Cut Off/Left Adrift

As of the latest figures there are deemed to be 196 countries in the world. Now because of U.S. based taxation and the Foreign Account Tax Compliance Act, U.S. citizens will be unable to live and work in all but one of those countries the U.S.

It is forbidden by the U.S. government that it’s non-resident citizens be allowed to live the same lives as those of their compatriots.  How this cannot be seen as a violation of the Human Rights of U.S. citizens by the U.S. government is hard to fathom. When restrictions on your life abroad are so onerous as to discourage you from seeking to live outside of the jurisdiction of the land of your birth then surely you are the victim of oppression.

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12 thoughts on “Cut Off/Left Adrift

  1. You know I have learned so much on this site. Or, maybe it’s that I’m learning to think about things differently. I’m pretty sure I had heard or read that the US was not a signatory, however it just didn’t impinge on my awareness. My eyes have been opened due to all of this mess, and I’m grateful for it, in an odd way. Of course I wish I wasn’t caught in this nightmare trap, however, it is turning me into a much more involved and aware Canadian citizen, and, really, a global citizen. I don’t think I will be nearly so insular going forward. I am slowly becoming politicized after having living pretty much my whole adult life with only a surface interest in politics and issues. I have read and re-read numerous times our Canadian charter of rights and freedoms, which I’d never bothered to read before this. I’ve read the human rights charter, I’ve research into politics in Brazil, I’ve investigated into just what the heck VAT is in the UK and how things are done there.
    The US is cutting it’s nose off to spite it’s face, something even my mother warned me against:) As we’ve said other places on here, we could be good will ambassadors for the US, we could be contributing members to US society (those who are dual), but, no, the US wants to marginalize and criminalize us and make people choose. That’s their right to do so, but really, what/who are they going to be left with? What kind of country are they trying to build? It’s a scary thought.

  2. My sense is typical homelander American is simply filled with out of control rage about what has happened over the last few years UBS, Lehman Brothers, AIG bonuses and piano wire, bankers smuggling diamonds in toothpaste, bankers using kids to smuggle paper bags filled with $100 bills. In all of the these instances “homelander” Americans feel the old America they grew up in has been taken away by evil “foreigners” Canadian included.

  3. @Tim: People in most countries feel like this, when their economy is in deep recession, but they are not super power like the USA. This is how ruthless mob bosses behave. If people in the super power like US behave like this, it only brews resentment. Decline of any nation begins as soon as it looses its fairness and respect for rule of law. An accidental citizen who decided to live in the country of his parents is not responsible for these problems. He is taking any thing from the USA and if he is living in a high tax country, he doesn’t owe any taxes to the IRS.

  4. @Expat_business_man

    I do have certain degree of respect for the right in American. When the right wing in the US disapproved of Canada’s opposition to the Iraq War they were not at all shy about saying so. I remember Bill O’Reilly used to get on TV night after night and rail against Jean Chretien. What all want to know is why pro FBAR pro FATCA commentators on the left such as Rachel Maddow, Ed Schultz, Dylan Ratigan, and Lawrence O’Donnell aren’t getting on TV night after night and railing about Canadian tax cheats and Canada’s opposition to FATCA. Put up some graphics on TV of diamonds in toothpaste tubs in front of the maple leaf.

  5. I think you US’s bluff that the world can’t survive without investing in US stocks needs to be tested. The US doesn’t have to lose much for the Wall St guys to start screaming they’re losing business (and their commissions). I’m reading a book now call Exorbitant Privilege and the real danger for the US is what the UK encountered in the 1920s.

    The dollar had already in the 1920s had overtaken the pound as the most used currency, then came the depression (which actually helped the UK stay on top for the 30s), then WWII, and that was it – the pound was toppled.

    Symptoms for pound’s demise – US banks popping up abroad to increase the transactions in dollars from late 1910s to 1920s and the pound started to become unstable.

