I have spent the last few days reading and contributing over at the Isaac Brock Society and following Just Me's links on his Twitter feed. It has been a real education for me. There is a saying in French, "nul n'est censé ignorer la loi." (There is no excuse for not knowing the law.) I had no idea how ignorant I was until I met people who have done the research and do know what they are talking about.
Now that I am a little less ignorant, I would like to take this opportunity to make an important clarification about, and an appeal on behalf of, what are called "U.S. Persons." Much of what I have posted here about U.S. tax law and reporting obligations I have tied to U.S. citizenship and that turns out to be a bit misleading.
U.S. citizens, I said, are taxed on their worldwide income. This is still quite true but it is not the entire story. More accurately, I should have said, "U.S. persons" are taxed on their worldwide income. This statement is vitally important to understanding just how aberrant the U.S. tax system is (and just how dangerous the FBAR and FATCA regulations are) because the term "U.S. Persons" includes U.S. citizens but is not limited to them. Believe it or not, there are other categories of people concerned, people who are not citizens of the United States, and they have even less representation and less of a voice than overseas Americans.
A U.S. person is: a corporation or entity based in the U.S., a U.S. citizen living in the U.S. or abroad, or a Resident Alien living in the U.S. (in other words, a legal immigrant or a Green Card holder) or you meet the Substantial Presence test (i.e. you live in the U.S. for a certain number of days a year).
All these people have exactly the same tax and reporting obligations on their worldwide income. Yes, my friends, an immigrant or a Green Card holder living in the U.S. must report his or her worldwide income to the American IRS, report all his or her foreign bank accounts (even ones back in the home country) and is impacted by FATCA in much the same way as U.S. citizens.
To give you some idea of how this might work in practice, let's consider a hypothetical situation where my foreign spouse and I return to the U.S. Upon receiving his Green Card my spouse would be:
1. Required to disclose all his U.S. income AND anything he earned in France (interest, dividends, rents) on assets he acquired before entering the United States. Depending on the type of income, he may be required to pay U.S. taxes on that French income.
2. Required to fill out an FBAR (Foreign Bank Account Report) disclosing all of his accounts in France and the balances.
3. And finally he would be required to fill out the new form 8938 (FATCA requirement) revealing his "foreign financial assets" (in other words just about anything he has in France).
4. Last but not least, in theory his bank in Paris would be required to turn over his account information in France to the IRS since by accepting a Green Card and residing in the U.S. he is a U.S. Person (not a citizen, mind you).
Not a pretty picture is it? Failure to comply with the above may result in draconian penalties even if no tax is due. I had no idea the U.S. tax system worked this way for immigrants and, I assure you, neither did my French spouse.
Clearly a potential immigrant to the U.S. with assets in the home or a third country would have to have a special kind of insanity to subject himself to this system with all the paperwork and potential for double-taxation. And it would do this person absolutely no good whatsoever to become a U.S. citizen since this would change nothing. On the contrary, being a citizen would actually make it worse - one might shed a Green Card relatively easily (if done before the immigrant acquired too many assets in the U.S. or abroad) but U.S. citizenship is forever unless one renounces.
You know, if I were tasked with designing a system with the maximum number of disincentives in order to prevent educated immigrants with existing assets to come to the U.S., I doubt could have done better than this. While this system has existed for some time, it was not well known until FATCA brought all these issues to light and the IRS actually started enforcing the rules. Most immigrants were never aware of them and many are now in a terrible position made all the worse because they cannot vote. I wonder if the French diaspora in the U.S. has brought this up with Mr. Courtial.
As for potential immigrants like my spouse, they have a lot of thinking to do. I suspect that the young, educated, childless ones will continue to go to the U.S. but I doubt they will naturalize and surely they will have every interest in limiting their stay. Older experienced workers with families and assets in the home country will probably avoid the U.S. in favor of places like Singapore or Canada.
