New Flophouse Address:

You will find all the posts, comments, and reading lists (old and some new ones I just published) here:

Tuesday, July 30, 2013

More on FATCA: 'Simple" Premise Gone Wrong

See below for updated links to other articles and discussions from around the world about The Hill piece.

It's been three days since our article,  FATCA:  'Simple' Premise Gone Terribly Wrong, was published in The Hill.  It is, as of noon today (Pacific Time), topping the Most Viewed and Most E-mailed lists and is second on the Most Discussed.

To all the people who read, commented, sent encouraging notes and phone calls, and who passed along the link via Twitter and FB and email, thank you so much.  To the sheer pleasure of seeing something we wrote published, we can add the joy of watching the Diaspora in action.  It's incredible and I never imagined that I would see such a thing in my lifetime.

To the homelanders who may be reading and wondering what the big deal is, please try to understand how frustrated we are.  We have tried just about every avenue to be heard.  We have joined organizations like ACA and AARO;  we have written (many of us more than once) to our Congressional representatives and to our local lawmakers in our countries of residence; we have sent article after article to the media; we meet every one-line article and discussions about this with comments and letters to the journalists correcting misconceptions and asking that they look into it further;  we have set up on our own websites and blogs.  Hell, we even went to the OECD and the European Parliament to see what could be done.

I don't know what more we have to do to get heard but I'm hoping that the publication of this article will mean that we will have an easier time convincing other publications to do interviews or accept articles giving OUR side of the story.

Whenever I get too frustrated or think that one sick, unemployed, middle-aged woman in Versailles is a complete fool for thinking that any of this can be changed, I remember the Dalai Lama saying:

“If you think you are too small to make a difference, try sleeping with a mosquito.”

Which is to say that the "weapons of the weak" can be quite formidable indeed.  So let's all be mosquitoes and perhaps together we can create the perfect swarm.  


Some very interesting discussions on the article around the Web if you'd like to see more reactions and comments:

Maple Sandbox (Lynne's blog)

Feel free to pass along any more links you may have come across in the comments section and I will add them to the list.

Update:  And here's one that hit my mailbox this morning from Greg in Thailand.  He asks, "Is FATCA Doomed?"  Really well done and a must read.

Sunday, July 28, 2013

FATCA: Not so simple after all

Last week Lynne Swanson and I submitted an article about FATCA to The Hill, a Washington, D.C. publication written for and about the U.S. Congress.

Our article was accepted and was published today:

FATCA: 'Simple premise' gone terribly wrong

There is already one comment up and hopefully there will be many more.

It's very gratifying to see the article on-line.  I am a neophyte when it comes to writing for publication in anything other than my blog.  Happily, Lynne more than made up for my lack of experience.  My sincere thanks to her because she is a damn fine writer and a real pleasure to work with and learn from.

Bon dimanche, everyone!

Friday, July 26, 2013

Tales from the Homeland: Driving in Seattle

Minor crisis this morning:  It was 5 AM and we were almost out of coffee.  Since we are still suffering from jet-lag, this is not good at all.  First order of business today was to head to the market for some beans.

I took the car.  First time I've driven any motor vehicle in two or three years since I don't have a French driver's license and I always take the public transportation.  My mother actually checked my Washington State license before giving me the keys - she thought it was expired - and suggested that I do a short trip to remember how to drive in the city.

I made it to the store just fine;  Seattle drivers are much less aggressive than Parisians (though some have guns so I wouldn't push it), the streets are wide and the signage is good.  I found the coffee, bought some half and half and some Peach Passion Fruit Scones.  By the time I made it to the checkout I was falling asleep again and the nice young woman behind the counter asked me if I was alright.  I replied that I was a bit jet-lagged and that led to a short conversation about what I was doing in Seattle.

All was going according to the Shopping in Seattle Cultural Script and I was pulling out my credit card  to pay when she looked at me and asked, "Do they have credit cards in France?"  Why, yes, I replied and I showed her my BNP (National Bank of Paris) Visa card.

I don't want to be hard on such a lovely young lady and there really is no such thing as a stupid question as far as I'm concerned.  However, I couldn't help but think that here was a poster child for why Americans really do need to get out of the United States from time to time.

Made it back home without killing any pedestrians and marched at once into the kitchen where I ground some beans and made everyone nice, hot, very strong, cups of coffee.

Seattleites are crazy about coffee.  Starbucks was born in this city and on every street there are coffee vendors selling pretty damn good brew.   This has been true for many many years.  When I was at university in the early 1980's my haunt was a little place called The Last Exit on Brooklyn. The service was slow, the boys were cute and you could order one coffee and then kick back to study or talk with friends for hours and never get kicked out.  And, of course, you could smoke.  It was a little slice of heaven.

On Being an American

Love where you're from but bloom where you're planted.
Flophouse Motto 

Asking a migrant if she prefers her home country to her country of residence is a little like asking a child if she loves her father more than her mother.  It's an unfair question.  To the people urging us long-term Americans abroad to just go ahead and renounce already, they are taking that question one step farther and asking not only which one do you love more, but which one would you disavow if we made you choose?  

Now I'm a goofy old lady who firmly believes that love shared is not love halved.  I will never accept the premise that one can only love one country at a time and I reject any model that says that ideally we should all be serial monogamists (or that a person can't have two mothers/fathers).

I had an epiphany the other day.  I may have spent most of my adult life outside the U.S. but I was born and raised here in Seattle.  No one can take away the first 20 years or so of my life.  I am an American and will always be one even if I decide to forgo the pretty blue passport.  Cutting ties by relinquishing/renouncing will mean cutting my ties to a political community but here's the kicker:   America is so much more than that.  There is a nation beyond the government and perhaps it's time to start putting the people above the state.  Yes, if I renounce I would no longer be an American citizen, but I would still be an American by culture, blood, language, and inclination.  I am part of the collective memory of this country and no one on this planet (not  the US Congress or the President or the homelanders) can take that away from me. 

And they can't take it away from anyone else either.  To the Canadian/American reader who left a comment about how distressed she was about giving up her U.S. citizenship, I'd just like to say that as far as I'm concerned she's an American as long as she wants to be one with or without her U.S. passport.  So she won't be able to vote anymore in US elections.  Big deal.   It's not like American citizens themselves do that with any regularity. 

Thinking about it this way makes me much more serene about the whole business.  What do you think of this motto for those of us thinking about renouncing? "Forget the state and just be a child of the nation."  

Just a few thoughts coming out of my jet-lagged brain this morning.

Two Birds Tattoo was a bust.  They are booked until late August and at that time we'll be flying out to Quebec.  So today we are on a quest for another tattoo parlor and we plan to check out Slave to the Needle in Ballard some time today.  

Already got the Seattle punk haircut this afternoon... 

Tuesday, July 23, 2013

Easing Back Into America

I have had yet another salutary lesson as to why "living in the wreckage of the future" is not only futile, it's downright dumb.

I flew out of Charles de Gaulle airport Monday morning on a Delta/Air France direct flight to Seattle.  First surprise came when I was upgraded to Economy Comfort - something I only realized when I actually got to my seat and saw that I had space.  I was so delighted I grabbed the nearest flight attendant and said "Thank you!'  We got to talking in that easy way Americans have of chatting and exchanging information and it turned out that she has a family member with breast cancer.  For the entire flight this very nice woman made sure that I was comfortable, checked up on me several times during the flight and even brought me some hot tea.

