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Tuesday, April 2, 2013

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.


Janet said...

Thank you for writing this

Blaze said...

Perhaps the most bizarre thing about this issue it the fact the U.S. is a country of immigrants. Unless someone is a native American, everyone's ancestors immigrated to U.S. from elsewhere.

Yet, Sweden, Germany and Ireland didn't stalk my grandparents and great-grandparents for money. Their homelands did not consider them tax evaders, traitors, money launderers or terrorists.

Rather, they were just like us. They were people who, for a variety of reasons, chose to live their lives in a country other than where they were born.

Why is it so difficult for Americans to understand that about us?

Anonymous said...

Very clearly explained Victoria.

And I'd like to add, that calling those born dual outside the US via parentage, or lumping them in with 'expatriates', camouflages the manner in which the US asserts the right to the person and labour of individuals who have NO economic relationship with it. They may not have ever been to the US, or have any other possible US tie - except the vague and tenuous one conferred under some circumstances by some kinds of US parentage. They may not even know or suspect that the US claims them solely by inventing the inheritance of a US taxable status via a parent - which is objectionable and absurd.

Articles are very careful not to acknowledge duals - and very careful never to acknowledge that those deemed to be US taxpayers may very well have been born 'abroad'.

These are even more 'accidental' Americans than those born in the US to non-US citizens studying or on short visits, or the Canadian 'border babies' (sent to US border hospitals when Canadian wards too full or unequipped). Or the 'accidentals who never lived, worked or earned in the US as adults.

The idea of someone born a dual 'abroad', for example, in France - being described by the US as a 'US tax evader' is ludicrous and unethical.

If we could pin some of these US homelanders down, perhaps they would have to admit how absurd citizenship-based US taxation is as applied to its il-logical conclusions.

But I note that even our allies like the ACA often do not address the injustice of those born outside the US - and often unable ever to vote, yet fully expected to file US taxes for ever and ever.

Someone born in France is NOT a US expatriate. Someone born in the US whose family moves 'abroad' or returns from whence they came, is NOT a US expatriate. To expect them to obey US laws of any kind based on mere parentage, or even accidental birthplace, is absurd and unethical.

Although the OVDI program had a special lower penalty category for those born duals, the penalty would still be levied on the basis of an assumption of an applicable US tax and reporting duty unfilled. As if, at birth, we are all issued an IRS Internal Revenue Manual, which we must master no matter where were born, and live - as if it were a holy book passed down via a god's decree.

Tim said...

You have reference to this post on another blog:

Victoria FERAUGE said...

@Janet, Thank you for the comment.You are very welcome. :-)

@Blaze, Many countries at one time or another have tried to control outbound humans. There is a very good book called Citizenship and Those Who Leave edited by Nancy Green and Francois Weil that talks about some of the past methods which were pretty scary. Canada and the US have had a long history here. Basically both were targeting the same potential migrants and both countries actually went to the others territories to "poach" people they needed. Both countries desperately needed immigrants and they needed them to STAY PUT once they arrived. I think what was true then is still true today. The US wants those STEM workers and once they've got them they want to discourage them from leaving either to go back to their home countries or to a third country. Since they can't legally prevent them from doing this, other methods will have to do. Shaming, for example, or (I believe) citizenship-based taxation which means the US follows them wherever they go to extract what they can. Not a pretty picture is it? And alas it is much admired by other countries in the world who I believe would emulate the US if they ever had a efficient cost-effective way to make it stick.

@anonymous, You are absolutely right, I did not address the issue of Accidental Americans. And thank you for pointing out how these people are treated. It is a scandal that these people must pay a ransom to get themselves of a citizenship they never asked for and don't want. There is a post there, I think.

@Tim, Thank you so much for the link. Allison has some wonderful comments. I will add my own link to her post on this one.

Anonymous said...

It would be nice if someone should come up with a way to register all ex-pats to vote in Wyoming. You wouldn't even need all of them to register to be a majority voter.

Tim said...

I was having dinner with several "homelander" Americans earlier this evening and this subject came up. I can't say it went very well. For one thing I am discovering there is actually quite a bit a prejudice among very "progressive" Americans both toward immigrants and expats. In fact a part of me believes we must to be even more militant and disobedient after this evening.

First on immigration to the US. My sense is immigration is viewed very much through a political lens. Basically more immigrants are good because they will vote Democrat and the Democrats will be able enact social programs and policies that these people support. There was not in my mind a lot of interest in the issues or problems immigrants to the US face. At one point I brought up how many countries such as lets say Iran(and many other countries) refuse to allow people to renounce their Iranian citizenship and when Iranian immigrants to US obtain US citizenship and travel back to Iran they must enter still on Iranian passport and Iran refuses to give the US any consular access/assistance to these individuals. They didn't this was "good" but really did not think much could or should be done about it. It is someone "elses" problem basically.
After this one person argued perhaps the US should do what Iran does and simply prohibit the "rich" from renouncing their citizenship. However, the also thought that any US citizen living outside the US for more than ten years should be forced to give their US citizenship even if it makes them stateless unless of course they are "rich" in which case it should be made impossible for them to renounce or give up their citizenship. Several others seemed to be in agreement with this idea.

The dinner was at a fairly liberal and chic restaurant in Boston on Newbury Street. I mentioned that the local member of Congress Mike Capuano was a co-sponsor of HR 597.Everyone liked Capuano but several thought it was a waste of time for him to be focusing on legislation like HR 597 instead of more "important" issues closer to home.

Victoria FERAUGE said...

