— John Richardson – lawyer for "U.S. persons" abroad (@ExpatriationLaw) June 21, 2021
The rules of taxation should follow changes in society. The ordering of society should NOT be hampered by the rules of taxation!
As the world has become more digital, companies can carry on business from any location. Individuals have become more mobile. Multiple citizenships, factual residences and legal tax residencies are not unusual. It has become clear that the rules of international tax as reflected in tax treaties (as they apply to both corporations and individuals) are in need of reform.
The purpose of this post is to identify two specific areas where US tax treaties are rooted in the world as it was one hundred years ago and NOT as it is today.
First: The “Permanent Establishment” clause found in US and OECD tax treaties
Second: US Citizenship-based taxation which the US exports to other countries through the “saving clause” found in almost all US tax treaties
This article explains the simple regulatory actions that United States Department of the Treasury can take that would, in the absence of legislative change, improve the lives of Americans living overseas and permit the IRS to better focus its limited resources to more effectively administer the U.S. tax system.
On June 3, 2020 I plan to do a podcast with Anthony Scaramucci of Skybridge Capital and SALT Conference fame. The June 3 podcast has its roots in the following @Scaramucci tweet which was the subject of discussion at the Isaac Brock Society.
Win Win for U.S./Many of the NINE million Expats who may start voting would forgo the relief checks (spent overseas)/They want Residency Based Tax as per Rep. Platform (Promise kept)/Most do not pay tax BUT pay expensive fees to file/Save $$ on checks/Google it
Mr. Scaramucci’s tweet generated a great deal of discussion. If you click on the tweet, you will see, what some of the responses were.
A third party individual has arranged for me to do a podcast with Mr. Scaramucci. This will take place on June 3. In order to provide background information for “citizenship taxation”, FATCA and how they impact Americans abroad, I would ask that you reply to the following tweet. It is your opportunity to contribute to the conversation.
Hi – yes I am scheduled to speak with @Scaramucci on June 3. I hope to discuss the trials and tribulations of #Americansabroad in a #FATCA and @citizenshiptax world. Would greatly appreciate everyones specific suggestions to highlight the injustices.
— John Richardson – lawyer for "U.S. persons" abroad (@ExpatriationLaw) May 27, 2020
Feel free to leave a comment to this post. I will ensure that it finds its way into the twitter thread.
Pre-Registration: Required – please visit http://www.facebook.com/RepublicansOverseas for instructions (or leave a comment at the bottom of this post which includes your name, email and country of residence).
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 →
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”.