A FATCA IGA requires the non-U.S. country to attack it owns citizens, erode its tax base and pay tribute to the US.

A FATCA IGA does not require the US to erode its own tax base in any significant way.

Why is there this imbalance? The answer is simple. Only the US employs citizenship-based taxation. The US employs citizenship-based taxation as a weapon against not US citizens abroad, but against the countries where they reside.

Therefore, at the end of the day, if the US is going to get “FATCA Co-operation” from the rest of the world, it must stop citizenship-based taxation.

Interestingly this necessity seems to have been recognized in an academic paper –  FATCA: Toward a Multilateral Automatic Information Reporting Regime by Joanna Heiberg. I highly recommend this article.

She writes in part:

D. Room for Compromise: Citizenship-Based Taxation

Despite its commitment to a collaborative FATCA regime, the proposed intergovernmental approach ignores a significant underlying inconsistency: basis for taxation. Whereas most countries impose taxes on resident and source income, the United States also taxes nonresident citizens. This inconsistency provides an opportunity to reevaluate the policy of taxation based solely on citizenship159 and, this Note argues, to terminate it.

First, strong non-FATCA based arguments exist in favor of eliminating citizenship-based taxation.160 The United States is the only country in the world to base worldwide taxation solely on citizenship.161 This policy dates back to the Civil War,162 and is protected via a “saving clause” in U.S. income tax treaties.163 Historic U.S. justifications for taxing nonresident citizens, including deterring draft-dodging and flight of wealthy Americans, no longer apply.164 Similarly, arguments in favor of taxing these individuals are weak,165 especially in light of existing alternative bases for taxation.166

Second, FATCA imposes substantial burdens on U.S. Citizens living abroad in the form of complex reporting requirements167 and, in some circumstances, barriers to obtaining a foreign bank account, insurance, or pension.168 Under FATCA, FBAR, and other existing reporting requirements, inadvertent noncompliance may result in steep civil and criminal penalties that are often disproportionately high in comparison to the amount of tax involved.169 Abandoning taxation of nonresident citizens could lead to significant simplification and reduction of administrative costs, which likely exceeds the revenue collected solely on the basis of citizenship.170 Third, elimination of citizenship-based taxation would not impair FATCA’s goals of tracking down tax evaders and raising revenue. FATCA was designed to fight offshore tax evasion by “bad actors” whose primary reason for establishing and and avoid paying U.S. taxes they legally owe.171 In contrast, the estimated five to seven million172 U.S. citizens living abroad generally fall into a category of “benign actors”173 whose primary reasons for establishing and maintaining overseas accounts are unrelated to tax. Nonresident citizens include a wide range of individuals, from those who choose or are assigned to live overseas due to the opportunities of globalization to “accidental citizens” who were merely born in America and left the country at a young age.174 The average nonresident citizen holds foreign assets, including bank accounts, retirement funds, insurance plans, and investments, that are necessary for living and working in his country of residence. Similarly, due to international income exclusions and credits, citizens living abroad have, at most, a deminimis tax liability.175 Despite this inconsistency, FATCA poses serious problems for U.S. citizens living abroad.176

Finally, termination of citizenship-based taxation would facilitate an intergovernmental approach to automatic information reporting.177 Requiring financial institutions to identify both a taxpayer’s residence and citizenship, as is currently the case, doubles the amount of work required for compliance with FATCA. Unlike other FATCA requirements under the intergovernmental approach, identifying a taxpayer’s citizenship would only benefit the United States.178 Conversely, the ability to apply a single standard for identifying taxpayers based on residence would improve efficiency and reduce the burden on financial institutions to the benefit of all FATCA partners. Further, this compromise may induce other countries to participate in the proposed intergovernmental approach. This may be especially true of countries, like Canada, that are home to a significant number of U.S. citizens.179

In sum, taxation of nonresident citizens is inconsistent with global norms, creates administrative inefficiencies, and impairs development of a multilateral FATCA regime. For these reasons, the United States should abandon the policy of citizenship-based taxation.