@Anonymous, Yep that would be something wouldn't it? :-)

@Tim, Alas that is exactly the reaction I get when I try to talk about this with homelanders. The progressives seem to agree with some of their conservative brethen that: 1. we should be taxed and 2. we should be relived of our citizenship if we live outside the US for X number of years. I think all issues related to American emigration transcend ideology. We are not loved and our homeland compatriots are in general not our friends. All the more reason for us to start demanding better representation but that would be a bitter fight because clearly they don't want us to have it.

Tim said...

New youtube video posted of EU Parliament statement on FATCA(MEP Sophia In't Veld). Posted by hint hint.

Tim said...

New Youtube video of EU Parliament on FATCA(MEP Sophia In't Veld).

Unknown said...

Coming in a day late on this but with admiration for a very clear argument!

As regards reframing the debate and choosing new language,one approach the organizations I work with, like AARO and FAWCO, are promoting is the redefinition of the word "foreign".

I live in France and am a US citizen. My accounts in the US are not foreign because of my citizenship; my accounts in France are not foreign because I need them to be paid by my clients, pay the electricity bill and my taxes, buy groceries...
If I had an account in Luxembourg, Switzerland or.... the Cayman Islands, that would be a "foreign" account.

If you think about it, this would solve a lot of problems related to filing - no more FBAR for the vast majority of Americans and greencard holders; no more problem of joint accounts with non-American spouses and partners...


Victoria FERAUGE said...

@Tim, YOWZA! Great video and I will post this tomorrow because I think it merits highlighting. I think I have a new heroine. :-)

@Lucy, Thank you for the comment and damn I do like that argument which has the merit of being true AND compelling. Yes, my daughter's college savings account in France is NOT a "foreign" account, it is LOCAL to her and to us, her parents, because we live here in France and not in the U.S. :-) I think that should be obvious to any reasonable person....

calgary411 said...

Thanks, Victoria, for this post. Your analyses of so many different aspects of ramifications of citizenship-based taxation law of the US are thoughtful and express what many of us think but have difficulty putting into words.

I'd like to second all that Anonymous says regarding "accidental Americans" born outside the US. I would like to give a side aspect of that group.
As you know, my son was one such “accidental American” -- born in Canada, raised in Canada, never registered with the US, never lived in the US, never had any benefit from the US. He and others like him with developmental disability or other mental incapacity are leashed to the US and huge cost of compliance year after year after year (even when an executor has to manage their financial affairs after parents are gone). There generally would be little or no US taxes owed – until, for some, they receive an inheritance from their parent(s) which is to be for their parents’ peace of mind that their offspring will be OK after they are gone. The US Department of State states that a Parent, Guardian or Trustee of such a person does NOT have the RIGHT to renounce on behalf of that person even if they think it in the best interests of the person (and make other daily decisions, some pertaining to life and death). I believe this is so morally wrong and, really, punitive. For many such as these persons, automatic conveyance of US citizenship is not at all a gift.

… and don’t get me started on how their ‘supposed’ US citizenship renders them second-class citizens to similar others of their country with regard to legal registered disability savings accounts that the US considers “foreign trusts”.

Again, thank you for all your hard work, Victoria.

I hope you are doing well!!!

Tim said...

Along the lines of STEM jobs in the US I thought you might find the video below amusing. I was actually driving by this building earlier today.

Was this the "job" you really had to "dress up" for. The people at the DS Waltham campus don't look that well dressed. Do you know anyone in the video? The guy sitting next to French Ambassador to the US is the Lt. Governor of Massachusetts.

Funny its good for Americans to work for French companies in Waltham, MA but bad to work for French companies in St. Cloud France. Even better to get those STEM visas so DS Waltham can fill even more "high tech" jobs.

Victoria FERAUGE said...

@Calgary, So good to hear from you! Thank you for telling your story here. It is unbelievable that the US is doing this. You are an incredible woman and if there is ever anything I can do to help you in your fight, you have only to ask.

Victoria FERAUGE said...

@Time, Thank you so much for that video of DS. I was there just as the French campus was finished and we moved from Suresnes to Velizy. Now there is a US campus and I wonder when there will be an Asian one.
Such a pleasure to see Charles - really amazing man and he is so charismatic in person. Yes, I recognize some faces in that video. This was a great company to work for and yes I always dressed up when I had meetings with top management. They took mobility very seriously - when I was there I was able to get one of my IT people in France sent off to Japan. And one of the Japanese staff was able to come to France. The driver was an initiative called "One Company" and it was one hell of an opportunity.

Rosy the Riveter said...

I wish someone in a high important place in the US - and elsewhere - could read these comments. What's so complicated about just letting foreign -that is, local to the overseas resident - accounts being taxed where they are located, and US-source accounts being taxed where they are located ? I don't believe the EU common tax policy on the table right now even deals with that. Good work, as usual, Victoria !

Tim said...

DS Waltham actually got several TV stories on the air around the time they opened.

But this video has to take the cake? What is Michigan Gov Granholm Michigan as in the Michigan of Carl Levin and Sandler Levin doing at the MAIN HQ of DS in Velizy, France. Who is that American woman? At first I thought it might be Victoria but then I noticed whoever it was was named Kate. She kind of looked like Victoria's picture.

As to my earlier comment. I got Saint Cloud and Suresnes mixed up. Aren't they right next to each other and both start with an S(Isn't there a Sevres too or something like that). I just remember they are halfway between La Defense and Versailles.

Victoria FERAUGE said...

@Tim, Understandable. It's confusing because Dassault Aviation is located in St. Cloud
and the old Dassault Systemes campus was located one city over in Suresnes before they moved to Velizy.