The other members of the cabin crew were equally good.  The announcements were few but pertinent and rather droll.  At the beginning of the flight they pointed out that we were flying on a Boeing 767 "Made in Washington State."  At the end of the flight as we flew down the corridor between the mountains, they made sure we saw The Mountain (Mount Rainier) in all its glory.  

The food was great.  The in-flight entertainment system had a lot more choices than remembered:  movies, HBO specials....  Caught part of season three of Game of Thrones, discovered Mildred Pierce and laughed for over an hour watching a Chris Rock special.  I'm a huge fun of the last.  I'm not sure this would make sense to American homelanders but listening to him reminded me of all the reasons I like my country of origin and my compatriots.  Rock is irreverent, crude, politically incorrect, wicked smart and oh so right about a great many things.

Going through immigration was just fine.  The border officer didn't bat an eye when I told him I lived in France.  He laughed when I replied to his question "Brought anything?' with "Actually I'm planning on doing all my shopping here and taking it all back to France."  And when he asked the purpose of my trip and I said, "Seeing my Mom,"  he smiled, handed me my passport and said, "Welcome home."

Now if we could just clone this guy...

My parents picked me up at the airport and, as promised, I had a very soft landing.  Before I knew it we were in Phinney Ridge getting out of the car and I was planted on the couch in the kitchen gulping down a fresh peach smoothie (my Mom has come a long way from those ghastly tofu milkshakes she made me as a child) and eating the elder Frenchling's chocolate chip cookies.

Got up at 5 AM this morning, made coffee and have been perusing the stacks of books scattered all over the house.  If I'm up to it this morning I plan to head over to Two Birds Tattoo to talk to Tara about my next bit of body art.

All in all it's good to be back for a visit.

More later.

Friday, July 19, 2013

Flophouse Garden: Healing through Writing and Gardening

Monday morning the younger Frenchling and I will be on a flight to North America.  We have several destinations:  Seattle, WA;  Silverton, Oregon;  Vancouver, BC;  and Montreal, QC.

I'm a little nervous about the trip.  I will be very far from my caregivers, my family doctor and the staff at the René Huguenin cancer treatment center.  Yes, there are centers like this one in North America but, hey, I don't know them and they don't know me.  Just to be on the safe side I asked my local pharmacy in Versailles to give me a good supply of my cancer medication - don't think I want to try and purchase it over there, especially in the US.

I'm also very aware that I'm not quite 100%.  I still have trouble sleeping and I'm tired a lot of the time.  Sometimes the meds make me feel wretched and, ever since I stopped the chemo, I've had really bad joint pain.  I don't want to make too much of it (for a taste of what it's like for some see this post by Scorchy) but it's enough to make me wonder how this trip will go and if I'm really up to it.

Two things have brought me this far in my healing.  The first is writing.  I'm often asked where I find the energy to post (in three places now), read, and comment.  Well, it's something I truly enjoy.  In fact when I sit down and start typing I get into what has been called "flow".   The aches, pains and nausea disappear or greatly diminish.   Most importantly, I get out of my own head.  This means that I stop focusing on my problems and start taking an interest in other people and their/our issues.  It's a way out from the tyranny of self.

The other is gardening.  It's the perfect activity for healing because I can do a little at a time, there's no deadline to meet and nothing to stress over.  When I get tired, I just go inside and....write. :-)   Or lie on the couch and read really good bodice-rippers and paranormal romance novels.  

In gardening there is all the satisfaction of seeing something come alive and having it be appreciated by my neighbors.  "C'est magnifique!" said my Italian neighbor and that means a lot coming from him since he comes from a line of accomplished gardeners and knows personally the director of the gardens over at the Versailles castle.

And that leads me to my last worry:  What will happen to my garden when I'm abroad?  My spouse has promised to faithfully water every single day.  I believe him but will he notice that the young fig needs a little extra care? Or that he should cut the old blossoms of the roses?  Or put out a little slug bait to kill the escargots that are causing devastation to the hostas?  I know I need to let it go and trust that it will be alright.  Another lesson in surrender.  Another opportunity to live in the present and not in the wreckage of the future.

May you all have a good weekend and I'll leave you with the latest pictures of the Flophouse garden.

Front courtyard
Back perennial bed

View from the back porch

Wednesday, July 17, 2013

Some Great FATCA/CBT Links

Swamped here.  The Flophouse will be on the move next week and we are busy with doctors, dentists, the mayor's office, visas, packing and the like.

Nonetheless, I wanted to highlight some of the great links that were left in response to Monday's post (FATCA:  A Project Audit).  I may be imagining things but it feels as though the human side of FATCA/CBT is finally generating some interest.  Here are a few that Flophouse readers left in the comments section and a couple I threw in as well.  Thank you all so much for reading the Flophouse and for generating such a great conversation and sharing information here and elsewhere.  Bonne lecture!

Vers une dérive du fisc américain?  by Mohammad Faroukh for Bilan

How to Lose Friends, Citizens and Influence by Colleen Graffy for the Wall Street Journal 

Has the IRS Gone Fishing?  by Geoff Cook for International Adviser

The Personal Impact of Offshore Enforcement by Marie Sapirie (originally published in Tax Notes but made available on-line by Tax Analysts due to the great interest it generated)

British Banking Association letter.  Question about what to do with those pesky "US Persons" start on page 8.

And while I have you, you might also be interested in something I was made aware of yesterday.  Sophie in't Veld and her staff are working very hard to raise awareness about FATCA and its implications.  They have submitted the following questions to the President of the European Council and Council Vice-President/High Representative:

"Recently in a letter to the European Commission, five EU Member States announced their interest in a pilot agreement for multilateral exchange of information on tax matters (EU FATCA) based on the IGAs agreed with the US.[i]

At the same time, the "reciprocity" stipulated in IGAs of exchange of information seems to become problematic for both members of the US Congress and US banks.[ii] Questions were raised about the Treasury's authority to negotiate directly with foreign governments and to sign IGA's. There were calls for "a moratorium on FATCA enforcement and negotiations of additional IGAs".[iii]

On the 12th of July, the US IRS announced a postponement of the enforcement of FATCA by six months because of a.o. "continued uncertainty about whether an IGA will be in effect in a particular jurisdiction hinders the ability of FFIs and withholding agents to complete due diligence and other implementation procedures". The list of jurisdictions, treated as having an IGA in effect will include also jurisdictions that have signed but not yet brought into force an IGA and may be removed from this list if they fail to do so within a "reasonable period of time".[iv] In that case, the FFIs in that jurisdiction will be considered as non-compliant and will be confronted with sanctions.

Is the Commission aware of the above mentioned concerns related to FATCA and the IGAs?

Is there a "moratorium" on IGAs and does the Commission consider such moratorium as necessary?

What would constitute "a reasonable period of time" for bringing IGAs into force? Will the "reasonable period of time" be decided by provisions in the IGAs, or unilaterally by the United States authorities?

What is the legal status of IGAs and can the US change or repeal them unilaterally at any given time?

Should the IGAs on FATCA constitute a template for EU-wide exchange on information on tax matters, given its flaws regarding proportionality and data protection?"