RT @politicalpoints After term ends, US ambassador to Canada Jacobson to join BMO ctvnews.ca/business/after… – Advising 70 year old grandmas!—
U.S. Citizen Abroad (@USCitizenAbroad) May 21, 2013

This is an incredible story. Ambassador Jacobson is best known for his amazing “70 year old Grandmas” speech in Ottawa on October 18, 2011.

“When I read all of this I was concerned. So last week I called the Commissioner of the United States Internal Revenue Service to see what we could do. I explained the problem to him.

The result is that both he and I are sympathetic to the concerns. We are going to work together to see if we can’t find a way to accommodate grandma — and others — here in Canada. But we have to figure out a way to do it without letting the person who is trying to evade taxes in the Cayman Islands off the hook.

My message on this one is to sit tight. We are not unreasonable. We are not unsympathetic. We are not irresponsible.”

David Jacobson – U.S. Ambassador to Canada – October 18, 2011

Does this suggest a coziness between the U.S. government and the Canadian banks at the beginning of the U.S. attempt to impose FATCA on the world. You know, to get the world to sing in perfect harmony?

Is there any impropriety here?

Congressman Goes On Berating Rant At Ousted IRS Commissioner And Gets A Standing Ovation businessinsider.com/mike-kelly-ran… – Rep. Mike Kelly (R-Pa.)—
U.S. Citizen Abroad (@USCitizenAbroad) May 19, 2013

All U.S. citizens everywhere should watch this video of Mike Kelly and Steve Miller. I predict that (as the Carpenters sang):

“We’ve only just begun!”

Yemeni Farea Al-Muslimi explains how Obama’s drones generate hatred for America

“What radicals had previously failed to achieve in my village… one drone strike accomplished in an instant: There is now an intense anger and growing hatred of America.”

Very interesting video. The witness is clearly a friend of America and in general “pro-American”. He is just “telling it like it is”.

It is very costly for the U.S. to defend itself against the hatred that it generate. How long will the United States be able to afford the cost of the hatred that the drones generates? This issue has been discussed on the Ron Paul Forums.

Here is an excerpt:

Washington’s drone war has turned Yemenis against the US and sparked “intense anger and hatred,” which Al-Qaeda has exploited for recruitment, according to witness testimony at the Senate’s first public hearing about the legality of drone strikes.

Yemeni writer Farea Al-Muslimi has revealed the shock and hatred felt towards the US after a drone bombed his home, the village of Wessab: “The attack terrified thousands of simple, poor farmers,” Muslimi told the Senate Subcommittee on the Constitution, Civil Rights and Human Rights in its hearing titled ‘Drone Wars: The Constitutional and Counterterrorism Implications of Targeted Killing.’

“The drone strike and its impact tore my heart, much as the tragic bombings in Boston last week tore your hearts and also mine,” he added. “What radicals had previously failed to achieve in my village… one drone strike accomplished in an instant: There is now an intense anger and growing hatred of America.”

Washington’s drone war has turned Yemenis against the US and sparked “intense anger and hatred,” which Al-Qaeda has exploited for recruitment, according to witness testimony at the Senate’s first public hearing about the legality of drone strikes.

Yemeni writer Farea Al-Muslimi has revealed the shock and hatred felt towards the US after a drone bombed his home, the village of Wessab: “The attack terrified thousands of simple, poor farmers,” Muslimi told the Senate Subcommittee on the Constitution, Civil Rights and Human Rights in its hearing titled ‘Drone Wars: The Constitutional and Counterterrorism Implications of Targeted Killing.’

“The drone strike and its impact tore my heart, much as the tragic bombings in Boston last week tore your hearts and also mine,” he added. “What radicals had previously failed to achieve in my village… one drone strike accomplished in an instant: There is now an intense anger and growing hatred of America.”

What is it going to take for the U.S. to wake up? The U.S. is generating hatred against America at a faster rate than America can pay to defend itself.

