, if you were being “hunted” because of a U.S. place of birth, you would do the same thing! If severing that “U.S. tie” includes “renouncing U.S. citizenship” (which it often does), this is perfectly understandable.

Accidental American “I Live Hell. I Had to Give up my dual Nationality. (i.e., Renounce my U.S Citizenship)”

original article in French HERE

reposted from Anmerican Expatriates Facebook Group

ACCIDENTAL AMERICAN’: I LIVE HELL. I HAD TO GIVE UP MY DUAL NATIONALITY (I.E. RENOUNCE MY US CITIZENSHIP)

Keith Redmond says:

Thank you Fabien Lehagre or making sure this injustice stays in the press! The homeland US press refused to report on it. I know Caroline and her story is one of millions where the US government is ruining the lives of people outside the US.

English translation below.

carolinec Caroline, 37, was born in the U.S. of French parents and lived there for two years. Franco-American, her dual nationality was unfavorable to her when she discovered that she had to pay taxes there. The U.S. is one of the only countries in the world to base the taxpayer’s status on nationality and not on place of residence. Stuck in a legal imbroglio, it tries desperately to regularize its situation.

Caroline says:

I was born in 1979 in Los Angeles. My parents were French, but they were expatriates in the United States for professional reasons.

All my life, I had dual French-American nationality. Even though I only lived for the first two years of my life on the other side of the Atlantic, I always found it amusing to have this double status. I was the only one of my siblings to have this peculiarity.

I remember returning to the United States when I was seven, then in 2008 with my husband. Always with my French passport since I never redone my American identity papers.

A legacy blocked because of “my clue of americanity”

Since July 2014, France and Switzerland have undertaken to disclose the tax data of their US residents. For the moment, this device is not reciprocal. As a lawyer, I had heard about the Fatca (Foreign Account Tax Compliance Act), a law to combat tax evasion, but I never thought I would be directly involved.

I have always paid my taxes in France, and since I have never really lived on American soil, why should I have had to pay taxes in the United States? I was wrong. In reality, the United States is one of the only countries in the world to base the taxpayer’s status on nationality and not on place of residence.

I understood it in September 2014, a few months after the death of my father. The succession had to be settled. I thought there would be no worry, but I received a letter from my father’s bank, BNP-Paribas, to point out that I had a “clue of americanity” because of my place Of birth. So I was concerned about the famous Fatca law.

To unlock the legacy, I had to prove that I was in good standing with the US Treasury (the IRS). In the meantime, the succession would be blocked.

It was the cold shower. After cashing in, I thought I wanted to be in order. If I were to pay, no worry, I would do it to live in peace.

I needed my US tax number. I have never had

I contacted the American Embassy to inquire. I was asked what was my tax number (Individual taxpayer identification number)? I did not have any. What to do ? I had to provide them with a US Social Security number. Same, I never had one. My father never used it because he was an expatriate.

By searching the internet, I learned that to obtain my social security number, it was necessary to have an extract of birth certificate. Immediately, I thought to myself. It’s good, the situation will soon be resolved. In France, it is obtained in a few clicks, but in the United States, it is another pair of sleeves.

To obtain such a certificate, I had to go there because the American embassy in Paris did not issue the required notarized document. No power of attorney was possible. And even if I did, I had no guarantee since I no longer had any American identity papers.

At the foot of the wall, I had to give up my dual nationality

This administrative imbroglio impacted not only me but all the members of my family. It was impossible to mourn the loved one whom we had lost. The situation was totally blocked.

I was also pressed for time: my husband and I had to move to Switzerland in January 2015.

After finding out, I realized that I could never open a bank account in Switzerland – a sine qua non for working in the country – without proving that I was in good standing with the US IRS. It was the snake biting its tail.

I checked with tax lawyers. I was asked 5,000 dollars to take my case. Can not imagine. During all this time, I harassed the US embassy which was unable to give me a solution. One day I came across a woman who said to me:

“If you do not want to do anything about your American nationality, the easiest way would be to give it up.”

At the foot of the wall, that’s what I did. Out of spite, I renounced a right because I saw no other way out.

It cost me the modest sum of 2,350 dollars

The American Embassy sent me a 25-page file to complete, written entirely in English in an indecipherable technical vocabulary for a non-bilingual person. I was asked to tell my story, to explain the reasons why I had to give up my nationality before stating a list of incredible consequences.

Once the form was completed, I got an appointment at the embassy. When I arrived, I was installed in a room with protective glass. I was not allowed to drink, to eat and my laptop was confiscated.

An official entered the three-square-meter room. She spoke with a hallucinatory flow. I did not understand anything. I asked to be assisted, that was refused me. Clearly, she did not care what I could live.

She asked me a few questions. I asked her if my tax situation would be in order after this waiver. She replied that it was not her problem before I exposed all the consequences of my act: it would be much more difficult for my children to study in the United States and not sure that I could ever get A visa if I were to settle there.

She’s gone for an hour so I can think about it. When she came back, I explained to her that my decision was made. I was then asked to go to the cash to pay the processing fees: it cost me the modest sum of 2,350 dollars!

I still have this sword of Damocles above my head

I waited almost three months to get my act of renunciation. The first barrier was crossed, it was necessary from now on that I am working on my regularization with the American tax authorities.

