New Berlin Wall V: The IRS attack on U.S. expats will become a diplomatic issue (guest post)

The following guest post from Renounce US Citizenship adds to our series on the New Berlin wall.

The IRS attack on U.S. expats will become a diplomatic issue

The conventional wisdom is that taxes are a domestic matter and that the U.S. State Department should not get involved in the vicious assault levied on American citizens living abroad. The conventional wisdom is wrong. The conduct of the IRS is becoming and will become more and more of a diplomatic issue for the U.S. There are two broad categories of reasons. The first pertains to the role that U.S. citizens play as ambassadors for the U.S.A. The second has to do with friction with foreign governments.

U.S. Expats As Ambassadors for the U.S.A.

  1. Everybody agrees that there have been a large percentage of U.S. citizens living abroad who didn’t know they were required to file a U.S. tax return.
  2. Of those who did know that they had to file a tax return, only a small percentage of them knew about the FBAR reporting requirements.
  3. Recent events have caused U.S. citizens living abroad to cower in fear that their savings and property will be confiscated. Whether true or not, that is the perception.
  4. The reaction of U.S. citizens abroad is anger and a feeling of betrayal. They have done nothing wrong. The most that could be said is they failed to comply with a requirement (of questionable moral validity) that they did not know about and had no reason to believe existed. (Many accountants and lawyers are just getting up to speed on this). Not only are many U.S. expats getting ready to renounce U.S. citizenship, but they are now extremely hostile to the U.S. Furthermore, many U.S. expats now understand (having been subjected to the arbitrariness, capriciousness, recklessness and irresponsibility of the U.S.) why the U.S. is so disliked throughout the world.
  5. These expats are now part of the world that dislikes the U.S. But there is more. Expats were (in most cases) the most loyal of American flag wavers. No more. They are now the strongest and most articulate U.S. bashers. This is not something the U.S. can afford. Imagine five million U.S. citizens who make “America Bashing” an obsession.  It’s like this: You steal a person’s health, wealth and life and that is what you are going to get. Just imagine who much damage this will do to the U.S. over a long period of time. Five million U.S. expats outside the U.S. expressing their disgust with the U.S.
  6.  The U.S. cannot afford to have five million U.S. citizens trying to renounce their citizenship and telling everybody they know why. The U.S. and Eritrea (a terrorist state) are the only two countries that tax on the basis of citizenship.
  7. In case you didn’t understand this from points 5 and 6, I will make it clearer. The U.S.  government has turned U.S. expats against the U.S.

Friction With Foreign Governments

FATCA, the U.S. Berlin Wall and the neutron bomb of the financial system, will guarantee that foreign banks and countries will do their best and will learn how to avoid the U.S. financial system. Over the long run other countries do NOT have to “play in the sandbox” with the U.S. Of course, if they don’t want to play with the U.S., this will make it difficult for the U.S. dollar to maintain its status as the world reserve currency.

Leaving aside FATCA, the current assault on U.S. expats is going to be a problem for foreign governments of which the Canadian government is one example. The Canadian Finance Minister has made it clear how the Canadian Government views this unprincipled, immoral, vicious assault on Canadian citizens. If the IRS steals the retirement savings of Canadian citizens, this will become a long term burden on the Government of Canada. To put it another way: the IRS is stealing from the Government of Canada.

Bottom Line: In the short run, the current IRS assault on U.S. expats is an IRS tax issue. In the long run (and it won’t be too long), it is going to become a major diplomatic problem for the U.S. There is still time to change course, but the time is running out. The U.S. really can’t afford any more enemies. Hilary Clinton take note!


(used with permission).

Americans getting group therapy at U.S. Consulate in Toronto

Hi Obama, Geitner, Senator Levin?  Are any of you aware that the Toronto consulate explained to a group of 22 Americans how to jump the New Berlin Wall last month.  The Globe and Mail has an article telling about this group therapy session.  The illness:  American citizenship.  The cure:  Renunciation of citizenship.

The salient quote:

A U.S. embassy official played down the significance of the renunciation meeting. He said consular officials were responding to calls and requests for information prompted by a flurry of media coverage about the tax crackdown.

“We simply decided it was more efficient to have everybody come as a group and talk to everyone at once, rather than doing it individually,” the official said. “It was simply a time-management decision.”

For those interested in therapy, the cost is $450 per renunciation.