IRS doesn't know as #americansabroad do that power to tax ruins lives and should not be used for improper purposes taxprof.typepad.com/taxprof_blog/2…—
U.S. Citizen Abroad (@USCitizenAbroad) May 14, 2013

Other than the power to prosecute, the taxing authority is the most awesome power the government has. It can ruin people and companies. When wielded for political purposes, it is a violation of the basic contract the American people have with their government. The abuse admitted by Ms. Lerner can’t be dismissed in a casual apology on a casual Friday as no big deal. It’s a very big and bad deal.

________________________________________________________________

Washington Post editorial, Playing Politics With Tax Records:

A bedrock principle of U.S. democracy is that the coercive powers of government are never used for partisan purpose. The law is blind to political viewpoint, and so are its enforcers, most especially the FBI and the IRS. Any violation of this principle threatens the trust and the voluntary cooperation of citizens upon which this democracy depends.

So it was appalling to learn Friday that the IRS had improperly targeted conservative groups for scrutiny. It was almost as disturbing that President Obama and Treasury Secretary Jack Lew have not personally apologized to the American people and promised a full investigation.

The problem is that this is exactly what you would expect of the United States of today.

On May 7, 2013 Toronto Globe and Mail editor-in-chief interviewed former U.S. Vice-President Al Gore. Mr. Gore has just published his most recent “The  Future – Six Drivers of Global Change“. Although I haven’t had time to read the book, the interview was fascinating. Most of the discussion focused on climate change – he made a believer of me.

The most interesting parts came at the end and in the Q and A that followed. Mr. Gore made one very interesting comment and one very interesting point.

Interesting Comment

When asked about “American Exceptionalism” Mr. Gore referred to it as a kind of (are you ready for this) “National Narcissism”. Reminds me of an earlier post on the topic of “Nationalistic Narcissism“. He did go on to say that he did not think that any country would replace the United States for some time.

Interesting Point – On Democracy In America

This is of interest to those of us attempting to get the law of citizenship-based taxation changed. Mr. Gore referred to “US democracy” as completely dysfunctional. He used the word “pathetic” to describe it on at least two occasions. His basic theme was that Congressmen were completely captive to and responsive to the “special interests” that donate money to their campaigns. His argument was that elections should be completely “publicly financed” with no private money allowed.

Some specifics:

- Congressmen spend about five hours a day attempting to raise money and are not doing the jobs they were elected to do;

- Obama is operating in an environment of unprecedented hostility;

- the only people who have representation in the U.S. are those who make “big money” contributions to campaigns;

- the average “wage earner” has NO political representation (they may not be much better off than U.S. citizens abroad);

- the United States is a country full of “good people” who are locked in a “bad system”;

- at present it takes “big money” to get your message heard, but he is hopeful that the internet will change that;

- he spoke favorably of Thomas Paine (the author of Common Sense). Perhaps US citizens abroad can be at the forefront of the next American Revolution;

- the internet can help move the United States back to what a “representative democracy” is, which is a country where the government gets its powers from the consent of the governed.

All in all, the message is that (as we know) we are going to continue to have to work very hard to get our message heard in Washington. Once again, U.S. citizens abroad need their own lobbyists to protect themselves from Congress and to get the attention of Congress.

I have always been an “Al Gore fan”. I left the interview feeling a little better about the American people in general and a lot worse about the U.S. government. Those interested in a bit of “political nostalgia” might remember (the then) Senator Gore’s “It’s Time For Them To Go” speech at the 1992 Democratic convention. It’s one of my “all time” favorites.

That said, as I finish this post, I have received a bulletin from that great lobbyist James Jatras (one of those Americans who qualifies as “good people”) , to the effect that Senator Rand Paul has introduced a bill to Repeal FATCA. Yes, there are good people in the U.S. government too!

Things are getting more and more interesting!

Don’t forget to remind everybody to:

Repeal FATCA and abolish citizenship-based taxation.

