July 2022 – A FATCA Delegation Goes To Washington, DC
This post is to document a small part of the practical impact of the US citizenship taxation regime. It is a continuation of a series of posts exploring what US citizenship taxation is and how it impacts people who live outside the United States and the countries where they live.
The first post – “Toward A Definition Of Citizenship Taxation” – concluded that the only practical and contextual meaning of citizenship tax is:
Therefore, the practical meaning of “citizenship taxation” is the United States imposing taxation on the non-US source income earned by people who live in other countries. To be clear: citizenship taxation means that the United States is claiming the residents of OTHER countries as US residents for tax purposes!
The second post – “Should tax residency Be Based On The “Circumstances Of Your Birth” Or The “Circumstances Of Your Life”?”
The US claim of tax residency is based on the “circumstances of their birth”. The “push back” from those impacted is based on the “circumstances of their life”.
Combining the themes of the first two posts we see that:
The United States claims the right based on and only an individual’s “circumstances of birth” to impose regulations and taxation on that individuals’s income earned outside the United States when his “circumstances of life” are such that he lives outside the United States.
Or to describe it slightly differently:
The United States claims the right based on and only an individual’s “circumstances of birth” to impose taxation on the non-US source income of people when their “circumstances of live” are that do NOT live in the United States.
Or maybe …
The United States claims the right based on and only an individual’s “circumstances of birth” to regulate, penalize and tax those individuals when they no longer live in the United States. This includes imposing tax on the non-US source income of people who do NOT live in the United States.
It is very difficult to arrive at a succinct and simple description of what tax and regulation of individuals based on a a “U.S. birthplace” means.
The effect of claiming these nonresidents as US tax residents results in a massive interference (because of the punitive US tax treatment of non-US assets and income sources) in their ability save, invest and carry on businesses in their country of residence AND their ability (because of FATCA) to access bank accounts in their country of residence.
Categories of problems caused by this US extra-territorial claim of tax residency include (but are not limited to):
1. Direct taxation of non-US source income earned by nonresidents
2. Expensive and penalty compliance requirements which interfere withe the ability to manage the financial/retirement planning options in their country of residence
3. The ability to open and maintain basic bank and investment accounts
The problem of bank account access
The European Delegation visiting Washington, DC in July of 2022 was concerned with and ONLY with access to bank and financial accounts. Significantly and disappointedly the delegation expressed no objection to the U.S. extra-territorial tax policies that “claim” European residents as tax residents of the United States.
Banking Access Problems Of European Residents Who Are US Citizens
The perception in July of 2022
On July 18 to 22 of 2022, a delegation from the PETI Committee of the European Union made a visit to Washington, DC to discuss “FATCA Concerns” with US Treasury and certain members of Congress. An excellent report on the meeting was written by Helen Burggraf in the American Expat Financial News Journal. On January 25, 2023 those members delivered a live report to the European Parliament of the visit.
The perception in January of 2023
The following video – January 25, 2023 in which the delegates report on their trip to Washington to the PETI Committee is worth watching.
The members discuss:
– how they experienced the meetings
– the necessity of continuing to work on the “European FATCA” problem
– the general attitude of their American hosts towards the FATCA problem (in some cases outright denial).
I would say that the sentiment was “cautious optimism”.
(The article by Stephen Gardner referenced in the above tweet continues additional commentary.)
The video also includes the thoughts of “Prof Carlo Garbarino – Bocconi University, Milano, Italy” who prepared the following report titled: “FATCA LEGISLATION AND ITS APPLICATION AT INTERNATIONAL AND EU LEVEL: – AN UPDATE”
John Richardson – Follow me on Twitter @Expatriationlaw