by Rhodri C. Williams
Spare a thought this week for US citizens abroad, who will be scrambling to comply with one of those nightmarish bureaucratic systems that no rational person would ever propose if they were working from a clean slate today.
As one of those affected, what to say? Many of us will have stayed up far too late during recent nights, working out whether we are likely to fall victim to an arbitrary snap-enforcement program that has imposed massive fines on people out of compliance with a previously dormant filing requirement we had precious little reason to be aware of. Still more of us face the prospect of spending entire days working through a battery of incomprehensible forms in order to prove what should be a self-evident point – we owe nothing to the US Government because our residence is registered in foreign jurisdictions with a legal right (and often a great enthusiasm) for culling our incomes in exchange for the services they offer. Those with higher incomes will simply be taxed on them twice over, and this by the ostensibly most tax-averse country in the developed world.
As an American on the ‘liberal’ side of the political spectrum, I have never had much time for black helicopter conspiracy theories about an oppressive ‘big government’. On the other hand, my experience with the US tax authorities has sharpened my classically American concerns about unrestrained government. While I have little doubt that the US Internal Revenue Service behaves responsibly and responsively (e.g. as a ‘service’) when it comes to ‘internal revenue’, it has taken the form of an unaccountable, repressive juggernaut for those of us in the ‘external revenue’ free-fire zone (consider the terrifying recent experience of one of my fellow US citizens in Sweden). However, it is ultimately the IRS’ masters in Congress and the Executive Branch (ahem, Mr. Obama) that have given these dubious tendencies ample room to breathe.
For those of you interested (academically or personally), there is lots of good information out there on the internet. A few starting points include the Isaac Brock Society representing the enormous population of affected people in Canada, as well as the more academic Federal Tax Crimes blog. Peter Spiro also provides a helpfully contextualized running commentary on these issues on Opinio Juris. However, the most important player is American Citizens Abroad (ACA), an organization that provides updated advice on navigating the double taxation labyrinth while actively seeking to replace it with an ordinary system recognizing residence-based taxation that would let Americans abroad get on with raising families and engaging in the private diplomacy and trade promotion we provide our country with every day (at zero cost to any taxpayer!)
If you surf this topic a bit, you will probably find yourself scratching your head and wondering how this could have come to pass. Foreign banks to refuse to open accounts for US citizens as a matter of policy? Struggling US citizens abroad put to the rack for the sins of fat-cats with undeclared Swiss bank accounts who are mostly US residents anyway? (I mean, who really thinks the Swiss care where you live if the numbers add up?) US citizens lining up to renounce their citizenship because their own government is shaking them down in a desperate and legally questionable attempt to fill the deficit gap?
In the cold light of day, this stuff should not stand up for a single Congressional term, particularly in a Congress now dominated by politicians dead-set on (1) reining in out-of-control Federal agencies, and (2) cutting tax burdens on productive citizens come hell or high water. For the first time in my memory, I may actually passionately agree in principle with my conservative delegates to Congress, at least as far as this issues goes. So why does it just get worse?
My considered opinion after some self-interested research is that affected people have been kept so busy sweating over personal compliance that they have had very little energy left over to focus on political message. There are lots of complaints about how the US media seems only too happy to fall into line with the IRS’ implicit assumption that living outside the US is in itself a form of tax evasion. However, beyond the ACA’s important efforts, there doesn’t seem to be much systematic advocacy. So let me take a first stab of my own. Why should the average US citizen care about the fiscal fates of their brethren abroad?