The Empire Speaks, The Myth Replies: The Communication Gap

The underlying message that I hear in Treasury's press release is that the U.S. government really really wants Americans and Green Card holders abroad to comply with the U.S. worldwide tax and reporting system.

However bizarre it may seem to us and our foreign spouses, friends, co-workers and family, they want those bank account reports and that huge pile of paper (1040 plus all the extra reporting like form 8938 and the FBAR) every year from each and every one of us even if we earn no money in the U.S.,  pay tons of taxes locally and don't owe the United States Treasury one dime in tax.   That means every American and Green Card holder (rich, middle or low-income) from Thailand to Timbuktu, from Paris to Moscow, from Sao Paulo to Mexico City, from Libreville to Casablanca.

They are serious and anyone who thinks they aren't is living in la la land.

But three things that are absolutely essential to the success of the U.S. government's grand project are completely missing from the picture:  information, education and support.

Even today with all the hoopla about FATCA and FBAR's, when I hop the train into Paris I am still meeting newly-arrived Americans who have no idea about the tax and reporting obligations of an American citizen or Green Card holder who lives works, and raises a family outside of the United States.

Call this the future crop of American "tax evaders" who are materializing right before my eyes.  On a scale of 1 - 3,  with 1 being "total ignorance" and 3 being "fully informed and demonstrate a clear understanding of the topic," I'd say that the vast majority are at 1, a small minority are at 3 and a precious few are scattered in the middle.  There are even a few 0's - folks who don't know what they don't  know.  Americans abroad who dismiss the notion of citizenship-based taxation as "a conspiracy theory." (I kid you not).

If one of the U.S. government's goals here is to get Americans abroad into compliance with the U.S. tax system, then how about we look at what could be done about the "communication gap" before we get too excited about the overseas filer "compliance gap"?

To be very clear, I do not agree with citizenship-based taxation or FBARs or FATCA.  However, can we all agree is that it is crucial that Americans and Green Card holders at home and abroad are given clear information about the U.S. worldwide tax system and IRS/Treasury reporting obligations if they live or aspire to live outside the United States?

That obscure little note in the back of every U.S. passport about taxes on worldwide income?  Not good enough.  Only two countries in the world tax their emigrants on their wages and assets in their host countries:  the United States and Eritrea.  Why in heaven's name would an American or Green Card holder abroad, or an immigrant in the U.S., think for two seconds that the United States of America has anything in common with a little country in the Horn of Africa that has been condemned in the United Nations for the same practice of taxing its diaspora?

What is needed is an information campaign that gets the message out to everyone - U.S. citizens, Green Card holders, future Green Card holders and anyone the U.S. government considers to be a "U.S. person/taxpayer" -  all over the world.

But that would be hard and costly!

Nonsense, this is an era of mass communication, the Internet and social media. In addition, there are American organizations and institutions the world over that could help.  Like the State Department and the nearly 300 US Embassies and consulates in the world.  Like the American schools, churches, libraries, missions, VFW halls, Chambers of Commerce and many other places where American communities gather.  And, of course, organizations like American Citizens Abroad, the Associations of Americans Resident Overseas and the Federation of American Women's Clubs Overseas.

But that's not our job!

Again, nonsense.  Robert LeBaube and Charles Vehorn put these three things firmly under the responsibility of all tax administrations:

"1.  To support those citizens who wish to comply with tax laws by making the burden of compliance and payment as light as possible (Adam Smith's third maxim of convenience of payment);
2. to minimize the amount of public and private resources diverted from other uses to ensure that taxes are collected (Adam Smith's fourth maxim of economy in collection;  and
3.  to strive through education to increase the number of willing compliers."

My good people, you are public servants and here is your public standing before you ill-served and desperately needing information that you possess.

Furthermore, you have made it abundantly clear that you expect compliance even where there has been years of ignorance and confusion.  So let's clear up the latter and I just bet that you will find it much easier (and cheaper) to get the former.

Now, I have heard a rumor that all this has been proposed before.  That this very suggestion was made to some of the 3 letter agencies in the homeland and the answer was "no."

As in, "No, we will not communicate widely about worldwide U.S. tax and reporting requirements."

I sincerely hope that is not true.  Stretched thin already, I might lose all my faith in my government and the goodness and goodwill of the people in it, if that really was their response to something so basic, so simple, so commonsensical.

But part of me has to wonder because they have to know (as I do) what the possible repercussions would be:  more renunciations of American citizenship, a drop in people seeking Green Cards, fewer high-skilled immigrants coming to the U.S., and fewer immigrants becoming citizens once everyone understands exactly the global reach of the U.S. tax system.

But if the U.S. government and homeland Americans believe that citizenship-based taxation is a Good Thing and that FATCA has "clear, positive benefits" then these repercussions are irrelevant and they have nothing to fear from making a full disclosure in clear language to each and every U.S. Person (or aspiring one) on this planet.

Have the courage of your convictions and staple that to those shiny new U.S. passports, Green Cards and H1B visas.