"What Is The Future Of Citizenship-Based Taxation?" Prof. William Byrnes (Texas A&M Law), Prof. Edward Zelinsky (Cardozo Law), John Richardson (Canadian attorney who represents US-Canada dual nationals), Kat Jennings (CEO Tax Connections) https://t.co/LP63MHEFYS
You are invited to submit your questions in advance. In fact, PLEASE submit questions. This is an opportunity to engage with Homelanders in general and the U.S. tax compliance community in particular.
Thanks to Professor Zelinsky for his willingness to engage in this discussion. Thanks to Kat Jennings of Tax Connections for hosting this discussion. Thanks to Professor William Byrnes for his willingness to moderate this discussion.
Tax Connections has published a large number of posts that I have written over the years (yes, hard to believe it has been years). As you may know I oppose FATCA, U.S. citizenship-based taxation and the use of FATCA to impose U.S. taxation on tax residents of other countries.
Tax Connections has also published a number of posts written by Professor Zelinsky (who apparently takes a contrary view).
This is the fifth of a series of posts that reflect views and experiences of Americans abroad who are experiencing the reality of actually living as an American abroad in an FBAR and FATCA world. (The first post is here.) The second post is here. The third post is here. The fourth post is here. I think it’s important to hear from people who are actually impacted by this and who have the courage to speak out. The “reality on the ground” is quite different from the theory.
I hope that this series of posts will give you ideas for questions and concerns that you would like to have addressed in the May 17, 2019 Tax Connections – Citizenship Taxation discussion.
Laura Snyder has graciously contributed the first four posts of this series. In her series of four posts, she has outlined the origins and requirements of U.S. citizenship-based taxation.
Ms. Snyder grew up in the United States and moved to Europe as an adult. The tone and pain reflected in her writing suggests that she truly identifies as being a citizen of the United States. Continue reading →
This post is a continuation of my post (referenced in the above tweet) which describes the reduction of the threshold for Married Filing Separately from $4050 to $5. In this post I describe why I believe that this change will result in further renunciations of U.S. citizenship. The primary incentive to renouncing citizenship is that: by requiring married low income Americans abroad to file U.S. tax returns, more financial information about their nonresident alien spouses will be reported to the IRS. On the most basic level, a Form 8938 is required only if a U.S. tax return is also required. The requirement to file a tax return increases the chances of a requirement to file Form 8938 (and others). Form 8938 does require the disclosure of some jointly owned assets. If you were a nonresident alien, would you want your financial information to be transferred to the IRS? On December 19, 2018 Dr. Karen Alpert commenting on changes to the 2017 TCJA that would affect Americans abroad noted that: Continue reading →
— John Richardson – lawyer for "U.S. persons" abroad (@ExpatriationLaw) December 13, 2018
Considering renouncing US citizenship? #citizide – US citizens have the right to enter the USA on demand: "Canadian cannabis investor gets lifetime U.S. entry ban as conference goers face scrutiny at border" https://t.co/VpLouY6ok3 via @nationalpost
— John Richardson – lawyer for "U.S. persons" abroad (@ExpatriationLaw) December 6, 2018
U.S. citizenship has its privileges and its obligations Privileges:
As the message in the above tweet indicates, ONLY U.S. citizens have the right to enter the United States. Obligations:
Because U.S. citizens have the right to enter the United States, U.S. citizens are required to enter the United States on a U.S. passport. (The U.S. passport tells the border guard that the individual has the right to enter the United States.) The Immigration and Nationality Act states:
Except as otherwise provided by the President and subject to such limitations and exceptions as the President may authorize and prescribe, it shall be unlawful for any citizen of the United States to depart from or enter, or attempt to depart from or enter, the United States unless he bears a valid United States passport.
The border guard does not have the authority to deny entry to a U.S. citizen. Non-citizens and admission to the United States – Tell me who you are and I will tell you whether you can enter
Non-citizens do NOT have the right to enter the United States. For non-citizens, entry into the United States is governed by the Immigration and Nationality Act and an apparatus of rules and regulations. Different rules and regulations apply to citizens of different countries. When you cease to be a U.S. citizen, you will be treated according to your citizenship/nationality.