Big news! It appears that #streamlinedcompliance is now an option for those who wish to file amended returns! federaltaxcrimes.blogspot.ca/2012/04/opting… #OVDP—
U.S. Citizen Abroad (@USCitizenAbroad) May 01, 2013

Assuming the correctness of this, it is very big. It signals that the focus of the IRS may be moving away from penalties and toward getting people back into the system! Note the discussion of the role of Taxpayer Advocate.

anon5percent • 2 days ago

RT @FATCA_Fallout Drawing the Boundaries of Tax Justice bit.ly/Y1a91F Characterized by arbitrariness & injustice—
U.S. Citizen Abroad (@USCitizenAbroad) April 24, 2013

An excerpt from the article that is a useful contribution to the analysis of “citizenship-based taxation” is:

Citizenship or nationality might seem like an appropriate place to start in thinking about the state’s right to tax to the extent the category indicates the individual’s (and perhaps by proxy the  entity’s) choice to identify with a state as a matter of political allegiance. The suggestion is that citizenship is a brand of identification that signifies a positive undertaking—lodged in legal terms—to mark a person as belonging to the state. However, this is a difficult, perhaps impossible, argument to sustain in a world in which globalization has redrawn the boundaries of human community so that people can easily be branded as a citizen by multiple states. This simultaneous branding dilutes the citizenship category so much that it cannot easily serve to distinguish among competing jurisdictional claims.

Citizenship’s brand dilution is reflected in conflicting state practices when it comes to identifying taxpayers. With few exceptions, states routinely reject citizenship as the best normative explanation for the state’s exercise of taxation over the person. The one state that imposes taxation on the basis of citizenship in all cases—the United States—is routinely criticized for this position, since the act is hostile to other jurisdictional claims that the United  States otherwise acknowledges as valid.

DRAWING THE BOUNDARIES OF TAX JUSTICE  - Allison Christians

Citizenship-based taxation is premised on the assumption that the citizen is the property of the state. Although citizenship-based taxation is  not okay for the rest of the world it is somehow okay for the U.S. What would be the the U.S. reaction if other countries subjected U.S. residents to taxation? What would be the consequences? This was explored in Don Whitely’s article:

The Accidental Kenyan

The Expatriation Act of 1868 guaranteed all citizens (including U.S. citizens) the right to renounce their citizenship. In other words, assuming that citizenship-based taxation assumes the state has a property right in the citizen, the citizen has the right to remove himself from bondage by renouncing citizenship.

The Expatriation Act of 1868 was an act of the 40th United States Congress regarding the right to renounce one’s citizenship. It states that “the right of expatriation is a natural and inherent right of all people” and “that any declaration, instruction, opinion, order, or decision of any officers of this government which restricts, impairs, or questions the right of expatriation, is hereby declared inconsistent with the fundamental principles of this government”. Its intent was to counter other countries’ claims that U.S. citizens owed them allegiance; it was an explicit rejection of the feudal common law principle of perpetual allegiance.

Countries use residence based taxation, in part, because they recognize that they are part of a global village – that is part of a world. Does the United States view itself as part of the world? If citizenship-based taxation is any indication, the United States views itself as the world! On the back cover of Stone’s “The Untold History of America” you will find an interesting comment from Mikhail Gorbachev.

“At stake is whether the United States will choose to be the Policeman of a “Pax Americana”, which is a recipe for disaster, or partner with other nations on the way to a safer, more just and more sustainable future”.

Stop citizenship-based taxation! Repeal FATCA!

Future generations will visit the #PFIC memorial in Washington – a monument to the destruction of #americansabroad isaacbrocksociety.ca/2013/04/17/exc…—
U.S. Citizen Abroad (@USCitizenAbroad) April 24, 2013

I have never met a Homelander who would believe the story referenced in this tweet.

Q. What do the U.S. and Eritra have in common?

A. They both terrorize their citizens abroad.

@USCitizenAbroad Answer must be Congressional ignorance of the facts. Any other reason is too terrible to contemplate.—
Peter Dahlen (@peterdahlen) March 02, 2013

@uscitizenabroad Don't know Nunes. @ACAVoice is doing great work educating (which is lobbying at its core) Congress. ow.ly/icT3U—
Peter Dahlen (@peterdahlen) March 02, 2013

This post is a “follow up” to an earlier post called: “Why are we so cruel to U.S. citizens living abroad.” That post also referenced the above Twitter Exchange. That post included the following poll:

The preceding twitter exchange identified at least part of the reason for citizenship-based taxation as “Congressional ignorance”. The exchange also referenced the need to get the message to the Ways and Means Committee. With the help of the advocacy of American Citizens Abroad and others Congress received many submissions on the topic of citizenship based taxation. Thanks to AbusedExpat for taking the time to transcribe excerpts from the submissions in comments starting here.