Please feel free to correct me if there are any errors or omissions in what I have written here. This is a complicated subject and I am not a lawyer or an accountant. Also, I know that there are a lot of you visitors to the Flophouse are interested in immigrating and working abroad. If you have a moment, I would very much like to have your impressions on this. For U.S. citizens, how has the U.S. tax system impacted any ideas you might have had to live and work abroad? For those of you from other countries does this information make you more likely to choose another another destination over the U.S.?
Tuesday, January 10, 2012
Monday, January 9, 2012
Testing the Loyalty of Dual Citizens
The Economist is reporting that the Dutch are proposing a new law that would limit naturalizing citizens ability to keep their nationality of origin and strip Dutch expatriates of some of their rights as well if they naturalize in their host countries. These people would become "ex-Dutch nationals" which would limit their right to return to The Netherlands and limit their ability to pass Dutch citizenship (EU citizenship) onto their children.
As I've written elsewhere, most states have reluctantly come to tolerate the idea of dual (or even plural) nationality. It's almost impossible to enforce, there is an almost endless combination of jus sanguinis and jus soli laws to be taken into account, and globalization has dramatically increased the opportunities for dual citizenship to occur. In the bad old days there were some very effective methods of limiting dual citizenship in Europe and the US: citizenship passed through the paternal line and revocation of citizenship through naturalization in another state. For example, there was a time when a Frenchwoman marrying an Italian or an American marrying a Scot became citizens of their husbands' countries even if they stayed in France or the US. As a result of this their children were nationals of their fathers' states but not of their mother's - a very practical solution but grossly unfair and quite sexist. These laws were repealed in the 20th century and just about everyone I've ever talked to thought this was a good thing.
That leaves the latter method, revocation of original citizenship upon naturalization in another state, which still gets some traction. Very few people would argue that children or women should lose their citizenships because of factors beyond their control (a parent's citizenship, sex or marital status). But many more people still see some justice in taking away the citizenship of someone who has performed an "expatriating act" like serving in a foreign military or voluntarily acquiring citizenship in another state. From the receiving state's perspective (and the perspective of many citizens of those states) it seems right that naturalizing citizens declare their loyalty to one state only.
I think a lot of this is based on uncertainty about the intentions of naturalizing citizens. Are they naturalizing out of love and commitment to the receiving state or are they doing this for reasons of convenience? No state likes to be in a position of having to evaluate the loyalty of its citizens and, with people who have multiple passports, there is the question of how that individual "ranks" his or her different nationalities. Since this is ultimately unknowable, some states ask that these people reveal their intentions by publicly shedding other loyalties. Demonstrate to us how important it is to you to be Dutch (or French or American) by going down to your embassy and renouncing your other citizenship.
In short, it is a loyalty test, and the test takers in the Dutch case are both naturalizing citizens and native-born citizens who live abroad.
If this law passes I predict the following responses:
1. The Netherlands will experience a steep rise in foreign nationals who have residency permits (permits, by the way that allow them almost all the benefits of citizenship without holding them to any obligation other than paying taxes and obeying the laws) who will refuse to become citizens. Since these residents do not feel that they can become citizens, since the price they are being asked to pay is too high, they will feel even less loyalty to The Netherlands and will see no need to integrate. A result that is likely to exacerbate the issues Dutch citizens have with their resident immigrant populations.
2. The Dutch overseas who naturalize in their host countries will unwillingly be stripped of their Dutch/EU citizenship and that will make them very bitter indeed. It is not likely that these people will continue to feel much loyalty toward The Netherlands or have any interest whatsoever in working on the homeland's behalf. In one swift act the Dutch government will turn these people from "unofficial good-will ambassadors" into something else altogether.
3. The Dutch overseas who have not yet naturalized in their host countries might be reluctant to do so thus creating Problem 1 above for the receiving state.