Let’s consider four categories of individuals. Continue reading →
— John Richardson – lawyer for "U.S. persons" abroad (@ExpatriationLaw) July 26, 2018
In addition to the meeting organized by the American Chamber of Commerce described below (August 16), there will be a second, more informal program for individuals affected, expats, their families and friends. This format would be a more intimate question and answer which will be focused on individuals subject to the U.S. CBT regime. This second event will take place on Sunday, August 12, from 2:00 – 4:00 pm on the U of T campus. Pre-registration is requred. If you are interested, please email nobledreamer16 at gmail dot com Cost: $20
Many of you reading this post will NOT be in the Toronto area! This are important events! Please actively share this information with all people who you believe would be interested or affected by this!
A LIGHT AT THE END OF THE TUNNEL OR ANOTHER ONCOMING TRAIN: THE POSSIBLE END OF U.S. CITIZENSHIP-BASED TAXATION
If you are an American citizen residing and doing business in Canada, you bear the pain of the heavy tax burden endured by all U.S. citizens due to the fact that the U.S. is the only major country that imposes worldwide taxation on its citizens no matter whether they live in the U.S. or in another country. In addition, the U.S. imposes significant penalty laden reporting requirements on U.S. citizens living in Canada and abroad. Change is a possibility.
Did you know that there is a possibility that the U.S. Congress may introduce, debate and vote upon a bill that may ease this worldwide taxation burden on U.S. citizens living and working in Canada? This bill would enact ‘Territorial Taxation for Individuals (TTFI)’. It is a tax cut for 9 million overseas Americans by ending double taxation.
Solomon Yue, CEO of Republicans Overseas has been involved with drafting the TTFI bill. Mr. Yue, who is currently working with AmChams throughout the world, will present publicly shareable information about the TTFI bill, and discuss its progress as it journeys through the legislative process. He will be encouraging AmCham Canada to lend its support in the global effort to encourage Congress to move forward with this legislation.
John Richardson, a Toronto Lawyer of Citizenship Solutions,will also be joining Elena and Solomon to speak on the lost opportunity cost of being a dual U.S.-Canadian tax filer: Canadian residents who are subject to the U.S. tax system do not have the same financial planning and other opportunities that non-U.S. citizens have..
Date: Thursday, August 16, 2018 Time: 6:15pm to 9:00pm Place: St. Michael’s College, Alumni Hall, Room 400; 121 St. Joseph Street, Toronto (paid parking near building; nearest subway station is Museum) MAP Cost: $20 +tax (AmCham members); $35 +tax (non-members). Pre-registration is required. Registrations due August 13. Register Info: AmCham Toronto TTFI Event
World politics is entering a new phase, and intellectuals have not hesitated to proliferate visions of what it will be-the end of history, the return of traditional rivalries between nation states, and the decline of the nation state from the conflicting pulls of tribalism and globalism, among others. Each of these visions catches aspects of the emerging reality. Yet they all miss a crucial, indeed a central, aspect of what global politics is likely to be in the coming years.
It is my hypothesis that the fundamental source of conflict in this new world will not be primarily ideological or primarily economic. The great divisions among humankind and the dominating source of conflict will be cultural. Nation states will remain the most powerful actors in world affairs, but the principal conflicts of global politics will occur between nations and groups of different civilizations. The clash of civilizations will dominate global politics. The fault lines between civilizations will be the battle lines of the future.
Tax policy and the possible “clash of civilizations”
To what extent does the insistence of the USA on imposing the Internal Revenue Code (“citizenship-based taxation”) on the citizen/residents of other countries, foreshadow a “clash of civilizations”?
This post was motivated by the article by Virginia La Torre Jeker which is referenced in the above tweet. It is an excellent discussion of how the Internal Revenue Code might (or might not) accommodate the reality of Sharia law. The post raises many questions and alerts practitioners to the challenges of applying the Internal Revenue Code to the lives of people whose culture is largely outside the United States. The post raises many “technical issues”. I expect there will further discussion of this issue on Virginia’s blog.
