Peter Spiro has thought a lot about citizenship, and it is interesting what he picks up on from Obama's speech in Burma: the President has a view of citizenship that is out of an "old playbook," because the alternative, based in human rights, is so politically sensitive:
President Obama’s visit to Burma/Mynamar has centered the status of the country’s Muslim minority Rohingya community which has been denied Burmese citizenship notwithstanding their historical presence in the country. .... Obama’s speech today welcomed recent steps by the Burmese government “to address the issues of injustice and accountability, and humanitarian access and citizenship.” Obama then focused on citizenship at length:
"Every nation struggles to define citizenship. ... But what we’ve learned in the United States is that there are certain principles that are universal... Only the people of this country ultimately can define your union, can define what it means to be a citizen of this country. ...Every human being within these borders is a part of your nation’s story, and you should embrace that."
He concluded: “we have an expression in the United States that the most important office in a democracy is the office of citizen — not President, not Speaker, but citizen.”Spiro notes the territorial nature of Obama's view, which he says is
"not so surprising out of the super-strong American tradition of jus soli. That’s also consistent with an emerging international law perspective on these questions, which sees habitual residence as giving rise to a right of access to citizenship. The Rohingya situation in Burma is exceptional in rejecting this norm (the Bedoons in Kuwait and Nubians in Kenya are other examples).
But Obama didn’t seem quite willing to turn to international law as the source of an obligation on this score. ”Only the people of this country ultimately can define your union, can define what it means to be a citizen of this country.” That’s out of the old playbook in which nationality is a matter ultimately of sovereign discretion. He was more in a “leading by example” posture than a tougher one under which Burma has no choice but to fall in line. Leave the latter argument to the human rights heavyweights.This is an interesting discussion in its own right, but it has application to tax law & policy because issues about citizenship crop up time and time again in taxation, as we try to determine and justify national expressions of jurisdiction over the person, almost always--except in the case of the US--based on assertions about physical location that are almost if not wholly arbitrary, and increasingly pressured by globalization. The US position, taxing its citizens wherever located, annoys and angers a lot of people (notably, americans living abroad). But I have yet to identify principles that would explain the appropriateness of either the inclusion or exclusion of a person in the taxpayer category on the basis of citizenship. Practice, history, assertions by government, yes, but principles? No.
There was something interesting about Mark Carney being appointed as the Governor of the Bank of England that brings up from the dead shall we say certain historical traditions that have led Canada/UK/Australia to not taxing their overseas citizens. As I have always said there are certain historical reasons why the US taxed its citizens overseas and certain reasons why Canada/UK/Australia did not. First foremost the Income Tax was introduced in Canada in 1917 whereas there was such thing definably as Canadian citizenship until 1949(In Australia and NZ this didn't occur until the 1960s). All Canadians pre 1949 were British subjects. Of course given the broad degree of autonamy Britain granted its dominions such as Canada in 1867 BNA Act couldn't impose taxation on its subjects residing in such dominions.
ReplyDelete1. Carney's move brings to mind the tradition of sucessful Canadian figures in 19th and early 20th Centuries moving on to big and better things in the UK(ala Lord Beaverbrook, Lord Stathcona) back in the days when Canada was a British colony still and Britain was number 1 in the world.
2. The degree of public support and acceptance of Carney's move in both the UK and Canada(again just like in the old days of Stathcona and Beaverbrook).
3. The acceptance of Carney taking up British Nationality and keeping Canadian citizenship(or perhaps the irrelevance as Canadian citizens residing in England already have the right to vote and run for office). The official UK press announcement made a big deal of the fact that Carney was ALREADY a subject of the Queen.
4. The real kicker. Several American columnists such as Felix Salmon who if I remember correctly very critical of Eduardo Saverin and making a big deal about how the US unlike England would never hire a foreigner to run its central bank and how this is a sign of backwardness and jingoism.
5. Left unsaid the fact that Carney is Canadian and NOT American I suspect is a really big deal from the the standpoint of the British. I would argue Carney's appointment at a certain subliminal level is really a slap in the fact by Britain to the US and its buckaneering method of capitalism that became so popular in the UK over the last few decades in favor of an older more Commonwealth/Imperial way of doing things.