    I don’t think it’s going to take much to tip over the dollar in the years to come. Even though you may not like the Chinese brand of communism and capitalism mixed, but for the moment it works. If the Chinese build a perception of safe, stable, secure, reliable renminbi, why on Earth would the Chinese want to continue paying the “dollar tax.”

    The Chinese are difinitely setting the stage, but will do it slowly so they don’t devalue their dollar holdings.

    But in the shot term, the US is doing themselves no favours building up a 30% Tax Wall around the country. For me as a foreign investor, 30% is a heck of a tax risk if the IRS decides otherwise and then you have to go through all the baloney filing a tax return to get your money back and how long would that take? – why would you want to the withholding tax ball and chain around your ankles?

    I’d rather invest in London or elsewhere, maybe have a slightly lower return, but no FATCA, No IRS, No possible withholding tax. The withholding tax is like a toll road, some drivers won’t either want to pay or risk paying the toll and avoid it or go find another way to earn money without the road.

    If you want FATCA to fail let evey man, woman, and child outside of the US know that the US imposes a possible 30% withholding tax on US investments and that Europe, the Far East, or Canada for that matter has no such tax. If Wall St starts complaining, FATCA will be repealed in short order.

    I think I’ll read this blog the rest of the weekend and give the life credits a chance to re-charge!

  6. @John
    Perhaps I’m misunderstanding you, but it seems you’re saying there’s no withholding taxes at all for overseas investors in Canadian & other non-US markets.

    Sorry to say, that’s NOT strictly the case for Canada – & I suspect also for many other countries. Certainly, nowhere else on the planet is there any arrogant, grasping, & hopefully ILLEGAL across-the-board FATCA-style withholding on ANY remittance, of whatever nature (if the recipient (or even intermediary!) entity “fails to ‘comply’ with info reporting demands of the remittance’s source country).

    But, Canada DOES impose tax withholding on all Canadian-source DIVIDEND payments to overseas investors (& also probably on some other kinds of investment income?); it seems likely that other countries may impose that kind of withholding tax on foreigners, too.

  7. “As of the latest figures there are deemed to be 196 countries in the world.”

    This refers to the number of sovereigns. It does not reflect the number of countries, self-governing jurisdictions or (more relevantly) taxing jurisdictions. Many such geographic entities are excluded from the tax treaties negotiated by and for the mother country, just as some parts of the French Republic and some parts of the United Kingdom are outside the European Union. As an example of how “country” has different meanings for different purposes, note that the ARRL counts 340 “countries” for purposes of amateur radio communication.

    One oughtn’t get too hysterical over IRS jurisdiction abroad. If one has another nationality and no assets, income or heirs in the USA (or, arguably, Canada due to the mutual collection treaty provision, unless one is a Canadian citizen), and does not hold a valid US passport, the likelihood of successful pursuit abroad by the IRS is not great.

    The fact is that if (as some say) there are over 6 million Amcits abroad, few of these can afford the accountancy and tax preparation fees required for dual filing. The trouble is that those who do not file a US tax return do not benefit from any statute of limitations; so arguably filing a slapdash 1040 is better than none at all, if there is arguable IRS claim for tax. But for those subject to forms 5471 and/or 3520 (because of, say, a Child Trust Fund established by or under the rules of the British Government for UK-resident children born between 2002 and 2011; or a foreign pension plan) the draconian penalties lead to ludicrous results. Because few Amcits abroad have the means ever to pay such penalties, or those for FBAR and FATCA penalties also.

    Unpayable draconian penalties lead to disregard of law and, worse (or better for those behind this Web site) cynicism and derision and contempt. Think of those Quebeckers born in Newport VT before the QHIP was established years ago solely because that was the closest maternity clinic to Rock Island QC?

    I would not so much count the number of voluntary renunciations of American nationality as the rate of failure to renew US passports. Financial institutions abroad will not likely note the US connection of a depositor born outside the USA unless told of it.