Proposed laws like this one, and the application of the principle in places like the U.S., reveals something quite startling: enormous insecurity on the part of some states in this globalized era. It is as if they are unsure about their power to command the loyalty and love of their own native-born citizens and they seem to have zero confidence in the attractiveness and assimilating power of their own cultures.
It is an admission of weakness, not an assertion of strength, before the forces of international migration and mondialisation. Furthermore, all countries that do this need to be very cautious. If large numbers of Dutch abroad choose their host countries over the homeland, and resident foreigners refuse to become Dutch citizens, than we will all see what Dutch citizenship is worth on the global market. Will this make Dutch citizens in the home country feel more secure and value their citizenship more or will it cause them to think less of it? And is this really something the Dutch people want the entire world to know?
As I've written elsewhere, most states have reluctantly come to tolerate the idea of dual (or even plural) nationality. It's almost impossible to enforce, there is an almost endless combination of jus sanguinis and jus soli laws to be taken into account, and globalization has dramatically increased the opportunities for dual citizenship to occur. In the bad old days there were some very effective methods of limiting dual citizenship in Europe and the US: citizenship passed through the paternal line and revocation of citizenship through naturalization in another state. For example, there was a time when a Frenchwoman marrying an Italian or an American marrying a Scot became citizens of their husbands' countries even if they stayed in France or the US. As a result of this their children were nationals of their fathers' states but not of their mother's - a very practical solution but grossly unfair and quite sexist. These laws were repealed in the 20th century and just about everyone I've ever talked to thought this was a good thing.
That leaves the latter method, revocation of original citizenship upon naturalization in another state, which still gets some traction. Very few people would argue that children or women should lose their citizenships because of factors beyond their control (a parent's citizenship, sex or marital status). But many more people still see some justice in taking away the citizenship of someone who has performed an "expatriating act" like serving in a foreign military or voluntarily acquiring citizenship in another state. From the receiving state's perspective (and the perspective of many citizens of those states) it seems right that naturalizing citizens declare their loyalty to one state only.
I think a lot of this is based on uncertainty about the intentions of naturalizing citizens. Are they naturalizing out of love and commitment to the receiving state or are they doing this for reasons of convenience? No state likes to be in a position of having to evaluate the loyalty of its citizens and, with people who have multiple passports, there is the question of how that individual "ranks" his or her different nationalities. Since this is ultimately unknowable, some states ask that these people reveal their intentions by publicly shedding other loyalties. Demonstrate to us how important it is to you to be Dutch (or French or American) by going down to your embassy and renouncing your other citizenship.
In short, it is a loyalty test, and the test takers in the Dutch case are both naturalizing citizens and native-born citizens who live abroad.
If this law passes I predict the following responses:
1. The Netherlands will experience a steep rise in foreign nationals who have residency permits (permits, by the way that allow them almost all the benefits of citizenship without holding them to any obligation other than paying taxes and obeying the laws) who will refuse to become citizens. Since these residents do not feel that they can become citizens, since the price they are being asked to pay is too high, they will feel even less loyalty to The Netherlands and will see no need to integrate. A result that is likely to exacerbate the issues Dutch citizens have with their resident immigrant populations.
2. The Dutch overseas who naturalize in their host countries will unwillingly be stripped of their Dutch/EU citizenship and that will make them very bitter indeed. It is not likely that these people will continue to feel much loyalty toward The Netherlands or have any interest whatsoever in working on the homeland's behalf. In one swift act the Dutch government will turn these people from "unofficial good-will ambassadors" into something else altogether.
3. The Dutch overseas who have not yet naturalized in their host countries might be reluctant to do so thus creating Problem 1 above for the receiving state.
Proposed laws like this one, and the application of the principle in places like the U.S., reveals something quite startling: enormous insecurity on the part of some states in this globalized era. It is as if they are unsure about their power to command the loyalty and love of their own native-born citizens and they seem to have zero confidence in the attractiveness and assimilating power of their own cultures.