Interesting points, all. I don't know Carney, but I know that the suggestion of combining embassies (Canada, Australia, UK) generated controversy. One more point on citizenship: the Carter Commission considered and rejected citizenship as a jurisdictional basis for Canada, saying that residence was the right choice, but that the decision was largely pragmatic.
DeleteI also think there are two groups of US citizens abroad. US CITIZENS Abroad and US citizens abroad. CITIZENS abroad are those people who might live and work for a year or two or three in someplace like London or the Middle East. These people's finances remain largely US centered and fully have the intention of returning to the US. US citizens abroad are those who have taken permanent residency abroad and/or second citizenship and have cut most if not all financial ties to the US. This later group is the one I think most opposed to citizenship based taxation. The later group is also the one that goes against the grain of what you might think of as the traditional sense of American citizenship in terms of permanently living outside the US. The first group actually has fairly generous treatment under US tax law. First they get the FEIE now indexed to inflation, then they get the housing allowance, then if they have any tax still left after those they can max out IRA and 401K contributions plus charitable deductions etc. I also believe if you are US citizen living abroad you can qualify for both the FEIE AND have a primary residence back in the US you can mortage and get the mortgage interest deduction on in some circumstances.
ReplyDeleteAh, this is interesting and now we are well into the weeds on citizenship as a basis for tax jurisdiction. Citizenship with temporary absence seems less dramatic than citizenship with effectively permanent residence abroad. The FEIE is supposed to be for people who are NOT temporarily abroad but rather INDEFINITELY abroad. Distinction without a difference?
ReplyDeleteFor one thing under Canadian law terminating ones residency is not open or shut(and yes nationality does play a part in this). For a recent college grad leaving McGill who packs up his or her belongings and only lived in an apartment in Montreal(which they are giving up the lease on to begin with)and moves off to London or New York ceasing Canadian tax residency is quite simple. For someone though well established in Canada who is a homeowner with two cars in the garage and leaves Canada for a short term assignment in either a country with a DTT or without is not that simple. Note: Canada had something similar to the FEIE for Canadian tax "residents" that was never as broad to begin with and is slowly being phased out(as announced in Flaherty's last budget). In the later case according to several rulings of the Tax Court of Canada you do really to cease all residential ties to Canada. You can keep your house as an investment and rent it out but it can't be avalaible for own personal use. The FEIE as I understand can be used solely on the number of days lived outside the US. The other issue for another post is the DTT "Tie Breaker" provisions.
DeleteThe link below gives a better description of the history of this issue in Canada:
Deletehttp://books.google.com/books?id=bOEHCMB8XXcC&pg=PA304&lpg=PA304&dq=carter+commission+citizenship+basis+of+taxation&source=bl&ots=CVpKKlGZ7r&sig=nvRY5twTsQnXUcXxbN5DvNOzL5s&hl=en&sa=X&ei=DCe0UO_PHuWw0AGckoC4Dg&ved=0CCwQ6AEwAA
I keep on trying to come up with reasons to justify the current US policy and its very hard. I don't really think you can do it on administrative grounds beceause the current policy is an administrative nightmare although this is just becoming realized in the past few years. I think it comes down to that the US can keep citizenship based taxation or it can keep FATCA I don't it can keep both unless it wants to go through constant turmoil in international policy.
The problem as I see it is many in the US tax policy community see citizenship based taxation through the lense of citizenship with temporary absence than citizenship with effectively permanent residence abroad. On a personal note someone I have discussed the issue who is also in contact with some of the people at Treasury i.e. Plowgian, Corwin, Eggert says I have put more thought into how to kill FATCA politically than they(Plowgian, Eggert) have put into how to save it or keep it alive(and they are being paid a lot of money to save it). Without mentioning names I can also say from discussion with my DC contacts not all 535 members of Congress are in favor of keeping the current policy(I can hint of certain Senator that likes to "hold"/block tax treaties would switch away from citizenship taxation if it was just up to him but there are others too and others being "worked on" on the issue).
An interesting note J. Richard Harvey creator extroadinar of FATCA in his latest presentation on the subject like below seems to indicate the subject of citizenship based taxation is now "in play" because of FATCA.
http://www.georgemasonjicl.org/wp-content/uploads/2012/09/CLE-Materials-Final.pdf