Great questions and I for one am really looking forward to hearing the answers.

Monday, July 15, 2013

FATCA: A Project Audit

Awareness of the implications of the U.S. law, FATCA (Foreign Account Tax Compliance Act) is growing.  For FATCA supporters the past few weeks has seen both domestic (US) opposition to reciprocity and the Intergovernmental Agreements (IGAs), and yet another delay in implementation.  For FATCA detractors this is good news but it's too soon to tell where this is all going and I wouldn't break out the champagne just yet.

Whenever there is a lull in the action, smart strategists take the time to reassess.  FATCA, the law, is a reality.  It was passed by the U.S. Congress and, come hell or high water, the U.S. Treasury and the IRS have to come up with some way to make it stick.  That's their job.  But what began as a law to force foreign banks to disclose their U.S. Person account holders has become something else altogether.  

What we are seeing right now is the creation of a very complex worldwide financial reporting system - what Marvin Van Horn has dubbed "GATCA" (Global Account Tax Compliance Act).  Is this what the U.S. Congress had in mind back in 2010?  I really doubt it. U.S. lawmakers are not terribly concerned about other countries and their problems with tax compliance.  Some are even horrified that their very own foreign investors might be deemed another country's tax evaders and they are resisting any attempt to make U.S. banks report those accounts to their respective governments.

Allison Christians made this very pertinent observation the other day on her blog, "It's really, really difficult to get an international tax regime going on a unilateral basis. There is a story in this about the difference in making a unilateral rule first, and then repeatedly changing it to fix all the problems that inevitably arise, versus sitting around in international networks trying to make sure the rule will work first, before trying to implement it internationally."

My background is in the management of large information systems for multi-nationals.  What Professor Christians  is describing feels a lot like some of the global projects I've worked on where company HQ decides unilaterally to impose a new system on its subsidiaries around the world.  What appears  straightforward, logical and necessary to the home office in Houston or Paris is often completely illogical and unworkable when it hits the ground in Tokyo or Sao Paulo.  When a multi-national company tries to run a project in this manner, it inevitably has to make many changes and the end result is all too often a system that is overly complex, late, and costs far more than HQ ever intended to spend.

A much better way is to gather the requirements ahead of time and build a core model that takes local conditions and perspectives into account.  Equally important in the "Gather Requirements" phase is what I call "evangelization" - building support for the project one country or region at a time.  Yes, all this takes time but it's worth it because implementation will then go much more smoothly and the project is much more likely to be a success.

Whatever the merits or demerits of FATCA the law,  it's worth looking at FATCA/GATCA from this perspective.  If this were an IT or engineering project and a consultant was asked to do an audit, what might he or she say about it?

Failure to identify all the stakeholders:   FATCA was originally thought of as something between foreign banks and the U.S. government.  But at every stage of implementation new stakeholders keep popping up:  foreign governments and their tax authorities, the compliance industry, U.S. Persons abroad and so on.  Now the World Council of Credit Unions is chiming in as well as regional authorities like the European Union.  As the final system takes shape some U.S. lawmakers have become major stakeholders as well.  Yes, Treasury did ask for comments when preparing the final regulations and did take them into account.  However, this did not suffice as a forum for discussing all of the concerns and questions.  This has led to mounting criticism and both legal and political challenges which are slowing down the implementation and might even stop it.

Failure to do a proper assessment of the impact and the risks:  FATCA has already had many unintended consequences that could have been foreseen.  A few (like banking discrimination) were considered but then set aside as unlikely to occur.  Surprise!  The cost issue was raised pretty much after the fact and the U.S. Congress never asked for, to my knowledge, any estimate of how much FATCA would cost to implement, nor was there any realistic cost/benefit analysis.  For the money spent building the system, not to mention the recurring support costs, just how much net revenue will the U.S. get in the end? No one knows.  Even today there are only vague promises of "putting a halt to tax evasion" but there are no hard numbers from a credible source.

Lack of success criteria:  One of the signs of a very poorly conceived project is that the original objectives were either fuzzy to begin with or become completely lost in the frenzy to get the project in.  What exactly would have to happen for FATCA to be considered a "success"?    To date the only scorecard we are seeing is the number of intergovernmental agreements signed.  But the original project goal wasn't about making these kinds of agreements - in fact the IGAs are something that came into the game rather late.  The fact that they are now being used as a measure of success should trouble everyone.    A perfect example of "mission/scope creep" and one could argue that Representative Posey's letter to Treasury and Senate opposition is just the Steering Committee (such as it is) trying to rein in the project team's attempt to broaden the scope of the original project objectives.

An out of control Core Model:   FATCA was originally a few pages in the 2010 Hire Act. Today it has become a monster with over 500 pages of regulations and eight signed intergovernmental agreements. In the recent announcement by the IRS that FATCA is once again being delayed, they say, "The Department of the Treasury (Treasury Department) and the Internal Revenue Service (IRS) intend to incorporate the rules described in this announcement in final regulations under sections 1471 through 1474."   As I understand it, as the IGAs are signed, changes are fed back into the Core Model (the regulations).  Since only a few countries have actually signed IGAs to date, this raises the question of what future changes may have to be included as Treasury negotiates with the remaining 180+ countries in the world.

This not only increases both the uncertainty about what the final system will look like, it adds to the complexity and the costs.  Today one can see the outline of what the system will look like but is that good enough for those who must modify processes, laws and information systems?  As my friend JJ says:   “Walking on water and developing software from a spec are easy if both are frozen.”   Trying to deploy a Core Model without having the vast majority of the requirements already taken into account, and making ad hoc changes during implementation and deployment,  is a recipe for disaster.  If I were an IT manager running a FATCA compliance project I would be very very nervous because the ice looks pretty thin to me.

Complexity:  FATCA begets GATCA and as the system becomes more and more complex with more and more components (people, processes, information systems, legal and political systems) it is rapidly becoming a bowl of spaghetti the kids are trying to eat on a white couch.   Charles Perrow, author of Normal Accidents, has a lot to stay about high-risk systems and "inevitable accidents."   It's not so much about original design flaws as it is the way the components interact in new and surprising ways as the system starts working and doing what it was meant to do.  
"We start with a plant, airplane, ship, biology laboratory, or other setting with a lot of components (parts, procedures, operators).  Then we need two or more failures among components that interact in some unexpected way.  No one dreamed that when X failed, Y would also be out of order and the two failures would interact so as to both start a fire and silence the fire alarm."   
And that's why the house burns down or the system crashes.  Efforts to make the system safer and more robust only add to the complexity thus making it,  Perrow says, even more likely to fail.

FATCA is becoming such a system;  highly complex and more and more "tightly coupled" (a change or failure in one component means sending ripples through the entire system).   More components mean more danger.  A good example of this are the IGAs - an attempt to make a poorly-written, dangerous and unworkable law "safer" and less likely to have catastrophic consequences.  

But are they really making the system more secure or have they introduced new risks?    If Treasury cannot get the IGAs signed in sufficient numbers by next year then the choices are 1.  Start the 30% withholding which could be interpreted as starting a financial war with the rest of the world;  2.  Step back and get the law revised or delayed yet again;  3. Give up.   