It is an admission of weakness, not an assertion of strength, before the forces of international migration and mondialisation. Furthermore, all countries that do this need to be very cautious. If large numbers of Dutch abroad choose their host countries over the homeland, and resident foreigners refuse to become Dutch citizens, than we will all see what Dutch citizenship is worth on the global market. Will this make Dutch citizens in the home country feel more secure and value their citizenship more or will it cause them to think less of it? And is this really something the Dutch people want the entire world to know?
Sunday, January 8, 2012
Representation for Overseas Citizens - It Just Got Better for French Expats
I'm not sure if French citizens abroad are aware of this but, from my standpoint, they benefit from extraordinary support from their home country - support that this American abroad can only regard with envy.
France-Amérique : Quel est le rôle du secrétaire d'Etat aux Français de l'étranger ?
For starters there is the something called the DFAE (direction des Français à l’étranger et de l’administration consulaire). This service has over 500 people in France dedicated to expatriate issues and concerns as well as 2,700 people abroad. Their mission?
La DFAE se distingue des autres services du ministère en ce sens qu’elle traite pour l’essentiel de cas individuels, d’affaires concernant les personnes privées. Lorsqu’elle négocie une convention ou un accord, celui-ci porte toujours sur des sujets intéressant les particuliers. C’est ce qui fait la spécificité du métier consulaire et le distingue du métier diplomatique, les deux étant et devant rester intimement liés. L’activité de la direction des Français à l’étranger et de l’administration consulaire, très diverse, touche à quasiment tous les domaines de la vie, de l’acte de naissance au certificat de décès.
(The DFAE distinguishes itself from other ministries in the sense that it mostly manages individual cases, matters concerning private citizens. Whenever a treaty or convention is negotiated [with other countries] it always has an impact on topics of interest to private citizens. This is what makes the consular mission different from the diplomatic one though the two remain closely linked. The activities of the DFAE are diverse and touch all aspects of a citizen's life, from birth to death....)
And then there is the Secrétaire d’État aux Français de l’étranger (Secretary of State to the French Abroad). Yes, there is actually a government minister whose sole purpose is to travel and actually talk to French expatriates and hear their concerns. Hughes Serraf's rather tongue-in-cheek comments notwithstanding, at least he exists. The Secretary of State to the French Abroad, Edouard Courtial, visited the United States back in November of 2011 and this is what he had to say in an interview with France-Amérique :
France-Amérique : Quel est le rôle du secrétaire d'Etat aux Français de l'étranger ?
(What is the role of the Secretary of State to the French Abroad?)
Edouard Courtial : Ce poste, qui a été créé en juin dernier, est une réponse à l'évolution de la population française à l'étranger, qui a augmenté de 50 % en dix ans. Et elle continue d'augmenter de 4 % par an. Il fallait donc une adaptation institutionnelle à cette tendance.
Edouard Courtial : Ce poste, qui a été créé en juin dernier, est une réponse à l'évolution de la population française à l'étranger, qui a augmenté de 50 % en dix ans. Et elle continue d'augmenter de 4 % par an. Il fallait donc une adaptation institutionnelle à cette tendance.
(This post was created last June and was a response to the evolution of the French population abroad which has grown 50% in ten years. It is continuing to grow 4% every year. It was necessary that our institutions adapt to this phenomenon.)
France-Amérique : Pourquoi avez-vous décidé de vous rendre aux Etats-Unis ?
(Why did you decide to come to the United States?)
Edouard Courtial : Pour mieux comprendre les gens, il faut aller sur le terrain. Je n'ai pas besoin de théoriciens dans mon bureau à Paris qui m'expliquent les problèmes des expatriés. Cela fait 45 jours que je suis à ce poste et je suis déjà allé en Corée du Sud, en Chine, en Espagne, en Allemagne, en Haïti ou encore au Japon. Il était normal que je vienne en Amérique du Nord. Je n'apporterai des réponses qu'en écoutant les questions adressées directement par des expatriés.