As Patrick Henry notes the comment from Jackie Bugnion of ACA rated a 10 on the “emotion scale” and was a true “Declaration of Independence” for Americans Abroad. Patrick Henry comments that:

I just read the submission from Jackie Bugnion. Her statement reads like the Declaration of Independence and actually brought tears to my eyes. Thomas Jefferson and Benjamin Franklin could not have written it better.

http://waysandmeans.house.gov/uploadedfiles/bugnion_wg_comments.pdf

“A revolution among long-term overseas residents is now underway. Five years ago, Americans abroad never talked about renunciation of citizenship. Today, it is a common topic in the press and among the community abroad. For more and more individuals, renunciation is the only solution to an intolerable situation created by the U.S. imposing its laws beyond its borders. The United States is literally destroying the community of Americans abroad, which plays an essential role in representing U.S. interests and goodwill overseas.”

Thank you Jackie!

It’s clear that Americans Abroad have communicated their plight, their circumstances and their resentment to the Ways and Means Committee. This is the  biggest achievement  of Americans Abroad to date.  It is an extraordinary achievement. An achievement made possible by the work of so many people all over the world. So, congratulations to all!

The Difficult We Do Today – The Impossible Takes A Bit Longer

Where are we now? What Peter Dahlen calls the “congressional ignorance” is (or will be over). Jackie Bugnion did a brilliant job of demonstrating that the problems of “US citizenship abroad”  result from the combined effects of many pieces of legislation. The problems are a combination of Congress dumping many pails of “legislative gasoline” on U.S. citizens abroad, followed by the Obama administration “lighting the match”, and “torching U.S. citizens abroad and their families”.

Winston Churchill (who had an American born mother) once described a wartime situation as “The End of the Beginning”. Americans Abroad are at the end of the beginning.  Congress has been made aware of the problems. But, as Roger Conklin says:

This battle is far from over. In fact it hasn’t really begun.

The battle is now over the critical mass of public opinion. The battle is to convince Congress to understand what I believe is the governing principle.

That principle is:

In the battle between U.S. citizens abroad and the Unites States (represented by Congress), there is NOT one winner and one loser.

There are only two winners or two losers. What the submissions of all have demonstrated is that:

If citizenship-based taxation is changed to residence based taxation BOTH the United States of America  and U.S. citizens abroad will be winners.

If citizenship-based taxation is NOT changed and remains the law BOTH the United States of America and U.S. citizens abroad will be losers.

This may be the way to pitch the argument.

What the end game will be …

After all of these submissions there is NO possible way that Congress can plead ignorance to the “prison of citizenship-based taxation” – a prison built – one legislative brick at a time.

Therefore, a Congressional failure to correct this situation would invite the inference that the United States would be attempting to:

1. Identify through FATCA; and

2. Destroy through “citizenship-based taxation”

one specific group of U.S. citizens – U.S. citizens abroad.

Since U.S. citizens abroad have NO political representation (the right to vote doesn’t matter if there is nobody to vote for), this “tax reform” discussion is the only chance to get the law changed.

If the law is NOT changed:

U.S. citizens abroad who are tax compliant  must choose between returning to the Homeland or renouncing.

U.S. citizens abroad who are NOT tax compliant will have a harder choice. It’s not clear to me how they return to the Homeland if they are not compliant. I assume they would have to become compliant prior to returning.

A Final Thought …

As Roger, Tim and others have stated on numerous occasions:

This is going to take time. This is going to take patience. This is going to take courage.

And above all else:

This is going to require maintaing a positive attitude!

If U.S. citizens abroad don’t believe it’s possible to change the law of citizenship-based taxation, then why would Congress even consider it?

Short of a revolution in the spirit of 1776, this is the closest that Americans Abroad can be to getting a peaceful change in the law!