If Treasury succeeds, on the other hand, it could be even worse because no one really knows what is going to happen when the system goes live in July of 2014.  Already other countries are looking at the opportunities inherent in FATCA.  The U.S. could very well end up with the short end of the stick if other countries use it to for their own ends - ends that are in direct opposition to U.S. interests.  

Any one of these outcomes would be a huge blow against the credibility and prestige of the U.S.   Stepping back and looking at it very coldly, FATCA may represent one of the riskiest projects the U.S. has ever tried to push on the international stage.

Can this project be saved?  As someone who would be more than happy to see it fail, I am not well-placed to objectively answer that question. 

What is clear is that no one - not the proponents or opponents of this law or the lawmakers and bureaucrats around the world making policy or even the average person mindlessly cheering on the "fight against tax evasion" - has any idea of what the FATCA/GATCA landscape will look in the years ahead and if it will be a deemed a great victory or a catastrophic failure. 

Perhaps both.   Because, as every experienced project manager knows, "If you don't know where you're going, any road will take you there."

Saturday, July 13, 2013

Farm Report from Oregon: Regarding Cherries and Other Things

My great-grandparent's former farm in Eastern Washington
Urban dwellers have a rather romantic view of what farming is all about. My family is only one to two generations removed from rural life and so I was taught early on that farming is not all bucolic bliss. I remember that my great-grandparents were greatly relieved when they sold their little ranch and retired on U.S. Social Security. Imagine being 70 and getting up at 5 AM every morning to milk the cows. Or getting down on your hands and knees to weed the strawberries. Once or twice might be fun for a city-dweller but doing farm chores 365 consecutive days in a year gets old fast.

When people migrate from rural areas to cities - a worldwide phenomenon described beautifully in Arrival Cities by Doug Saunders - they have good reasons.  It's a hard life.  But every so often the migration is circular with people leaving the city and going back to the land.

The farm in Oregon - the fields
As I've mentioned before my parents own a small farm in the Willamette Valley in Oregon, USA. Since they retired they have been spending more and more time there.

My parent's farm no longer has cows or chickens or any other livestock. The fields are rented out to local farmers. The house is also rented out.  What they do have is a beautiful old barn and space for a magnificent vegetable garden, a walnut orchard and grapes. It's just enough "farm" for a retired couple to enjoy themselves but not so much that they exhaust themselves trying to make a go of it.

In the summer the farm is a family affair. We go down there from Seattle, my brother and sister drive over from Portland, and my other brother comes up from Sacramento with his brood and we all spend a few days reconnecting. Last year I couldn't make it because of the cancer but this year I will be there come hell or high water even if all I do is sit in a lawn chair.

Every so often my mother sends out a family email about what they are up to in the valley. Her notes are a joy to read (my mom is a very entertaining writer) and she gave me permission to post the most recent one. Here it is with some editing on my part - mostly I took out names to protect the innocent.  As you will see it's a story about refined city sensibilities meeting the reality of "vermin".  Yes, our ancestors would have hauled out the shotgun in no time flat.  Please note that the story is a bit one-sided since the raccoons' names and where they reside are unknown at this time.  So, alas, they could not be contacted for their version of the event.

Regarding Cherries and Other Things
Well, we tried to pick and process cherries last weekend.  OK, we were a
week or so later than we should have been but still it was an impressive
crop and neither of us felt much pressure to race down. In fact, with
retirement, I personally don't feel pressure to race much of anywhere.
So went to B's for a lovely dinner in Portland on the on the 4th, then
directly to the farm.

After clearing out the very ripe mouse and trap from the living quarters
I went out to inspect the cherries - nada - a bust.  Nice crop, then
rain (split them), then a biblical  horde of starlings descended and
stripped the trees - I mean every cherry gone to the very highest branch
on all seven of them.  Tenant's mother reported that she went out to
pick the Bing's one morning and the tree was so loaded with birds that
it was shaking,  Why she didn't turn the hose on them, scare them off
and get the cherries  picked is a bit of a mystery.  My opinion is that
it's the perfect setting for a shotgun with a light load - we are talking
starlings here. But then again there is our performance with the damn
raccoons (more on that a bit later).  Interesting and kind of annoying
but then again we still have cherries in the freezer from last year.

So no shortage of other tasks including the ever popular weeding and
mowing but  did take a couple of  long drives,  one that featured both
the Buena Vista and Wheatland river ferries.  Went back to the Jones
Fruit stand, our new favorite.  They grow an impressive amount of what
they sell.  They have early greenhouse tomatoes, while not the lovely
warm from the garden variety but still much, much better than the
imported ones in the stores and their  early peaches are in - yum. Just
finished off the last bite of a rather nice peach tart with a sweet
almond crust.

The garden was messy, humm - oh, of course raccoons,  digging up
earthworms and in the process a few other things including the new
mulch.  Damn.  Later the same day mom and two babies came strolling
through on an afternoon food run. B goes out to run them off ( the
start of the realization that we need to pick up the pace on our farm
kid chops). One of the little guys doesn't run. Damn, he/she has some
sort of injury and is dragging his hind legs. Mother of the year has
sauntered off ditching his ass. Little guy drags him/herself to the barn
where he shows no interested in kindly human intervention.  In fact we
recall that racoons are related to bears. And we also decide to ditch
his ass hoping  that either mom with return (she did) or that the barn
owl will deal because neither of us wants to - we have become city wienies.

All of my farm people would have had the gun out to dispatch mom and the
kids on the first round and certainty would have figured out how to deal
with the injured baby - ax would play prominently in that scenario. But
we benevolent city guys abandoned the task.  Baby did show up with mom
the next afternoon - so nature will deal with the baby but we still have
mom and her dinning habits because neither of us wants to shoot her.

But where are the damn coyotes when we need them? Actually hoping that
the annoying neighbor's dog decides to take mom on - dogs NEVER win a
fight with a raccoon ,but they always try. Could be a two for one deal -
win, win.

Honestly, we have become hopeless weaklings.

Friday, July 12, 2013

Expats, Exbrats and Guests

I've come across some very good blogs in the past two weeks.  Allow me to introduce you to:

The American Expat in Chiang Mai - Greg who hails from California talks about life in a Thai town.  Some very cool pictures. - Ken in Mexico has just started this site which is a superb round-up of articles and information from and about American expats all over the world.  Ken used to live in France.

Born Again Brazilian - Megan from New York who is now living in Sao Paulo.  She has a book out which I am reading and will review.  She uses a term I'd never heard before:  Exbrat.  Definition is here.

The Displaced Nation - This is a site for "international creatives" and is a group effort with bloggers from the US and the UK.

Last month Megan (Born Again Brazilian) gave an interview to Displaced Nation about how she went from being a migrant (albeit one with strong ties to her host country) who was relatively uninterested in local politics, to someone who wants to get involved in the politics of the country where she lives and raises a family.  She describes her awakening this way:
Being displaced often makes it easy to be removed from your own surroundings.
Being displaced also makes it easy to be in a bit of denial.
But that Thursday night in mid-June, as my husband and I sat in a bar near our apartment and watched as the streets filled with protesters, my perspective on my adopted country changed. 
Not every expat/migrant has that sort of epiphany.  Andy Martin of Displaced Nation ran an article after her interview called As an expat, is it my place to join another country's political protest? giving the reason that he too changed his mind and got involved.  His reasoning was a bit different but the end result was the same.  

