Part 1 – The Obama 2015 Budget Proposal – Change you can believe in?
This was the subject of significant discussion at the Isaac Brock Society. It was also the subject of an insightful blog post by U.S. Tax Lawyer Virginia La Torre Jeker.
It is possible that (at long last) the U.S. government is beginning to recognize that there is a difference between “technical citizenship” and a voluntary U.S. connection indicative of “substantive citizenship” that might (but is not required to) justify taxation of U.S. citizens abroad in the 21st century.
The relevant provision (page 282) includes:
On October 10, 2014 Kelly Phillips Erb (AKA @TaxGirl) published a “Guest Post” on the question of whether one one would give up U.S. citizenship because of taxes. It was a very will written post which detailed the horrors that Americans abroad experience in attempting compliance with a tax code that “puts most of their lives in the penalty box”. I recommend the post to you. There are a number of comments about the post at the Isaac Brock Society.
The post concludes with:
So will I renounce to avoid taxes? Not exactly, because I DON’T OWE taxes due to my very low income. BUT IN ORDER TO AVOID THE CONSTANT THREAT, like a huge hammer hanging over my head, of “INFORMATION FILING PENALTIES” as I grow older and less able to cope. To protect my executors from those same things?
YES, I’m afraid I shall have to. I have put off taking this step until now, partly because of the cost and my fear of the long journey to the embassy in a distant city; but mainly in the hope that my beloved homeland would regain its wisdom and fix its mistakes by switching to an equitable system of residence-based taxation with penalties that reflect only a percentage of tax actually owed.
And now it seems I have waited too long. A price increase from $450.00 to $2,350.00 was just announced. I may be trapped. I am becoming desperate to escape, but unable to afford it.
What a silly situation this would be, if it weren’t so very tragic.
Oh my dear, sad homeland. I do so wish you happiness and a return to shared prosperity. Please do the same for me. Thank you.
*Tisha (who prefers not to be identified by last name) remembers fondly her years in Pennsylvania and its wonderful people. She now feels she is too old to start over again, and so remains in her mother’s country.
Of particular interest is:
Some developments are able to sell some lots to Americans who don’t want or need dual citizenship. But Americans alone aren’t enough to finance most projects. Instead, many projects gain most of their investments from people who routinely encounter travel restrictions and obstacles due to their country of origin.
And the continuation of Treasury’s War:
One big drawback of the programs is the potential for fraud. Authorities are concerned that without strict oversight, the programs can be used by money launderers and other criminals for unfettered travel.
In May, the U.S. Treasury Department sent banks a warning letter that foreign investors, namely Iranian nationals, were “abusing” St. Kitts’ citizenship-by-investment program for “illicit financial activity,” according to the letters. St. Kitts suspended Iranians from its program in 2013, but the U.S. alleges Iranians continue to get St. Kitts passports
And for those who wish to open the door to EU citizenship:
In Europe, qualified applicants can gain visas from Spain, Portugal or Latvia by buying property in those countries. France, Singapore and the U.S. grant visas to qualified applicants who invest in companies or projects that create a minimum number of jobs over a set period.
I was recently attempting to explain FATCA, FBAR and U.S. taxation practices to a friend. After deciding that I was NOT fabricating a story, she remarked:
“It’s unjust! It’s inhumane! I didn’t choose where I was born!”
(Fortunately she was not born in the U.S.).
The truth is that issues of FATCA, FBAR and citizenship-based taxation are more “citizenship problems” than tax problems.
Incompatible tax systems create problems for people subject to both tax systems.
Incompatible citizenship laws create problems for people who have dual citizenship.
U.S. tax lawyer, Virginia La Torre Jeker has just published a fascinating post where she describes the problems of “incompatibility of citizenship”. Ms. Jeker describes the problems where a country:
Sooner or later the debate about U.S. “place of birth taxation”, will focus on the meaning of citizenship and connection to the country of citizenship. What’s needed to get the discussion going? Sometimes, the most unlikely events (although they are obvious after the fact) become the catalyst.
It turns out that the U.S. World Cup Soccer team has (are you ready for this):