The New Berlin Wall IV: A reader’s comment

The United States government is acting like a trapped animal in a desperate attempt to keep capital in the United States.  The New Berlin Wall consists of the various laws, many of them recent, which attempt to force American citizens and companies to keep their capital in the United States.  But instead of having success, these laws will cause many to leave permanently, with no intention of ever returning.  It will eventually result in a mass exodus if the U.S. doesn’t begin to implement measures that tries to entice capital to stay rather than measures that try to stop it from leaving.  The exodus of capital is already occurring.

A reader responded to my first New Berlin Wall with the following comment, which I edited to protect her and myself from a rapacious evil government (I’ve changed the identity of her country to X and omitted her name):

I am in the exact same situation as you. I have lived in X for thirty years. I have been told by the IRS when I call as I have been a stay at home mom of a disable X-IAN child that I did not have to file since I did make enough to file but, that I might want to fine and use my husband *who claims me as a dependent** income, he is X-IAN. I do not have to file her as “American for tax purposes” but, was told I could. Why would I want to do that?

My health is not good and this is such a royal pain. It is exceedingly confusing. This year I inherited some money when my mother passed away. I will of course report it but, it’s right in the middle of this U.S. tax change for citizens residing in other countries.  …

Why should people of lower middle income be subjected to this after living outside the country for so long. I no longer have any desire to be American because of these draconian practices. It puts such hardship on law abiding citizens. I want to renounce. The stress of it all is too much. I am only worried about being able to visit my family in the U.S. occasionally but, have no desire what so ever to EVER live there again.

Shame on you United States for this monetary slavery. We are not rich and my husbands income supports me *I have lupus and RA* AND my son with disabilities. Now you want me to feel like I’m a servant to you though I’ve done nothing wrong. This puts such a hardship on people.

I have already applied for my X-ian citizenship, I want to renounce American citizenship and not be penalized for traveling on my X-IAN passport. Thirty years of not living in the U.S. and we still have to contend with this ridiculousness.

Of course now that I will be travelling on Canadian passport, I can still visit the US but I can’t reside there any more.  But expatriation and the relinquishing of my US citizenship is what I had to do to avoid the stupid and draconian legislation against Americans who live outside the country.  The government is attempting to stop millionaires from expatriating their capital and is instead making life hell for stay-at-home mothers.  Shame on you indeed.

The New Berlin Wall series

New Berlin Wall III: No renewal of passport until IRS satisfied?

The U.S. Government Accountability Office has recommended withholding passports from people who have unpaid tax bills owing to the IRS.

That’s a really good idea.  Now I have another.  Let’s build a really high wall at all of the land borders and post guards with machine guns to keep Americans who owe taxes from leaving the country.

The New Berlin Wall II : New fee for those wishing to renounce US citizenship

One year ago, I announced that I had applied for Canadian citizenship with intention of renouncing my American citizenship.  I wrote that the US has tried to erect a Berlin Wall to keep American citizens from expatriating:

Since 2008, the US has placed particular restrictions on wealthy people who wish to expatriate.  If I were to own 2 million in assets or if my average net income tax over the last five years were $139,000 , I would be a “covered expatriate” upon renouncing my citizenship.  The law penalizes these individuals with exorbitant expatriation tax that boggles the mind.  Why?  To keep them in the USA.  So it is a Berlin Wall designed to keep people from leaving the US.

Now the US government has piled another bunch of useless rubble against that Berlin Wall.  I read in the US Consulate in Toronto’s website the following (emphasis mine):

Renunciation: We accept applications to renounce U.S. citizenship and forward them to Washington DC for a decision, which takes several months. This process CANNOT be expedited. You may contact us by mail, fax or email to request information and proper forms. Once you are ready to renounce, you must make a special appointment by emailing us … and proposing a date at least two weeks in advance. All renunciation appointments are at 10:30 a.m. We will respond and confirm the date and time of your appointment or propose a new date depending on staff and appointment availability. Note that there is now a US $450 fee to renounce U.S. citizenship, payable at the time the renunciant takes the Oath of Renunciation from the consular officer inside the Consulate.

Well, this is embarrassing isn’t it?  The US prides itself in being the best country in the world, the one where everyone and his brother wants to live.  But now they will just add one more insult to injury to their citizens living overseas: in order to escape the jurisdiction of the US, escaping citizens must pay $450.  Well, from the standpoint of fleeing the greediest government in the world, that will soon become desperate for revenue because of hyperinflation, it’s probably a small price to pay.

In any case, my citizenship application to Canada was accepted, I took the citizenship test Wednesday February 16, and I have been invited to a citizenship ceremony next Monday, on February 28.  I’ll be contacting the US Consulate in Toronto tomorrow.  Au revoir.