All this is very controversial.  It's not an easy decision to make and I've struggled with it myself.  If you read the comments after Martin's article the answers to his question range from "No, you're a guest and you shouldn't meddle" to "Of course!  After all you live here and pay taxes."

I had a couple of visceral reactions to the articles and the comments.  At some point in one's migration journey using the word "guest" to describe your status (as one person did) is ridiculous.   Someone who is still living in someone's house as a "guest" after 5 or 10 years or so is really pushing the limits of the term.  Most of us would consider such a person to be an annoyance and an embarrassment, if not a freeloader.  Remember Ben Franklin's words? "Guests, like fish, begin to smell after three days."


A few more nails in the coffin.  A guest generally does not need a bank account or a taxpayer identification number.  Guests do not pay rent or own their own home or apartment.  Guests do not generally marry into the family.  The last time I used "guest" to describe myself many years ago at a dinner party in Paris, they (my French friends) laughed at me.   Here I was in my French clothes, among French friends and family, eating French food, drinking French wine, conversing entirely in French and talking about my French job, French family and French neighbors and then calling myself a "guest." They were right to mock me.

The other word that was used, expat, is one I'm ambivalent about.  People from developed nations who move to to other countries usually refer to themselves as "expatriates."  People from developing nations are called "immigrants."  What is the difference here other than the supposed "rank" of the country of origin?  This makes me very uncomfortable because it feels like those of us from developed nations are trying to elevate ourselves and put distance between us and those who move from poorer countries in search (many claim) of economic gain.  Is that justified?  I don't think so.  When I came to France I went through exactly the same procedure as any other migrant and integration was a long hard road:
Finding a job was difficult since my French was poor and my credentials frequently misinterpreted. Obtaining my residency card meant going to a clinic that resembled a factory processing cattle for a medical exam - the sheer humiliation of being part of a human assembly line waiting to be x-rayed and being asked very personal questions by the immigration officials. And then there was the sense that my entire world had turned upside down and I could no longer do anything right. Life seemed to be an endless series of encounters where I was corrected or admonished for using the wrong words, not doing the proper thing or simply not understanding fast enough for the people around me.
Today I have a carte de resident (residency permit) like all the other legal migrants here.  Because I'm not a citizen, there are restrictions on what I can do here just like any other migrant from Algeria or China or Cameroon.  And like many others, I have no plans to return to my country of origin any time soon and aspire to citizenship in my host country.

Perhaps one could argue that I came back in 1989 with more human capital than people from developing nation but I would counter that many of my friends from such places have far better educational credentials than me and got better jobs.  Yes, many migrants here in France are low-income but that group includes American migrants.  I even know migrants from developed countries in Paris who are darn near destitute:  homeless, unemployed, on disability, or working low-paying, low-status jobs.  "Down and out in Paris and London" happens, folks.

My epiphany was realizing what I was and owning the term "immigrant."  It's what I am and there's no hiding it unless I want to practice self-deception for another 20 years.  If "immigrant/emigrant" is too hard to swallow, then how about the more neutral "migrant"?

For me, it's about solidarity.  For one group of migrants to attempt to claim a higher status and to bow out of the local political arena could be considered not only delusional but an act of aggression against other migrants and the citizens of the host country itself.  It is the narcissism of difference.  While it is very comfortable to proclaim love and admiration for the host country while retaining the right to criticize it and comment on it as an outsider, this position essentially absolves one from any responsibility for changing it or caring for it too deeply.

I am not arguing here for deep political commitment on the part of migrants.  It's a touchy subject and the tolerance for such activity varies with the host country.  I myself am unsure when it is appropriate here in France.  However, at the very least I think migrants should be supportive of one another regardless of their socioeconomic status and country of origin and at least show some involvement in the making of policy that effects everyone's well-being.

A last word for those who still wish to be "guests".  Perhaps they should ask themselves why the citizens and residents of any country would be willing to let them stay without some sort of commitment to the greater good.  And that means, mes amis, getting your hands dirty by stacking the dishes, polishing the windows, mowing the lawn and cleaning the rust off the front gate from time to time just like everyone else.

Wednesday, July 10, 2013

The Flophouse is Doomed

Open Culture just posted a link to this 1954 video, The House in the Middle.  It is a scream.

Did you know that poor housekeeping and an untended yard may mean that you and your loved ones may not survive a nuclear attack?

It's true, mes amis, they tested it and then they made this video to spread the word.

If my grandmother were alive and watching with me I'm sure that she would feel vindicated - "No one is ever too poor to pick up his yard!"  No fan of slum-dwellers was she.

Looking at the Flophouse, I'm sure she'd be very disappointed in me.  It's not dirty but it's not exactly one of those brightly painted houses with a perfect picket fence, a golf course quality lawn and order within.  And did I mention the little mouse we caught the other day under the DVD player?  The younger Frenchling trapped it in a Tupperware container and released it in the garden.

And now I learn that my (and perhaps your) slovenly ways are a direct threat to the survival of my little Franco-American family.

Who knew?

There is only one appropriate response to this news as far as I'm concerned:  Surrender.

This means a direct march to the living room where I will grab a book from one of the many piles on the coffee table (thus scattering papers everywhere), pile up the pillows from the floor onto the couch (where I will read in blissful comfort on my covered-with-cat-hair couch) and share a chocolate ice cream cone (crumbs falling on the carpet to feed the mouse if he decides to come back) with my younger Frenchling until the heat of the afternoon passes.  Time enough tomorrow to get out the vacuum cleaner and swamp out the house if I feel like it because as Ed Ricketts once said:

"We must remember three things:
Number one and first in importance, we must have as much fun as we can with what we have.
Number two, we must eat as well as we can, because if we don't we won't have the health and strength to have as much fun as we might.
And number three and third in importance, we must keep the house reasonably in order, wash the dishes and such things. But we will not let the last interfere with the other two."

Ed Ricketts quoted by John Steinbeck in The Log from the Sea of Cortez


Opened up the EU Observer this morning and lo and behold there was this headline:

France scraps online piracy law.

They are referring to what is commonly called "Hadopi", which is actually the name of the government agency, the Haute Autorité pour la Diffusion des Oeuvres et la Protection des Droits sur Internet.  The French law behind it was first proposed in 2008 with the support of many film, music and book authors (the "creatives") because it was designed to stop illegal downloading and to protect their rights to their artistic and literary property.

However,  the rather draconian penalties which included cutting the Internet access of repeat offenders, were widely criticized.  In the English language media Hadopi was often referred to as a "three strikes law."

Though it was fiercely debated in France, and there were many accusations of "dirty tricks",  it did pass parliament in 2009, and a version of it survived scrutiny by the French Conseil Constitutionnel (Constitutional Council).

In a rather ironic twist, when the Hadopi agency unveiled its new logo in 2010, it turned out that the font they used was under copyright and owned by France Telecom.  Not a terribly auspicious beginning.

But they soldiered on and Hadopi went live.  What has been the result?  It took them millions of Euros and three years to get one conviction. Valéry Marchive reported on it in this article in ZDnet back in 2012:
For the first time since its difficult birth in 2009, the work of France's anti-piracy authority Hadopi has resulted in a conviction. Earlier this month, a man known as Alain P was convicted of having failed to effectively secure his home internet connection and will have to pay a fine of no less than €150 as a result. 