Taxation does NOT exist in a cultural vacuum. A country’s tax system reflects the counry’s cultural values. As the tax historian Charles Adams has noted, the rise and fall of civilizations can be linked to its tax policies. To impose the Internal Revenue Code on people who live outside the United States is to export U.S. cultural values and impose those values on other nations. The United States claims the right to impose the Internal Revenue Code on U.S. citizens who live outside the United States. The reality is that there are millions of people with no connection to the United States (other than a place of birth). U.S. citizenship is acquired automatically if one has the fortune (or misfortune depending on your point of view) of having been (as Bruce would sing) “Born In The USA!”
FATCA and the tax compliance industry are working hard to identify those who may be U.S. citizens and do NOT live in the United States. What the United States views as a good source of tax revenue should be seen more broadly. Leaving aside basic issues of fairness, to impose U.S. taxation (according to U.S. rules/cultural values) on the residents of other countries, is sure to create problems. As part of tax reform, the United States must stop imposing the Internal Revenue Code on people who are NOT residents of the United States!
The following “Storification” is an attempt to explain the problem from an “outside the USA” perspective … Continue reading →
Has it become too much work to remain a U.S. citizen? Has the time come to renounce U.S. citizenship? Would you be a "covered expatriate" if you renounced? Subject to the "Exit Tax"? https://t.co/1sSX7ZQeX9 via @ExpatriationLaw
— John Richardson – lawyer for "U.S. persons" abroad (@ExpatriationLaw) March 11, 2018
The reality of being a “DUAL” Canada U.S. tax filer is that you are a “DUEL” tax filer
“It’s not the taxes they take from you. It’s that the U.S. tax system leaves you with few opportunities for financial planning”.
I was recently asked “what exactly are the issues facing “Canada U.S. dual tax filers?” This is my attempt to condense this topic into a short answer. There are a number of “obvious issues facing U.S. citizens living in Canada.” There are a number of issues that are less obvious. Here goes …
There are (at least) five obvious issues facing “dual Canada U.S. tax filers in Canada”.
This is post is “based on” (not identical to) one of two submissions that I submitted in response to Senator Hatch’s request for submissions regarding tax reform.
__________________________________________________________ Why is the United States imposing full U.S. taxation on the Canadian incomes of Canadian citizens living in Canada?
The Internal Revenue Code mandates that ALL “individuals” , EXCEPT “non-resident aliens”, are subject to full taxation, on their WORLDWIDE income, under the Internal Revenue Code. The word “individuals” includes U.S. citizens regardless of where they live and regardless of whether they are citizens and residents of other countries where they also pay tax. This means that, by its plain terms, the United States imposes full taxation on the citizens and residents of other nations, because they are also (according to U.S. definitions) U.S. citizens. The United States is the only country in the world that has a definition of “tax residency that mandates full taxation based ONLY on citizenship. How “U.S. citizenship” and U.S. “taxation” interact Principle 1: The United States is one of the few countries in the world that confers citizenship based SOLELY on birth on its soil. Principle 2: The United States is the ONLY country in the world that imposes full taxation ON THE WORLD INCOME of its citizens, REGARDLESS OF WHERE THE U.S. CITIZEN LIVES IN THE WORLD. Bottom line: The United States is the ONLY country in the world that imposes full taxation, on WORLDWIDE income, based ONLY on the “place of birth”! A practical example: A person whose only connection to the United States is that he was born in the United States, who lives in Canada (and may have never lived in the United States and whose only income is earned in Canada), is required to pay U.S. tax on that income. This resident of Canada is treated AS THOUGH HE WAS A U.S. RESIDENT. NOTE ALSO THAT THIS INDIVIDUAL IS REQUIRED TO PAY TAX TO CANADA! He is subject to “double taxation”. (This “double taxation” is only partially mitigated through “foreign tax credits”, tax treaties and the “foreign earned income exclusion”.) Therefore: What academics and government officials refer to as “citizenship-based taxation” (they really don’t understand its practical effects) is PRIMARILY “place of birth taxation” and therefore a convenient way to impose U.S. taxation on the citizens and residents of other countries. As a blog devoted to “citizenship taxation” (noting the difference between the theory and reality) points out:
“A supporter of citizenship taxation is someone who THINKS about “citizenship taxation”. An opponent of citizenship taxation is anybody who has tried to LIVE under citizenship taxation.”
How did this happen? It certainly didn’t start this way!
