Settlers, Sojourners and Tax Evaders

The language we use shapes our perceptions and others perceptions of us.  Though words can be paltry things that don't come close to doing justice to our experience, we still try to find just the right word or phrase to encapsulate it.

It's a two-way street, however.  We can come up with any word we like but for there to be shared understanding the sender and the receiver must more or less agree on the meaning.  Needless to say where there is disagreement, there is frustration.   Worse, when a word that is loaded with meaning and judgement in one context is applied to denigrate people in another, the entire frame of a debate takes a sinister turn.

Take the word "tax evader,' for example.   This word which is thrown around promiscuously in this time of fiscal crisis, implies so much - the evil rich expatriates evading their responsibilities while living the good life in Rio de Janeiro or Los Angeles as their countrymen sit at home and suffer the erosion of social services and high unemployment rates.  No word exists however for the retired Canadian/American on a fixed income or the stay-at-home American mother in Germany or the former U.S. military man or woman running a small business in Asia or the au pair in France earning minimum wage or the IT worker in India or the immigrant in the U.S. with bank accounts in the home country who did not report their foreign bank accounts, file returns or pay their taxes in the U.S. because they didn't know they had to (and, frankly, when they do get clued in they find it pretty idiotic).

None of these people would agree to being called "tax evaders" and yet that is the language that is used by lawmakers, government officials and the media to describe them.  This and other negative terms shape the public debate and lead to a "one size fits all" approach to initiatives and laws designed to combat tax evasion.   In a world where catchy headlines, one-liners and sound bites rule, lengthy explanations of complex (and yet very common) circumstances gain little or no attention.  Homelanders say "tax evader" and the bewildered expatriate replies, "Look, I pay taxes in the country where I've been living and working for the past ten years..."  and that's usually enough for the former to turn deaf.   We need better terminology - a word that sums up the situation in a way that is pithy, clear and would make a great sound bite.

Because that term "tax evader" in this context simply will not do.  It implies nefarious motives where none exist.  Applied to expatriates, it implies that the main reason that someone went abroad in the first place was to escape one's responsibilities to the homeland.   But behind every headline that excoriates the latest artist, sports star, CEO and entrepreneur to leave the country are hundreds of thousands of regular people who leave to get married, to raise children, to retire, to take a good job or start a business.  Human beings doing very human things.  The only difference is that they are not doing these things in the country where they were born or raised.  But that is not the perception of the people they left behind.

Emigrants, unless they are showering the home country with desperately needed remittances, are pretty universally objects of suspicion (and sometimes they are outright loathed) and that is true from the developed world to the developing one.  If home is where the heart is then how could these people literally rip out their hearts, leave the land of their birth and their childhood friends and families, for economic gain?  And if the rational for leaving is love, well, isn't there something slightly suspect about someone who runs off to a foreign country to sleep with some damned foreigner?

That is all too often the view of the home country population but the funny things about emigrants is that they become immigrants as soon as they hit that distant shore.  If they are well-educated and are bringing money and talent into the country, they are generally welcome.  In the raucous debate over immigration reform in the U.S. a clear distinction is made between those who are considered "undesirable" and those the U.S. desperately wants and needs - the entrepreneurs and those with STEM degrees (science, technology, engineering and mathematics).

In the discussion it seems not to have occurred to the American public or its lawmakers that the people they are trying to attract are the product of other countries' investments in producing a well-educated populace.  Is there not an argument here that these countries deserve some compensation from the U.S. for providing it with skilled workers who will be producing for the American economy and thus eroding other countries' tax bases?   Another issue is that these people are pulling money out of other countries to park it in low tax states like Delaware.  If US politicians were really serious about their lofty goal to combat tax evasion, why not make it a requirement that USCIS officials check with these immigrants' home countries first to determine if these folks are trying to cash in on beneficial tax rates in the U.S. (the very thing they suspect those traitorous American emigrants of doing in other countries) and if they actually paid their local taxes before making that wire transfer.

To put it another way, an "immigrant investor" might just be another country's "tax evader."  One has to wonder if the U.S. or any other country would turn the money down if it turned out to be from somebody else's perceived "exil fiscal."  Somehow I doubt this will ever happen. :-)

To be very clear I am not proposing that these things be done - just trying to give another take on it.  What I would like to see is an acknowledgement on everyone's part that we live in a globalized world where people and capital circulate and that this is a Good Thing.  Making draconian "one size fits all" rules to tackle the worst abuses of capital flight and tax competition while not evaluating the impact on human beings is cruel, unjust and ultimately counterproductive.  120,000 registered French citizens in the U.S. and 100,000 U.S. citizens in France.  Is there really anything wrong with this picture?  And the name-calling and distorted perceptions are just plain dumb and the efforts to shame people into coming "home" or implying that they all left to avoid paying their "fair share" are utterly ridiculous.

In my ideal world everyone would have the opportunity to take his or her talents and try his luck in whatever country will have him or her.    Some will be sojourners (temporary residents) and some will be settlers (permanent residents).   And in my perfect world the laws and tax regimes of all countries would be "labor export neutral" which would mean that no worker would ever be worse off from a tax standpoint if he or she chose to live and work outside his home country.  I'm not just talking about double taxation, I am also referring to onerous filing and reporting requirements too.

Two battles to be fought here.  The first is about perceptions and terminology.  We need to change the language we use when we talk about emigration so that it is less judgmental.  "Emigrant" or "Expatriate" should not be a synonym for "tax evader" and the act of leaving one's country should never ever subject a person to a world where he is guilty in the eyes of his compatriots until proven innocent.  Some of this, I think, will happen naturally as more and more people (yes, even Americans) take advantage of all the opportunities unfolding in an increasingly globalized world.  Emigration starts to look very different to homelanders when it is their uncle, aunt, cousin, son, daughter, grandson or granddaughter flying off to take that job halfway across the world.

The second battle is one for the rights of the mobile worker.  All laws to combat tax evasion, all exit taxes, all diaspora tax proposals existing and proposed should be evaluated against one standard:  Do they make it harder for working people to live and reside wherever they are welcome?  If they do then we all have an interest in fighting them tooth and nail.

High time to reframe the debate over "mondialisation" because if globalization is to work for people, then people need to be at the top of the agenda and not just an afterthought.

Professor Allison Christians of the McGill University Faculty of Law very kindly linked to this post and added her comments on her blog, Tax, Society and Culture.  Very interesting read and I very much like her  suggestion that the impact of fiscal controls (existing and proposed) on global mobility in general and outbound labor in particular is a very rich area for further research.