France-Amérique : Pourquoi avez-vous décidé de vous rendre aux Etats-Unis ?
(Why did you decide to come to the United States?)
Edouard Courtial : Pour mieux comprendre les gens, il faut aller sur le terrain. Je n'ai pas besoin de théoriciens dans mon bureau à Paris qui m'expliquent les problèmes des expatriés. Cela fait 45 jours que je suis à ce poste et je suis déjà allé en Corée du Sud, en Chine, en Espagne, en Allemagne, en Haïti ou encore au Japon. Il était normal que je vienne en Amérique du Nord. Je n'apporterai des réponses qu'en écoutant les questions adressées directement par des expatriés.
(To better understand the people, it was necessary to go to them. I don't need theoreticians in my office in Paris explaining the problems of expatriates to me. After 45 days in this position I have visited South Korea, China, Spain, Germany, Haiti and Japan. So it was quite normal that I now visit the United States. I will only be able to provide answers back home if I listen to questions asked directly by expatriates.)
After reading this I had a question for Mr. Courtial - would he be willing to take on another job? Say, representing American expatriates in France before the U.S. government?
And finally, Article 24 of the 1958 Constitution establishes the right of the French living outside of France to have direct representatives in the French Senate. On the Senate website http://www.expatries.senat.fr/ I count no fewer than 12 Senators representing 1.5 million Frenchmen and women outside of France.
And if all that wasn't enough to make me green with envy, believe it or not, it just got even better for the French diaspora. In addition to the existing representation in the French Senate, this year (for the first time) French expatriates will also be electing 11 députés (representatives) to the National Assembly.
I am in awe. To my French friends who grumble a bit (especially the ones in Japan who were a bit critical of the French Embassy after the earthquake): I am sorry, mes amis, but I will take those complaints in the same spirit as I take all your criticisms of the French healthcare system. These things may not be perfect but at least they exist and, believe me, I am painfully aware of how fortunate you are to have them.
Saturday, January 7, 2012
Ted Talk: The Global Power Shift
Fascinating talk by Paddy Ashdown (former MP in the British Parliament). I think he may be right to call the wars of the 20th century as the "European Civil War." I had a professor at university who referred to them as "The 30 Years War of the Twentieth Century." Ashdown sees three power shifts on a global level that he thinks will destabilize us in the 21st century. Is this the end of Western hegemony in the world? Perhaps that is not the most constructive way to look at it. How about we say instead (as Ashdown points out) that the world is beginning to share a common destiny.
No Man is an Island
No man is an island entire of itself; every man is a piece of the continent, a part of the main; if a clod be washed away by the sea, Europe is the less, as well as if a promontory were, as well as any manner of thy friends or of thine own were; any man's death diminishes me, because I am involved in mankind. And therefore never send to know for whom the bell tolls; it tolls for thee.
And here is the John Donne poem he refers to at the end of his talk:
No Man is an Island
No man is an island entire of itself; every man is a piece of the continent, a part of the main; if a clod be washed away by the sea, Europe is the less, as well as if a promontory were, as well as any manner of thy friends or of thine own were; any man's death diminishes me, because I am involved in mankind. And therefore never send to know for whom the bell tolls; it tolls for thee.
Friday, January 6, 2012
Foreigners' Rights when Traveling Abroad
What do Florence Cassez, Shane Bauer, and Josh Fattal all have in common?
They were all arrested while traveling or living in a country outside their country of origin. Their stories are well-known and were the subject of many articles and debates on and off-line.
This blog post is not about their guilt or innocence, nor is it a commentary on the legal systems that they have had the misfortune to become very familiar with.
I'd like to focus instead on something that all of us who travel or reside abroad ought to know: our rights if we are arrested and detained (or jailed) in a country outside of our home countries.
Yes, it does happen - more often then you might think. Around 1000 Australians are arrested abroad every year with around 200 actually going to jail. Mexico and the UK seem to be real trouble spots for Americans. Ouest France reports around 2000 Frenchmen and women in foreign prisons, many of them in Tanger.
