I came across the two following interesting article/comments on the same day at about the same time. They are significant NOT because they focus (as most of these articles do) on why Americans abroad
must should come into U.S. tax compliance. Rather the focus on what it means to live as a U.S. Tax Compliant American abroad (something I have written on here).
First the perspective of a “young dual UK/US citizen” living in the UK.
Two kinds of #Americansabroad problems: 1. Those who are US tax compliant 2. Those who are NOT US tax compliant https://t.co/v8V5eCjxTS
— Citizenship Lawyer (@ExpatriationLaw) October 24, 2015
I am a young dual UK/US citizen. I left the States as a child with my family, and while I hold fond memories of the US, I have built my life so far in the UK and I don’t foresee myself returning stateside in the near or medium term. Life has just worked out that way.
I cannot understand how the US can treat its overseas citizens so poorly. After a horrible awakening to the nightmare of citizenship based taxation, complex reporting requirements and (terrifying) enforcement laws, I came into US compliance (at great expense, having hired a tax specialist to put together my 120+ page filing which proved that I didn’t owe anything to the US. Unsurprising for a 24 year old with no assets who has worked for only 2 years since college).
Now, I am compliant. What next? I look ahead and all I see are serious impediments to my ability to plan for my future appropriately, and, as dramatic as it sounds, to live a free and normal life in the country of my choosing. All thanks to US tax policy. It looks impossible to save and invest efficiently here in the UK; starting my own business is totally out of the question as long as I am a US citizen living in Europe, and I worry that I may lose access to basic banking services as a result of FATCA. These worries are just the tip of the iceberg. Something has got to give! Do I: a) give up my US citizenship, b) keep my citizenship and stay at my home in the UK, but severely limit my ability to save and subject myself to eternal US filing costs (financial and stress-related), not to mention permanent exposure to risk of US tax penalties that could wipe out whatever I do manage to save; or c) move back to the US with my tail between my legs, which seems to be what the US government is encouraging us to do (with a heavy stick rather than a carrot).
Accidentals don’t care about their US citizenship and want to be rid of it, and so they should be. I, however, am not an accidental, I am an American, and I detest this awful system which is putting me under immense pressure to give up my birthright, for no good reason.
The US must end citizenship-based taxation, and must introduce representatives in Congress for expatriate voters specifically — we have NO voice right now and we are being abused without a second thought from the US government. The stupidest part is that even in a world of perfect compliance (basically impossible), the amount of money the US will raise from shaking down its overseas citizens pales in comparison to the costs being imposed on those citizens, foreign governments and foreign businesses to comply with these maniacal rules.
Second, the thoughts of a investment advisor who explains: “What Foreign Expats Who Live In The U.S. Have that Americans Expats Don’t”
What Foreign Expats in U.S. Have That Americans Expats Don’t https://t.co/Gv2UV3lFh4
— Citizenship Lawyer (@ExpatriationLaw) October 24, 2015
The article includes:
For American expats, some of their financial struggles may be in part from the Foreign Account Tax Compliance Act, which aims to ensure that Americans living overseas pay their fair share of U.S. taxes.
Signed into U.S. law on July 1, 2010, FATCA took effect in July 2014. The first international exchange of taxpayer information between the IRS and foreign financial institutions, which is part of the IRS’ overall efforts to implement FATCA, took place in late September.
The information exchange involves certain intergovernmental agreements that not only enable the IRS to receive information from foreign financial institutions but also enable more efficient exchange by allowing a foreign tax administration to gather information and provide it to the IRS.
Many critics and expatriates argue FATCA is a compliance headache that often makes it difficult for Americans living abroad to maintain legitimate bank accounts — and curbs banks’ willingness to serve expats.
In 2010 the question was: why would an American abroad renounce U.S. citizenship?
In 2015 the question is: why would an American abroad NOT renounce U.S. citizenship?
How can a country treat its citizens abroad so horribly?
Such stories have become a dime a dozen. I don’t know of anyone who has given the matter any thought at all thinking that perpetuating citizenship-based taxation is a good idea. The few exceptions that one sees in the comments of the cited articles (or the first speaker at that ACA Information Day event in Toronto) present arguments so superficial and facile they seem to come from shills paid by the bureaucracy to preserve the status quo. Their arguments serve only to cripple public debate on and scrutiny of the topic through hecklers’ vetoes.
The question one should ask is, why is the Internet commentary not focusing on why members of the US Congress are not falling over one another in a race to be the first one to right the wrongs. As one of the WSJ articles cited in the link chain above points out, there is ‘broad consensus in Congress’ that something needs to be done, but actions speak louder than words. Congress’ debate is focused on making band-aid changes to FATCA, rather than focusing on the broader problems of citizenship-based taxation that have long existed, but were only brought to the forefront when FATCA obligated a more rigorous enforcement of this ridiculous taxation scheme. So Congress are paying lip-service to the problem, but doing much else.
Why has so little legislation been introduced? Why does what little that has been introduced seem to have been condemned to die a slow death waiting for the relevant (?) committee to act? The ACA had published a legislative analysis as to what needed to be changed, but now that has disappeared from the Internet, and the ACA deny knowledge of it ever having existed. It’s all very strange.
It may be there are special lobbying interests inducing Congress through contributions to fail to fast track the needed changes. For example, hamstringing Americans abroad gives an unfair advantage to the established, richer US multinationals who can afford to hire legions of foreign nationals to represent them in foreign markets. Sure, this is an inefficient way to do business, as those foreign nationals are prone to abuse the system, but if competition from leaner start-ups is legally impeded by the crazy regulations deriving from citizenship-based taxation, this inefficiency doesn’t matter in the short term to the wealthy few that can afford to play. Of course, under such conditions, the US companies and government grow out of touch with their international consumer base, but there seems incredibly to be a consensus that corporate media can control the thinking of the international consumer base to the extent necessary to prevent this from happening. Corporate media influence is consequently eroding . . .
Alternately, it could be that that the small but growing community of tax practitioners who have made themselves conversant with these regulations so twisted the population at large can’t even imagine they exist find it in their interest to preserve the status quo for a while, in order to make some money off their knowledge. Specifically, tax advisories like to benefit from the high compliance costs for Americans overseas. It’s easy money. A few ambitious lawyers can make nice careers out of gladiating this issue through the courts.
Whatever the case, Internet commentary on these issues is still focused on the exchange of sob stories among those dramatically affected, rather than on holding those who create obstacles to fast-tracking the minimal changes required to fix the problem up to public scrutiny if not legal sanctions for their blockade tactics. This will have to change before the needed legislative relief comes to pass. Is this forum to be part of that change?