    And think of the irony: former green card holders, some of whom will be ineligible for visas for various reasons (presumption of immigration, conviction of an offence …) but still will be claimed by the IRS as subject to tax. My favourite case along these lines was a Korean green-card holder (now deceased) who gave up his green card to take up a quasi-diplomatic post in Washington with an international organisation. Diplomatically immune, of course, for the duration of his posting and outside the scope of IRS interest thereafter.

  8. @recalcitrantexpat
    Re: “It is forbidden by the U.S. government that it’s non-resident citizens be allowed to live the same lives as those of their compatriots”. I look around me at all the ordinary people here who don’t have my burden and I can’t see why I am subject to this oppression. No-one around me is paying thousands to satisfy the country of their birth – and prove they owe no tax, and are hoping not to be fined into the dust for their ordinary chequing and other accounts. They aren’t afraid of their country of citzenship’s whims and follies.

    That puts the US in the company of Eritrea, and other places that it decries as being ‘undemocratic’ and oppressive.

    That has got to be a violation of our human rights. I am no more likely to be a criminal tax evader and money launderer than anyone INSIDE the US. If we are deemed guilty first, and the onus to prove innocence annually for life, falls on us and not on our fellows inside the US – that is a travesty. Where else is there a plan to track NOT just our earnings, but each and every debit and credit that passes through all of our accounts? This is NOT about taxes. This goes far beyond that. What other ‘developed’ country demands the right to track my monthly daycare fees as they pass through my account? Or may make me justify without just cause, limit or logic – any disbursement I ever made, and any deposit?

    Even between countries with US embassies, there is a conflicting approach to giving us advice and assistance ‘abroad’ – in addition to the significant differences in approaches to the renunciation/relinquishment wait times, etc.

    For those expats in the UK – funny that the US embassy page for the UK is so very reassuring in it’s advice to US citizens that haven’t been filing – and makes absolutely no mention of any FBARS, FATCA, etc.

    See http://london.usembassy.gov/irs/irsfaq.html
    “I am a U.S. citizen who moved to the U.K. several (or many) years ago and thought I did not have to file U.S. tax returns any longer. Now I have learned that information was incorrect. What do I do?”

    “This is a common misunderstanding among Americans abroad, and should not create anxiety for those who find themselves in this situation. Generally, you should file returns for the past three years, taking the foreign earned income exclusion, the foreign tax credit, or both. It would be extremely unlikely that there would be any late penalties assessed, since penalties are computed as a percentage of tax owed, and only the rare taxpayer would actually owe tax in this situation. ”

    Note that they say that ‘generally’ you only have to go back for 3 years for returns, and say it “should not create anxiety for those who find themselves in this situation”. There is absolutely no mention of FBARs and FATCA, or Offshore Voluntary Disclosure programs.

    VS.

    BIG CONTRAST with the Ottawa embassy (which has made changes to include the OVDI link on their page over the past few months):
    http://canada.usembassy.gov/service/taxpayer-assistance2.html

    “Important Information and Links
    Information for U.S. Citizens or Dual Citizens Residing Outside the U.S.
    IRS Website for International Taxpayers
    Regarding Report of Foreign Bank and Financial Accounts (FBAR)
    Regarding the Foreign Account Tax Compliance Act (FATCA)
    Offshore Voluntary Disclosure Agreement (OVDI)
    Answers to Frequently Asked Questions about the OVDI

    “Form 8938

    Form 8938 (Statement of Specified Foreign Financial Assets) should be filed by taxpayers withspecific types and amounts of foreign financial assets or foreign accounts. It is important for taxpayers to determine whether they are subject to this new requirement because the law imposes significant penalties for failing to comply. Form 8938 — including the instructions, regulations implementing this new foreign asset report, and other information to help taxpayers determine if they are required to file the Form 8938 — is available on the IRS website.”

    So, why do you think that the Embassy in London England thinks that filing back years shouldn’t cause anxiety, but Ottawa Canada wants you to know about OVDI?

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