So, with that in mind, here are a few things you should be aware of:
Local Law Wins Every Time: The most important thing to understand is that the laws of your country of citizenship do not apply in a foreign country. Strangely enough some people still don't get this. Laws (except for international law) are territorial and cannot be packed in your suitcase to be brought along in case of an emergency or a situation that does not appeal to you. You are both expected to know the laws of your destination country and to obey them even if you don't agree with or like them. Just for fun, have a look at the France Diplomatie website which has an entire page devoted to helping French tourists to understand some of the legal differences between the U.S. and France with an eye toward avoiding unfortunate incidents.
International Agreements: You have some rights under international agreements. If you have some time to kill, check out the Vienna Convention on Consular Relations (1963) and scroll down to Article 36 which, in a nutshell, says that you have 1. the right to contact your consulate without interference, 2. the right to have your consulate informed if you are detained and 3. the right to have consular officials help you with legal representation and visit you in your place of detention. Is that all? Yes, that's about it. Here is how how one jurisdiction in the U.S. (Los Angeles, California) applies the Convention. Be aware that not all countries have signed on to this protocol. This is something worth checking before you purchase that plane ticket.
Home Country Intervention: In addition to being to able to communicate with a consular officer and getting help finding a local lawyer that speaks your language, what else can they do?
Well, they can protest and try to pressure the government concerned if they and you think that you are being treated in an inhumane or unfair fashion. Sarkozy, for example, tried to intervene with the Mexican government on Florence Cassez's behalf. The U.S. government did the same with Shane Bauer and John Fattal. Neither government initially succeeded in getting its citizens released and to date only one of these stories has had a happy ending.
A quick look at the government sites I looked at were very clear that their authority, and their ability to help you, is limited in a foreign country. Read the U.S. State Department's article on Arrest or Detention of an American Citizen Abroad. Read and admire the Australian government's website which is very explicit: no free legal advice, for example, or getting you a Get Out of Jail Card. France has this procedure for its citizens abroad.
I've said it before and it's worth repeating, "know before you go" or you just might find yourself seeing a part of another country about which you really would have preferred to remain ignorant.
They were all arrested while traveling or living in a country outside their country of origin. Their stories are well-known and were the subject of many articles and debates on and off-line.
This blog post is not about their guilt or innocence, nor is it a commentary on the legal systems that they have had the misfortune to become very familiar with.
I'd like to focus instead on something that all of us who travel or reside abroad ought to know: our rights if we are arrested and detained (or jailed) in a country outside of our home countries.
Yes, it does happen - more often then you might think. Around 1000 Australians are arrested abroad every year with around 200 actually going to jail. Mexico and the UK seem to be real trouble spots for Americans. Ouest France reports around 2000 Frenchmen and women in foreign prisons, many of them in Tanger.
So, with that in mind, here are a few things you should be aware of:
Local Law Wins Every Time: The most important thing to understand is that the laws of your country of citizenship do not apply in a foreign country. Strangely enough some people still don't get this. Laws (except for international law) are territorial and cannot be packed in your suitcase to be brought along in case of an emergency or a situation that does not appeal to you. You are both expected to know the laws of your destination country and to obey them even if you don't agree with or like them. Just for fun, have a look at the France Diplomatie website which has an entire page devoted to helping French tourists to understand some of the legal differences between the U.S. and France with an eye toward avoiding unfortunate incidents.
International Agreements: You have some rights under international agreements. If you have some time to kill, check out the Vienna Convention on Consular Relations (1963) and scroll down to Article 36 which, in a nutshell, says that you have 1. the right to contact your consulate without interference, 2. the right to have your consulate informed if you are detained and 3. the right to have consular officials help you with legal representation and visit you in your place of detention. Is that all? Yes, that's about it. Here is how how one jurisdiction in the U.S. (Los Angeles, California) applies the Convention. Be aware that not all countries have signed on to this protocol. This is something worth checking before you purchase that plane ticket.