To the extent that I was going to receive an inheritance over 50,000 euros, I risked being taxed by the IRS. No worry to pay, I just wanted to no longer live with this sword of Damocles hanging over my head.

I have contacted them many times, but as I do not have a tax number or a social security number, I have not been able to find a way out of this impasse. No one was able to tell me whether I was going to pay a fee or not. I was even advised to continue “going about my business”, waiting for a providential outcome.

Regarding my father’s inheritance, the situation did not unlock overnight. The bank asked me to complete form W8-BEN, but again, I had to provide a US tax number. My act of renunciation was not enough.

Tired, furious, and accompanied in my steps by the collective “Americans accidental”, I decided to send emails to the governor of the bank of France, various government advisers, the Ministry of Foreign Affairs, etc. I do not know what happened, but one day the BNP called to tell me that the situation was going to be unblocked.

It took two years to glimpse the end of this story. But I’m still not reassured. I know that at any time, the IRS can fall back on me and ask me to pay taxes with retroactive penalties. The sword of Damocles is still there.

The feeling of being rejected on all sides

What is rather comical is that it is not the first time that I have to fight to prove my nationality. In 2008, I had a hard time renewing my French passport. Two years earlier, Nicolas Sarkozy, then Minister of the Interior, had passed a law requiring foreign-born persons of parents born abroad to provide proof that they were French.

My father was born in Morocco, my mother in the Congo, at the time of the colonies, both of them French, but that was not enough. It was necessary, although in possession of a national identity card and a French passport, that I recover the birth certificates of my family over three generations to prove that I was of French nationality!

With this new misadventure, I feel rejected. For two years I have lived a veritable calvary, and my family, too. My mother even told me that if she had known, she would have returned to France to give birth.

I am not the only one in this situation. The “accidental Americans” would be close to 50,000 people. Some have disbursed several thousand euros without getting out of business. Maybe it’s time to create a cell to regularize our situation? For, at present, no solution exists.

caroline

Solving U.S. Citizenship Problems-with special guest Andrew Grossman Montreal Monday December 5, 2016

A very special meeting for “U.S. Born People” or those who are otherwise “U.S. Persons” !(Naturalized U.S. citizens or Green Card holders)

Joining John Richardson will be Andrew Grossman

Discussing the “hot topic” of U.S. citizenship (including its liabilities in a FATCA and FBAR world)

In addition to focusing on the problems faced by those who agree they are U.S. citizens (to be a citizen or not to be a citizen …), this seminar will include consideration of …

     

  • Why the US cannot automatically restore your citizenship without your consent
  •  

  • The advantages of not making use of benefits of U.S. citizenship
  •  

  • Why the U.S. cannot force those born abroad to accept U.S. citizenship
  •  

  • Dominant Nationality & FATCA
  •  

  • About the revenue rule: How is it affected by the Canada U.S. Tax Treaty? Is the Revenue Rule on the way out?
  •  

  • Can the IRS place a lien on my assets even though I live in Canada?

The idea for this meeting grew out of Andy’s participation on a post at the Isaac Brock Society (Andy05).

“If anyone wants to follow up on issues I have raised, I will be in Montréal Dec. 1-3 & 5-6 and in Stanstead QC Dec. 3-5 and would be glad to meet for coffee and exchange views. I do not seek and scarcely ever accept clients but like to exchange views as an academic lawyer with a view to nationality law, cross-border tax and conflict of laws. French or English ok.”
Continue reading Solving U.S. Citizenship Problems-with special guest Andrew Grossman Montreal Monday December 5, 2016

The “Exit Tax”: Dual US/Canada citizen from birth, no Canada citizenship today = no exemption to US “Exit Tax”

cross posted from citizenshipsolutions.ca

The above tweet references a “guest post” written by Dominic Ferszt of Cape Town South Africa. The post demonstrates how the “dual citizen from birth” exemption to the S. 877A “Exit Tax” relies on the citizenship laws of other nations. In some cases those laws of other nations are arbitrary and unjust. If these laws were U.S. laws, they might violate the equal protection and/or due process guarantees found in the United States constitution. For example, Mr. Ferszt describes how the “dual citizenship exemption” to the “Ext Tax” is dependent on South African “Apartheid Laws”. He describes a situation where a “black” U.S. citizen from birth is denied the benefits of the dual citizen exemption to the Exit Tax, which are available to a “white” dual citizen from birth.
(During the “Apartheid Era” Blacks were not entitled to South African citizenship.)

So, what’s the S. 877A “Exit Tax” dual citizen exemption and how does it work?

The dual citizen exemption, which I have discussed in previous posts, is found in Internal Revenue Code S. 877A(g)(1)(B) and reads:

(B) Exceptions An individual shall not be treated as meeting the requirements of subparagraph (A) or (B) of section 877(a)(2) if—
(i) the individual—
(I) became at birth a citizen of the United States and a citizen of another country and, as of the expatriation date, continues to be a citizen of, and is taxed as a resident of, such other country, and
(II) has been a resident of the United States (as defined in section
7701(b)(1)(A)(ii)) for not more than 10 taxable years during the 15-taxable year period ending with the taxable year during which the expatriation date occurs, or

Entitlement to the “dual citizen exemption” depends entirely on the citizenship laws of other countries …


Continue reading The “Exit Tax”: Dual US/Canada citizen from birth, no Canada citizenship today = no exemption to US “Exit Tax”