Monthly Archives: August 2014

Canada-U.S. dual citizens could be worse off if FATCA lawsuit succeeds

FATCA is nothing more and nothing less than an attempt by the U.S. (with collaboration from the Harper Government) to forcibly impose a U.S. law on Canada. The article fails to point out the long run costs of compliance with U.S. law will far exceed the costs of non- compliance. Well, assuming that you want Canada to continue as a free and sovereign nation.
Roy Berg continually says:
The is U.S. law and therefore we must comply.

#Americansabroad are not tax evaders. The U.S. is a tax invader


What follows is a comment ot a rencent Robert Wood post.

This is a “must read”.

UrbanNomad 21 hours ago

I was born in California to foreign parents who were temporarily working in the USA. I left in 1968, aged 1, and haven’t been back except on vacation. I have been fully compliant with my IRS and related obligations since the 1980s.

I have lived in South Africa since 1979, and have spent the past 5 years attempting to naturalise as a South African citizen without success, so I am unable to renounce my US citizenship. I am not in violation of any of the naturalisation requirements; rather the granting of citizenship here is a privilege not a right. Being Africa, I suspect I could make a ‘payment’, but that is not how I operate (and it might put me in violation of the US Foreign Corrupt Practices Act).

I identify fully with Marilyn. Until recently, I had little objection to meeting my US tax obligations. I did think it unfair that the US could assert taxing jurisdiction over me so far away after so long, thereby depriving an African nation of some much needed revenue. However I am more pragmatic than idealistic: the tax rates are similar, and the tax treaty and foreign tax credits meant that the additional burdens (mostly admin & CPA costs) were manageable. This has changed dramatically in the last five years.

Since the IRS’ success against the Swiss banks in 2009 revealed a number homelanders evading tax, they have gone on a global witch hunt. Congress has armed the Treasury Department with some constitutionally dubious legislation which has exponentially increased my tax compliance efforts. I’m spending well over $15K, and up to 100 hours of my time, every year meeting these requirements. The biggest concern I have, given the complexities of the US tax code, is the egregious penalties applicable only to foreigners. Homelanders might be assessed penalties of around 20% of the tax owed, while we are potentially subject to the confiscation of the asset that generated the tax.

The IRS’ PFIC regulations make it almost impossible to hold savings outside the USA. A foreign mutual fund, if held long enough (a wise strategy), can similarly result in taxes approximating the value of your investment in the fund. Having been aware of the PFIC laws for many years, I decided to invest my savings in the USA, but the new AIFMD laws prohibit the sale of mutual funds to non-resident citizens.

I don’t dispute a country’s right to tax its citizens, even if the USA is only one of 2 countries in the world that does so. I am grateful for the Fourteenth Amendment which has granted me the right to hold a US passport and travel freely around the world. However, when you combine these factors with the US tax code and the IRS’ new enforcement abilities, they collectively amount to a violation of some basic rights. I am fortunate that I have savings and assets, and my circumstances may not elicit much sympathy from the homelanders, but the founding fathers intended for all of us to enjoy our rights, not just those on welfare.

To those who might brand me unpatriotic, that has no meaning to me. How patriotic do you feel towards South Africa? If you think that the USA is better off without the likes of Marilyn and me, think again. We don’t fill up your schools and we don’t congest your streets. We don’t crowd your courts with spurious claims nor do we claim medical benefits or welfare. The only thing the USA has ever given me is six passports, and I paid a fee for each of them. Meanwhile, for decades we’ve been swelling the coffers of your treasury with earnings generated in foreign countries. Tax evaders? I think not; the appropriate term is Tax Invaders!

Called-out comment

Robert W. Wood Robert W. Wood, Contributor 21 hours ago

Dear UrbanNomad: Thank you for this thorough personal account. Your costs and perceptions about the changes since 2009 are important for others to note. I have seen some people anxious to expatriate “buy” a passport in a country even where there are not living, if they can’t obtain citizenship in their country of residence. In any case, thanks for your comments. I like your “Tax Invader” term too!

Marni Soupcoff: Ottawa is violating Canadians’ constitutional rights to help the U.S. collect taxes

This is a good and interesting article with the usual comments from the compliance industry. If nothing else, it clarifies how difficult it is to understand the FATCA issues and the lawsuit against the Canadian government.

Canadian government faces constitutional challenge over FATCA deal

Important step forward in preventing the IRS Commissioner replacing the Governor General as Canada’s head of state.
Although the FATCA IGA is an initiative of the Harper Government, there are other reasons why it is unconstitutional.

#OVDP #Streamlined #Quietdisclosure – Is the past a predictor of the future?

A recent post described the unequal treatment under OVDP – that is the reality that “minnows” who entered the program paid proportionately more than “whales” (who the program was presumably designed for). Thus there was clear inequity in the OVDP program itself.

But, what about those who did NOT enter OVDP? How do their fates compare with with who entered OVDP early. Do you remember Commissioner Shulman’s claims that:

Those who come in and pay earlier will pay less?

The above tweet references a post from Jack Townsend’s blog. It is a report on how the IRS is administering transitions (or lack of them) from OVDP to the new Streamlined program.

Well worth the read. It includes:

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OVDP, Unequal treatment

Supports the theory that that OVDP is nothing but an #FBAR Fundraiser for those who didn’t even know they had Offshore accounts.

Offshore Voluntary Disclosure - Critique

Unequal treatment:  Apparently, U.S. taxpayers holding smaller offshore accounts who entered the first IRS limited amnesty program paid proportionately higher penalties.

Unequal Treatment

The above chart is the focal point of the GAO Report article

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The “inversion” issue is about whether the U.S. can tax income of other countries NOT patriotism!

Through “inversions” U.S. companies are unilaterally rejecting U.S. citizenship based taxation and embracing the world standard of “territorial taxation”

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