Home Country Intervention: In addition to being to able to communicate with a consular officer and getting help finding a local lawyer that speaks your language, what else can they do?
Well, they can protest and try to pressure the government concerned if they and you think that you are being treated in an inhumane or unfair fashion. Sarkozy, for example, tried to intervene with the Mexican government on Florence Cassez's behalf. The U.S. government did the same with Shane Bauer and John Fattal. Neither government initially succeeded in getting its citizens released and to date only one of these stories has had a happy ending.
A quick look at the government sites I looked at were very clear that their authority, and their ability to help you, is limited in a foreign country. Read the U.S. State Department's article on Arrest or Detention of an American Citizen Abroad. Read and admire the Australian government's website which is very explicit: no free legal advice, for example, or getting you a Get Out of Jail Card. France has this procedure for its citizens abroad.
I've said it before and it's worth repeating, "know before you go" or you just might find yourself seeing a part of another country about which you really would have preferred to remain ignorant.
Thursday, January 5, 2012
The 2012 Diaspora Tax Wars
It appears that the U.S. government has finally done something so annoying to the American Diaspora that they are actually organizing and their fury and frustration is something to see.
The issue at hand is FATCA (the Foreign Account Tax Compliance Act) which would require foreign FFI's (banks mostly) to report the accounts held abroad by U.S. citizens. On the citizen side (folks like me) there is a new form to be filled out to report foreign financial assets over $50,000. This Form 8938 is in addition to (not a replacement of) the already little known and often misunderstood FBAR (Foreign Bank Account Report). Between FBAR and FATCA the reporting requirements are onerous and the penalties draconian. Non-compliance can result in a foreign entity's assets in the U.S. being seized and for American citizens they run the risk of having their life savings wiped out if they are audited and found wanting by one of the local IRS agencies abroad in Frankfurt, London, Paris or Beijing (yes, the American "fisc" is quite the international organization.)
FATCA is a road to hell in the service of at least one good intention. The original purpose seems to have been to expose American citizens living in the U.S. who might be hiding taxable assets abroad. Somehow in the making of this law it escaped the notice of Congress that there are around 6 million "regular folks" (Americans who live and work abroad as teachers, managers, nurses, and so on) who are directly and adversely impacted by it. An American living in London does not have bank accounts there to evade U.S. taxes - he or she has them in order to be able do manage such mundane tasks as getting paid and saving for retirement or paying rent and buying food. One very concrete and unfortunate consequence of this law is that European banks are dumping customers with U.S. citizenship as fast as they can. I can only cringe as I imagine the reaction of an overseas Americans to the news that he is no longer a valued customer but an annoyance to be reluctantly, but firmly, cast off lest his bank suffer the unpleasant attentions of the American IRS.
The heartening news is that, for the moment, their host countries seem to be on their side. Canada and the EU have already expressed their "concern" about FATCA (which I think is a diplomatic way of saying "Are you out of your minds?"). Many countries would have to revise their privacy laws to comply and there is no real benefit to them since U.S. banks do not seem inclined (and are under no obligation) to share the names and account numbers of their citizens hiding money in U.S. "low-tax" states.
However, Americans should not count too much on their host countries' support. I think it is very likely that one of the possible results of FATCA is that the U.S. government will make deals with other countries (over the heads of the U.S. states) to make U.S. account information available to foreign tax agencies. This would give foreign governments a stake in the game and a real incentive to pass their own new data collection and tax laws for their own diasporas. I believe it is already illegal for a French to have a foreign bank account abroad if he/she has not reported it to the French government. It might be very interesting (and perhaps quite lucrative) for said government to get their citizens' account information from, say, California...