Calls to repeal the law have been getting louder.  In addition to those who always thought it was a bad idea (I was one of them) many of those who liked it or were ambivalent about it were admitting that it was not efficient and has not worked as intended.  The Rapport Lescure released in May called for the suppression of the Hadopi agency and lightening up some of the penalties.

So does this mean that Hadopi is dead?  No, the article in the  EU Observer is a bit misleading.   What the French government did was issue Décret n° 2013-596 du 8 juillet 2013 which eliminates only one of the penalties for illegal downloading (albeit the worst one):  the possibility to cut the Internet access of people who have been warned but who persist in downloading intellectual property in violation of the law.  The fines are still there and I've heard that Hadopi will be absorbed into another government agency which will take on the responsibility of enforcement.

But most importantly, the intent - the original objective - is still there.  Lescure's mission was called "L'acte II de l'exception culturelle" and his report is revealing.  Hadopi may be on the ropes but there are other methods to achieve its goals that are less punitive and more positive.

What I did like however about Lescure's report was the number of stakeholders consulted and the different views that were expressed.  Some of the proposals are quite good and show the incredible creativity of the French.  I'm not so sure about the tax they propose on connected devices but that might be a good compromise.  I wouldn't rule it out until I see the details.

But do you know what I admire the most?  Yes, millions of Euros were spent and a lot of time and energy expended on everyone's part but, when it became clear that it was not working, they were willing to face that and consider making a course correction.  In a situation like this one the "sunk cost fallacy" can be an important deterrent to doing the next right thing - just because one has spent a million euros doesn't meant it's rational to spend a million more just to try and save something that cannot be saved.

Here's hoping that the French, with their usual deftness and intellectual agility, have steered clear of the trap.

Tuesday, July 9, 2013

American Citizens Abroad: Proposal For Residence-based Taxation

American Citizens Abroad has been doing some excellent work to try and get the U.S. system of citizenship-based taxation changed to residence-based taxation.

What's it all about and why would this be good for Americans abroad and Americans at home?  Let's begin with a quick and dirty explanation of the difference between CBT and RBT.

Citizenship-based taxation (CBT):  The U.S. is the only country in the world other than Eritrea that taxes based on citizenship and not on residency.  This means that wherever  in the world that an American citizen (or Green Card holder) is living and working, he must report his "foreign" (local to him) bank accounts, file tax returns and pay U.S. taxes in addition to the taxes he pays locally in the countries he resides in.  An example:

An English teacher in France:  Makes a modest salary, has French checking and savings accounts, and a small studio apartment.  Because she lives in France she files French tax returns and pays national and local taxes to the French government and to the city she lives in.    But because she is a U.S. citizen she must then turn around and report her French accounts to the US Treasury, file tax returns to the U.S. IRS and, depending on the circumstances, pay taxes to the U.S. government even though not one dime of her money came from the U.S. - it was ALL earned in France and deposited into local French bank accounts.

Residence-based taxation (RBT):  Under this system a resident of a country may still be required to report on his worldwide income (depends on the country), but a non-resident only pays taxes on local income.  An example:

Take the same English teacher in France and imagine she has a few investments in the U.S. that she left behind her when she moved   Because she is a tax resident of France she would pays French taxes on what she earns and saves in France but she would only file tax returns and pay taxes to the U.S. on the income that is actually earned in the United States.  Her French income would not be taxed by the U.S. because she is a resident of France and not of the U.S.

Sounds pretty straightforward (and sane) to me.  To make it even easier to understand ACA has produced this excellent short video about their proposal which explains all the advantages the U.S. would have if it changed systems.

And for a bonus, here is an interview with Jackie Bugnion of ACA that provides more details:

Well done!

My take on the CBT vs. RBT debate can be found in my 2012 post:
Diaspora Taxes:  Citizenship-based Taxation.

Sunday, July 7, 2013

Flophouse Review: Embers of War

Last time I darkened the door of the American Library in Paris, I picked up a book with an intriguing title:  Embers of War:  The Fall of an Empire and the Making of America's Vietnam by Fredrik Logevall.

The war in Indochina (or as the Americans call it, "Vietnam") is of personal interest to me.  Not from the American point of view as no one I know in my American family ever served there but from the French perspective.  My father-in-law, a French army officer whose career follows the fortunes of France as a European and colonial power in the 20th century, volunteered for la Compagne d'Indochine.  As a result, some time in the early 1950's he found himself in southern Laos where he was the chef d'Etat-Major du Génie du Laos which I think means chief of staff of the Engineering Corps of Laos.

Embers of War covers the period from the end of World War I to 1959 with an emphasis on the period from the Libération of France to the independence and partition of Indochina. And it includes the very beginning of the United States' direct military involvement in the region in the late 1950's.

Logevall spins a fine tale - the book is not only well-researched but well-written, too.  He successfully achieves the goal of historians who write for a general audience:  finding the right balance between historical facts and telling a good story.  There is an excellent bibliography as well which lists popular works like Bernard Fall's Street Without Joy but others as well that may be  less known but still well worth the read.   Logevall's talents were recognized this year in April when he won the Pulitzer prize for this work.

Embers of War filled in many of the gaps in my knowledge about France and her colony in Indochina.  My U.S. education did include the history of the region but it was as if the history really only began in the late 1950's when the Americans arrived and there was very little mention of what went on before other than brief remarks about the area being a former French colony.   Today with the Americans long gone, and national memory of the war fading fast, the region is hardly ever mentioned anymore in the U.S. and I note that it is not exactly a topic of general conversation in France either.

In my personal library I have a copy of Hachette's 1889 book, Nos colonies which has a chapter devoted to Indo-Chine.  The reactions to the book sitting on my shelf or my attempts to ask questions about it are pretty consistently met with embarrassment and sometimes mild hostility.  The former I could understand since the U.S. has many periods that we Americans are ambivalent about, but I was confused about the latter.  Legovall's book gave me one possible explanation for why that is.

The United States' involvement in the region goes back much father than I knew - something I'm sure those of you who are better read on this topic already understood quite well.  The U.S. was not in it up to her national eyeballs (and drowning) until the 1960's but was already influencing events  since at least World War II.  In defense of the U.S. there was probably no way they could have stayed entirely out of it since it was the only power left standing after the war. It is fascinating to read just how many actions and reactions of the actors on all sides of the conflict were based at least in part on what the U.S. might do.  When the U.S. did respond with policies and statements that vacillated depending on the administration, it seemed that someone was always left bitterly unsatisfied.

However, the U.S. action that is often cited by older people I've talked to here was Dien Bien Phu.  This was a French base in the north that was surrounded and besieged for 57 days in 1954.  As the situation worsened the French quietly asked the United States for support in March.  Then in early April, Prime Minister Laniel and his Foreign Minister made an official request directly to the U.S. ambassador in Paris.:
On behalf of the French government, he hereby requested that the United States intervene immediately with heavy bombers capable of delivering two-ton-or-heavier bombs, in order to save the entrenched camp at Dien Bien Phu.  No other option existed.
The answer from Washington was "no" and the French were indeed out of options.  On May 7th the remaining French troops were overrun and the Viet Minh took over 11,000 prisoners.  Many of them did not survive the forced marches and prison camps.

