If all countries adopted American citizenship and tax laws, US President Barack Obama, Senator Ted Cruz and Secretary of State would finally agree on one thing. Citizenship-Based Taxation and FATCA are “Outrageous.”
Citizenship-Based Taxation: Unique or Outrageous was published in Tax-News today. This is an international tax publication based in the UK. The article by Lynne Swanson (aka Blaze) was originally published as a Letter to the Editor in Tax News International two weeks ago, but is only available to subscribers there.
The article explores how Obama, Cruz and Kerry would be affected if all countries adopted citizenship based taxation. Here’s how I predict they would react to FATCA.
Soon, Obama, Cruz and Kerry would face FATCA (Foreign Account Tax Compliance Act) demands. Their American banks would be required to report on all their accounts, transactions and other personal information or face harsh penalties. Just like United States is demanding of banks around the globe.
“That’s outrageous,” the trio would scream. They’re right.
“I’ll renounce,” each would declare. Following unique U.S. example, those countries could respond: “Not so fast.”
File five years of complex tax returns requiring hugely expensive legal and accounting help. Tell us your net worth. Give us your FBARs. Pay us massive penalties. Hand over a huge exit tax.
Then, maybe we’ll let you go. But, we will declare you “tax cheats” and “traitors.”
These scenarios are fictional, But, as we know, CBT and FATCA affect Real People and Real Lives.
So, what would happen if all countries followed the American model?
What would happen if the whole world adopted U.S. citizenship based taxation and demanded financial records of any of its citizens living outside its borders?
Would United States cooperate? Would they provide information on naturalized American citizens or U.S. Green Card holders to Kenya, Canada, Cuba, France, Mozambique, Portugal or Eritrea? Of course not.
Add about 190 other nations worldwide to those few and it’s easy to see it would create global financial chaos.
Put simply, citizenship-based taxation is “outrageous.” It’s time for U.S. to join the rest of the planet and move to residence based taxation.