As the deadline for implementation approaches, American citizens abroad are waking up and they are both fearful and furious. FATCA was the just the trigger and now there is an avalanche of discontent about a whole host of other issues: voting rights, discrimination, double taxation, citizenship rights, lack of representation. To get a feel for some of this anger I invite you to consult this selection of articles and sites:
The issue at hand is FATCA (the Foreign Account Tax Compliance Act) which would require foreign FFI's (banks mostly) to report the accounts held abroad by U.S. citizens. On the citizen side (folks like me) there is a new form to be filled out to report foreign financial assets over $50,000. This Form 8938 is in addition to (not a replacement of) the already little known and often misunderstood FBAR (Foreign Bank Account Report). Between FBAR and FATCA the reporting requirements are onerous and the penalties draconian. Non-compliance can result in a foreign entity's assets in the U.S. being seized and for American citizens they run the risk of having their life savings wiped out if they are audited and found wanting by one of the local IRS agencies abroad in Frankfurt, London, Paris or Beijing (yes, the American "fisc" is quite the international organization.)
FATCA is a road to hell in the service of at least one good intention. The original purpose seems to have been to expose American citizens living in the U.S. who might be hiding taxable assets abroad. Somehow in the making of this law it escaped the notice of Congress that there are around 6 million "regular folks" (Americans who live and work abroad as teachers, managers, nurses, and so on) who are directly and adversely impacted by it. An American living in London does not have bank accounts there to evade U.S. taxes - he or she has them in order to be able do manage such mundane tasks as getting paid and saving for retirement or paying rent and buying food. One very concrete and unfortunate consequence of this law is that European banks are dumping customers with U.S. citizenship as fast as they can. I can only cringe as I imagine the reaction of an overseas Americans to the news that he is no longer a valued customer but an annoyance to be reluctantly, but firmly, cast off lest his bank suffer the unpleasant attentions of the American IRS.
The heartening news is that, for the moment, their host countries seem to be on their side. Canada and the EU have already expressed their "concern" about FATCA (which I think is a diplomatic way of saying "Are you out of your minds?"). Many countries would have to revise their privacy laws to comply and there is no real benefit to them since U.S. banks do not seem inclined (and are under no obligation) to share the names and account numbers of their citizens hiding money in U.S. "low-tax" states.
However, Americans should not count too much on their host countries' support. I think it is very likely that one of the possible results of FATCA is that the U.S. government will make deals with other countries (over the heads of the U.S. states) to make U.S. account information available to foreign tax agencies. This would give foreign governments a stake in the game and a real incentive to pass their own new data collection and tax laws for their own diasporas. I believe it is already illegal for a French to have a foreign bank account abroad if he/she has not reported it to the French government. It might be very interesting (and perhaps quite lucrative) for said government to get their citizens' account information from, say, California...
As the deadline for implementation approaches, American citizens abroad are waking up and they are both fearful and furious. FATCA was the just the trigger and now there is an avalanche of discontent about a whole host of other issues: voting rights, discrimination, double taxation, citizenship rights, lack of representation. To get a feel for some of this anger I invite you to consult this selection of articles and sites:
- American Citizens Abroad (ACA) They are leading the charge from the heart of Europe with their Repeal FATCA Now! campaign.
- The Isaac Brock Society in Canada. "Liberty and Justice for All U.S. Persons Living in Canada and Abroad."
- Renounce U.S. Citizenship - "Stop Citizenship Based Taxation - Repeal FATCA."
- James Fallows FATCA series in The Atlantic: Fatca: The Menace You'll Hear About in 2012 (with links to articles in the New York Times and Wall Street Journal)
The Fatca Menace! (good selections from the mail he received in response to his first article with concrete examples of the impact to Americans abroad)
The Fatca Chronicles: Tales From China, Canada, and Estonia
Wednesday, January 4, 2012
Hallelujah Chorus - Quinhagak, Alaska
And this one which was passed along by a family member in Seattle. This is the Hallelujah Chorus by Handel interpreted by 5th grade students at the Kuinerrarmiut Elitnaurviat school of Quinhagak, Alaska.
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