Not a high point in French/U.S. relations and easy to see why some residual bitterness might remain.  And imagine, if you will, an American like me bringing up the subject with friends and asking naive questions without having any understanding of the context.  Did they think of this as a variation of Alden Pyle's sinister innocence?

One has to wonder if the French had these past events somewhere in the back of their minds when they in turn said "No" to the U.S. in 2003.  Perhaps that is a stretch but clearly the relationship between the two countries has included moments like these. It is absurd for Americans to say, "Well, the French are always so critical and say 'no" to everything" - on the contrary the record shows a great deal of agreement and mutual assistance between the two countries.  However, and this just my .02 here, neither should ever ever take the other for granted.

Going back to the Campagne d'Indochine, the irony of it all, of course, is that the French left Indochina and then the U.S. a few years later ended up intervening later to a far greater extent than the air support the French requested in 1954.

Toward the end of his life, my father-in-law made a remark to me that I will always remember.  Back in the 1960's as he watched the American move in and sally forth, he worried because he saw hubris.  "They really thought they would do better than we did," he said softly.  Because Americans believed their motives to be pure, noble and free from the taint of colonialism, and because of the great power, wealth and technological advantage of the U.S.,  they walked in assuming that victory was theirs.

It is, I reluctantly admit, a national character defect, one which probably stems from one of our more positive traits:  The sense that all things are possible if one simply tries hard enough and believes.

Embers of War will be available to patrons of the American Library in Paris just as soon as I can get into town (probably next week) to return it.

In the meantime, here is a video from Youtube (about 10 minutes) that talks about Dien Bien Phu, the French request to the Americans for assistance, and what happened after the base fell.

Friday, July 5, 2013

Bac 2013: A Fine Fourth of July

Yesterday afternoon I took the 171 bus from Versailles to Sèvres to pick up the younger Frenchlings French baccalaureate results.  The French bac is the exam French students take at the end of high school to graduate and to move on to higher education.  It serves the same purpose as the SAT in the U.S. but it's a very different experience.  It's not one exam, it's many over the course of a week with some written (essay questions) and others oral.  Students have to work very hard just to pass, much less do well enough to get into a good school.

The younger Frenchling had double the fun.  Four years ago she decided that she wanted an education that was more international - something similar to her school in Tokyo - and she was motivated enough to do the research herself. What she found was the Lycée de Sèvres.

Sèvres - Sections Internationales is a state-supported (public) French school on the outskirts of Paris that offers not just one but two bi-lingual programs (German and English) from elementary school through high school. The students follow the regular French curriculum in French (indispensable for passing the French Bac) but then have other classes in the second language in order to prepare for a wide range of other certifications recognized by the German, UK, US, and other university systems.  What an elegant solution for bi-lingual education and since this is a public school, it's affordable for a middle-class family here.

But just as she spent four years with extra classes and a very long school day (8 AM to 5 PM), this meant that she had extra exams too.  There were 16 of them over two weeks in French and English.  At one point she was so tired and stressed out that she told me that she was having second thought about having done this program.  

She survived just fine and when it was over her father whisked her off to Japan (her graduation present) for a week sightseeing in Tokyo, Kyoto and Osaka.  I stayed behind (I'm still not 100%)  and had the task of picking up her scores yesterday.

The atmosphere at the school when I arrived was almost exactly what it was two years ago at the elder Frenchling's high school.  A lot of very tense kids.   As each student received his or her results, there was great joy on the part of some and deep despair for others.  There was one young man who kept looking at his scores and saying, "Mais qu'est qui se passe?" (What's going on here?) Other kids were leaping into the air screaming "Oui!" and hugging their fellow students with joy.

I was as stressed as the kids but I'm a nearly 50 year old "Madame", very conscious of her dignity, and so I took the folder and went to another room to turn in her books and have a look.  Under the eye of one of the administrators I opened the file and started reading.  

There were two conditions for the younger Frenchling to get her admission to the University of Montreal Physics program confirmed:  pass the Bac (total score over 10) and get at least 11 in Mathematics and Physics.  As I read the scores I started smiling.  She ACED math and physics - she got 16/20 in both subjects and her overall Bac results earned her a "Mention Bien."  I threw up my hands and yelled at the top of my lungs in English, "My daughter is going to be a Physicist!"  

So the younger Frenchling will be joining her sister in Montreal (the elder Frenchling is at McGill doing Honours Psychology) this fall.  I am so proud of both my daughters.  My dreams as a parent have been realized -  I have children who are much much smarter than I am. 

Thursday, July 4, 2013

The U.S. Congress and FATCA Reciprocity

Breaking story from James Jatras.

An unexpected development on the FATCA front.  Congressman Bill Posey, a representative from the state of Florida and member of the House of Representatives Financial Services Committee, has sent a letter to the U.S. Treasury about the promises of reciprocity that Treasury is making to foreign governments as they try to negotiate agreements to implement FATCA worldwide.

For those just joining the conversation, FATCA (Foreign Account Tax Compliance Act) is a law that was voted in 2010 by the U.S. Congress as part of the HIRE Act. It requires foreign banks to report the account information of all U.S. persons (U.S. citizens and Green Card holders) all over the world to the American IRS and imposes draconian fines on foreign entities for non-compliance. The legislation is "extra-territorial" which means that the U.S. is expecting foreign governments to impose American law on their own people and banks.

The unintended consequences of this law are many.  It is already turning U.S. citizens and Green Card holders into pariahs, literally "toxic assets" outside the U.S.  It is getting harder and harder for Americans living abroad to get banks accounts in the countries where they live and work.  It is even having an impact on the ability of Americans to do business or find work outside the U.S.  But those things are not obvious to Americans living in the homeland since they don't impact most of them directly.  However, there is one consequence to this law that does concern them and that is the issue of reciprocity.

FATCA as written is a one-way street.  It calls for information about the financial doings of U.S. Persons abroad to flow into the U.S., but does not provide for information to flow in the other direction - from the banks in the U.S. to foreign governments.   This is a serious problem.  Why, in heaven's name, would foreign governments agree to change their own laws, force their own banks to make major and expensive changes to their IT systems and procedures, and oblige their own citizens to bear the costs without getting something in return?  

And that is precisely what countries around the world want.  If the U.S. is asking us, they say, to report on U.S. customers in our countries then we want U.S. banks to report to us about account holders from our country. Sounds fair to me.  

So what happened is this:  As the U.S. Treasury toured the world negotiating FATCA implementation worldwide and signing IGA's (Intergovernmental Agreements), they made promises to these countries that the U.S. would indeed provide some sort of reciprocity at some point in the future.  I was personally present at two meetings here in Europe where I heard them say this. They were vague and used ambiguous language (a "je vous ai compris" style of discourse) but they gave assurances that reciprocity would happen and the Europeans listening left the meetings with that message.

Did Treasury have the authority to make these kinds of promises?  Remember that FATCA doesn't call for U.S. financial institutions to participate in this kind of automatic information exchange and the U.S. Congress has never ever explicitly approved reciprocity.  Instead of a public debate about this, what we've seen is under the radar attempts by Treasury to get reciprocity authorized without having to go through the very public democratic political process.  A good example is a short paragraph slipped into the Obama 2014 budget where it's likely that Congress won't even notice it's there or ask too many questions about it.  Sneaky.   

