Category Archives: Pillar 2

As Goes The “Fairness Of Taxation”, So Goes Civilization: It’s Time To Consider The “Fair Tax”

Leave a reply

Introduction

I was recently introduced to the “Fair Tax“. My introduction to the “Fair Tax” was enhanced by the opportunity to host Jim Bennet and Steve Hayes as guests on my podcast. I encourage people to listen to these podcasts here, here and here. You will appreciate the character and commitment of Mr. Bennet and Mr. Hayes.

In simple terms, the “Fair Tax” would replace Subtitle A (Income Tax), Subtitle B (Estate and Gift Tax) and Subtitle C (Employment Tax) of the Internal Revenue Code. These Subtitles would be replaced with one National Sales Tax (currently proposed to be 23%). A general description of how the Fair Tax is envisioned to work is available here. Because the U.S. would no longer be trying to exercise tax jurisdiction outside the United States, it would no longer have to be concerned with the complex rules of international tax, no longer have GILTI and Subpart F rules and U.S. citizens would be free to live outside the U.S. without having the problems of having to comply with two tax systems.

(Notice this means that the U.S. would be taxing ONLY domestic consumption. The U.S. would no longer be taxing income driven by events outside the United States. Because the U.S. would be taxing activity ONLY in the U.S., it would have a “territorial tax system“.)

The purpose of this post is to argue that the adoption of the “Fair Tax” is both better tax policy, but also tax policy that is consistent with the nurturing and growth of a nation that believes in (to borrow the language of Ronald Reagan) the “freedom and dignity” of all Americans. By “all” Americans, I mean Americans who live inside the United States and those who live outside the United States.

Continue reading →

How The World Should Respond To The US FATCA Driven Attack On The Tax Base Of Other Countries

Leave a reply

This purpose of this post is to continue the general theme of focusing on the difference between what a law says and what the law means in application and effect. Yesterday’s post (The Pandora Papers, FATCA, CRS And How They Have Combined To Create Tax Haven USA) focussed on the role that the 2010 US FACTCA law played in in facilitating the rise of Tax Haven USA. (To be clear, I am not saying that FATCA was the sole cause.) That said, the unwillingness of the USA to sign the CRS (“Common Reporting Standard”) has also played a role in the growth of the US as a tax haven.

Many believe that FATCA is just the US version of the CRS. Because of this belief the US has received little or no resistance to its refusal to join the CRS. This belief that FATCA and the CRS are fundamentally the same is wrong. They are very different.

The purpose of this post is two-fold.

First, to explain how/why FATCA is very different from the CRS.

Second, to explain how FATCA is used to export the “original sin” of US citizenship-based taxation into other countries. To put it simply FATCA assists the United States in capturing the tax residents of other countries and subjecting them to direct US taxation.

Continue reading →