The evolution of “U.S. citizenship”
The result of legislative change and various U.S. Supreme Court decisions (primarily Afroyim ) has meant that “U.S. citizenship” is far easier to obtain and far harder to lose.
Furthermore, as people become more and more mobile, it is not unusual for somebody to have been “Born In The USA” but live outside the USA. Global mobility is now the rule, rather than the exception. The evolution of U.S. taxation and the Internal Revenue Code The Internal Revenue Code has become more and more complex and impacts more and more activities of daily life. Because “U.S. citizens” (even though they are citizen/residents of other countries) are subject to U.S. taxation, they have been tremendously impacted by the “creeping complexity” of the Internal Revenue Code (which applies equally to ALL Americans wherever they may live).
This “creeping complexity” has evolved slowly through the years. The problems have been exacerbated because Congress does NOT consider that when amending the Internal Revenue Code they are impacting the lives of tax paying residents of other nations (who happen to be U.S. citizens). Congress is “indifferent” to the plight of Americans abroad (indifference being one of the worst forms of abuse). Through the years, slowly and consistently …
The evolution of the Internal Revenue Code combined with ease of retaining U.S. citizenship has built a “fiscal prison” (legislative brick by legislative brick), in which to keep the tax paying residents of “OTHER NATIONS”, who just happen to have been born in the United States.
The advent of the OECD Common Reporting Standard (“CRS”) has illuminated the issue of “tax residency” and the desire of people to become “tax residents of more “tax favourable” jurisdictions. It has become critically important for people to understand what is meant by “tax residency”. It is important that people understand how “tax residency” is determined and the questions that must be asked in determining “tax residency”. “Tax residency” is NOT necessarily determined by physical presence. What is meant by tax residence? Different rules for different countries
All countries have rules for determining who is a “tax resident” of their country. Some countries have rules that “deem” people to be tax residents. Other countries have rules that base “tax residency” on “facts and circumstances”. Canada is a country that bases “tax residency” on either “deemed” tax residency OR tax residency based on “factual circumstances”. What if a person qualifies as “tax resident” of two countries?
When an individual (who is NOT a U.S. citizen) is a “tax resident” of two countries, it is common to consider any tax treaty between those two countries. Often the tax treaty will contain a “treaty tie breaker” provision which will allocate “tax residence” to one of the two countries. (Note that the “savings clause” which is found in standard U.S. tax treaties prevents U.S. citizens from having most tax treaty benefits. Note “treaty tie breaker” provisions are available to Green Card Holders.) In summary: for the purposes of the “CRS”, tax residence is determined by BOTH a country’s domestic laws AND tax treaty provisions that assign “tax residence” to one country.
Even though the United States has chosen to NOT participate in the OECD “Common Reporting Standard” (CRS), and is NOT a “reportable jurisdiction, the OECD reminds us of the rules for determining “U.S. tax residency”.
Hey all, just got back from the Bank of China because I wanted to open an account to hopefully find some easier method of transferring money back home to the States (an entirely different fiasco for another time), but after the bank teller floundering around with his supervisor for a good hour and a half, they finally told me I couldn’t get a card today and would have to try again some other time, which they would call me and let me know. How nice of them.
This is already the second time I’ve tried to go and been turned away. The first time they told me I needed proof that I was actually employed in China (to which apparently my valid residence permit was not enough), and so in true Chinese fashion, I had my school simply write down on a piece of paper that I worked there and then stamp it. Good enough.
Anyway, they told me that today I couldn’t open up an account because their system is “complicated” and there are a number of other people with “similar names to mine” and their system is too slow to process it today. This is of course just a string of nonsense and I don’t see how it’s any form of excuse whatsoever. My buddy opened his account no problem, so I can’t decipher why my situation might be any different. Unless of course it’s because he’s Australian and I’m American, which is the only difference. On the forms you have to fill out, there’s a simple question that says to check if you’re American or not American, and I think this is what may have flagged my account. With everything going on in Beijing and tightening controls on VPNs at the moment, I can’t but help to think this is the reasoning behind the vague excuse. Anyone else experiencing similar problems?
TL;DR: went to Bank of China, couldn’t open an account right now, and I think it’s because I’m American.