But some members of the U.S. Congress have noticed.  The domestic backlash over FATCA reciprocity started months ago and that brings us to Congressman Posey's July 1st letter to the Secretary of the U.S. Treasury, Jack Lew.  It's pretty direct and governments around the world should sit up and take notice.  He not only expresses his deep concern over proposed reciprocity because of the costs to U.S. banks, but he calls into question Treasury's authority to negotiate with and make promises to foreign governments without oversight and authorization from the U.S. Congress:
"My concerns are compounded by Treasury's actions to implement the Foreign Account Tax Compliance Act (FATCA) by negotiating "Intergovernmental Agreements" (IGAs) with foreign nations that would require these countries to enforce FATCA requirements on their own financial institutions." 
"I further note that the IGAs that are being entered into are not authorized, or even mentioned in FATCA.  Despite the absence of any specific legislative authorization, these IGAs are not being submitted to the Senate as treaties or treaty amendments for its advice and consent..." 
"I expect these broader questions to be more fully aired by the Financial Services Committee in its anticipated review of the administration's request for enhanced legislative authority.  In the meantime, I believe a moratorium on FATCA enforcement and negotiation of additional IGAs is in order."
Talk about cutting Treasury off at the knees.  They have already had a great deal of trouble getting foreign governments to sign IGA's.  There are 190+ countries in the world and right now only only a few nations like the UK, Germany, and Mexico have signed on.  Time is getting short - FATCA goes live in a few short months (January 1, 2014.)  How many more IGAs will Treasury be able to sign if there is uncertainty about reciprocity?  As for the ones already signed, how will these nations react to the possibility that those promises were empty?  And finally if FATCA goes live as planned in 2014 is the U.S. really going to start enforcing it and imposing penalties on foreign banks?  That would be a catastrophe.

Does this mean that FATCA is dead?  Not necessarily.  There is support, for example, from the EU and other regions for some kind of automatic information exchange and that isn't going to go away.  What I would hope for is that this will stop the heedless rush to implement a one-sided, very poorly written, American law with many unintended consequences.  Then everyone (all governments interested in automatic exchange) can sit down at a table and hash out together a system that is protective of people's rights, appropriately targets the few who are intentionally breaking the laws against tax evasion (and not those who are just collateral damage), and is agreed to by each country and its representatives through a legitimate political process.

"But that would be hard!"

Well, yes, it would be but if they think it is worth doing, then how about doing it right?  If I were one of the people who is adamant about implementing this kind of system, I would suck it up, press "rewind" and begin again. 

For more information, interpretations and comments, see the following sites:  The Maple Sandbox, The Isaac Brock Society and, of course, Repeal FATCA.

Monday, July 1, 2013

More on Exile from the 'Land of the Free'

In a previous post, Exile from the 'Land of the Free', we talked about the Reed-Schumer Amendment that proposes permanent exile for any former U.S. citizen deemed to have renounced to avoid taxes.  The way the amendment is written those who give up U.S. citizenship are "guilty until proven innocent" which means that the onus would be on the renunciant to prove that he or she gave up U.S. citizen for "good" (i.e. politically correct) reasons.

There were some excellent comments on this post and I encourage you to read them.  One of the latest is a story that is more common than many know:  a former American married to a foreign national who is a stay-at-home mother.  Her choice came down to her marriage/family or her citizenship.  Honestly I would make the same choice:  there is nothing more precious and irreplaceable than one's family, one's health and one's peace of mind.

To those who react rather bitterly to U.S. citizens who have renounced and those who are thinking about it, I have to ask them what they would do in the same situation?  Given a choice between U.S. nationality (and that pretty blue passport) or your spouse and children, which one would you give up?

Homeland Americans, I and many other Americans abroad are waiting to hear your answer.

In her comment, this former American asked a very good question:
Would the Schumer amendment apply to people who have renounced in the past, or only those going forward. What if the person becomes "covered" at one point in their life ( or if they lower the limit, if the dollar crashed, etc...)
Can the Schumer amendment be applied retroactively to those who "got out before"? And can they re-evaluate your covered status later in your life?
This is something that has us all scared.  We've seen three attempts already to exile the expatriates:  the Reed Amendment, the Ex-Patriot Act and now the Reed-Schumer Amendment.  Remember, folks, that the first, the Reed Amendment, actually passed and is U.S. law.  However the way it was written made it unenforceable so the law exists but there are no regulations to implement it.  I believe that they will keep trying until they can make it stick.  I speculate that if the number of renunciants skyrockets, they will succeed.  

Could they make it retroactive?  They could try.  However, (and take this with a grain of salt because I am not a lawyer) for those who renounced or relinquished under the prevailing laws at the time, any attempt by the U.S. government to go back and punish them further would certainly go straight to the courts.  And could you imagine the headlines if these people were denied entry into the U.S. to care for aging or sick family members?  What if some of those homeland Americans with exiled sons and daughters end up as burdens on the American social welfare system?  Something tells me that this would get everyone's attention.  I honestly don't think they would go there.  If anyone disagrees, please give me your take on it in the comments section. 

In my original post I quoted Phil Hodgen.  His blog is really extraordinary and well worth the read.  This post, in particular, is very pertinent to our discussion:  Why people expatriate?  It's a sober, dispassionate look at how expatriation from the U.S. works and why people are doing it.  He also offers his unvarnished opinion about where he thinks all this is going.  Clearly, the messages that are coming from Washington are leading many of us to think it might be best to, "Get out while the going is semi-good".  Hodgen concurs:
I expect the future to be more of the same. Expect the same exit tax rules, but more of them, and worse. Expect more expatriations. The floggings will continue until morale improves.
Can anything stop the trend?  I don't know.  Yes, it's discouraging to see American emigration framed entirely as a story about "evil rich tax evaders."  On the other hand my impression is that the media in the U.S. is starting to pick up these stories and some are being reframed to introduce homeland Americans to the idea that people do give up U.S. citizenship for reasons that are related to the citizenship-based taxation/FATCA dilemma but not in the way most homelanders think it is.

Is that going to be enough?  I don't think so.  Fundamentally, I see the problem as one of recognition/legitimacy.  Very few homeland Americans are aware that there 6-7 million of their compatriots living outside the U.S.   Myths about us abound:  we are only "temporarily" abroad, we always come "home" after a few years of fun, we are all rich, and so on.  Those of us who are long-term residents of other countries are viewed with suspicion by homelanders by just about every group along the U.S. political spectrum,  from the Right-wingers to the Progressives.  What we need, in my humble opinion, is recognition that we are simply the U.S. "Domestic Abroad" - America's very own Diaspora.  Look, living outside the U.S. doesn't make us any better or any worse than Americans in the homeland.  We aren't necessarily smarter, skinnier, prettier, richer or happier than our counterparts in Wisconsin or Nevada.  We're just people doing all the things that other Americans do - we're just not doing them on U.S. soil.  

Americans on the East Coast of the U.S. are not punished if they move to California.  So why punish Americans who want to move to Canada or Mexico or Europe or Asia?  The former doesn't cause anyone to blink twice - the latter is subject to all kinds of judgements and misconceptions.  

We have a serious PR problems, folks, and I'm open to any ideas about how to fix it.

Off to the garden to clear my head.