Friday, January 25, 2013

What's FBAR got to do, got to do with it

Everything, I am guessing. Tina will give up her US citizenship now that she has attained Swiss citizenship.  Reason given: to "clarify her situation." John Nolte says "She's 73 years-old, her longtime partner lives overseas, and as far as I know she's not in any way making a political statement." He seems a bit puzzled about her decision to give up her status, and he welcomes her back anytime.

Well said. So why is she giving up her citizenship?  Short of making a political statement, I can think of only one good reason: America's newfound vigor for enforcing citizenship-based taxation, and all of the surveillance and form-filling that entails.  Just consider that giving up citizenship is not a simple matter of mailing in your passport. It can be a complex and time- and resource-consuming process which involves enhanced scrutiny and fees for those with high net worth, who are viewed as attempting to flee the tax jurisdiction.

The US has always had citizenship based taxation on the books, but it wasn't truly enforced until FBAR came under IRS authority and FATCA emerged as its enforcement mechanism in 2010.  Now those who have not been compliant will be "rooted out" (former IRS Commissioner Shulman's description of FATCA) with ongoing monitoring, and hefty fines for failure to file. Those who have been compliant will go on to face a regime that is increasingly byzantine, with new forms and requirement seemingly being piled on all the time, in a situation that is becoming very lucrative for tax return preparers and the compliance industry in general--just google FATCA compliance officer job posting and you will get the idea.  Of course, the regime is meant to catch Americans hiding their cash offshore: a laudable goal especially in light of so many high profile cases, many prominently featuring Switzerland.

So the question is whether Tina Turner is an "American" and if she, with her Swiss bank accounts, is "hiding offshore." This raises a series of unanswered questions about the relationship between the individual and the state, none of which, I think, are easily answered. These include, to which country does Tina belong, if she has dual citizenship?  Is this a first come, first served world, so she belongs to the US in perpetuity, based on her birth in Tennessee, no matter where she lives out her life?  Can she choose to belong to another country, or only if she is willing to pay the cost of her continued US status in the form of ongoing compliance with US tax law?  Is Tina going to be allowed to leave the US jurisdiction only on the condition that she renounces any right to come back?  What financial restrictions should a state place on people--especially wealthy ones--who want to move to other jurisdictions?

As long as Tina holds on to her citizenship, even if she is a dual citizen living in another country, the answer to the first question is that she is now and will ever be American. And as long as she has any accounts anywhere in the world outside of the US, the answer to the second is "guilty unless proven innocent on an annual basis." None of the other questions are answerable in law: all are a matter of opinion and, more than anything else, geo-political power.

I am sure that Tina's expatriation will be viewed by many as a response to the high US tax rate, or a betrayal of her US roots, or both. But it is likely neither.  As a Swiss citizen resident in Switzerland, Tina's worldwide income is subject to income tax (federal, cantonal, and municipal), wealth taxes, VAT, etc., and we can only speculate about how much tax she may be asked to pay in the US after credits, exemptions etc. as a US citizen living abroad.  It could very well be zero or close to zero.  So it is seems more likely this is about the hassle of filing a thicket of tax forms, year after year, despite owing little or no tax to the US, and stiff penalties for even "non-willful" infractions, including mistakes.  And it could be about having to do all of that because Americans living abroad are viewed as likely criminals because they have offshore bank accounts.  

If Tina has been tax compliant all these years, she may just be exhausted with the effort; if not, she may see many reasons to cut ties by going the drastic step of irrevocable renouncement.

I would very much like to know if there is some other reason to give up her US citizenship. "Clarifying" one's situation seems just abstract enough to cover the hassle of dealing with US tax compliance.


  1. There is no way that Shumer, Levin and Boehner will touch this one. The last thing that they want to do is to be seen as a bunch of old establishment White men who are ganging up on Black woman who is an icon in the Black community.

  2. Excellent observation. Another issue which could be very relevant is that Tina will have more local banking flexibility by not being a US person. She will no longer be rejected by local banks and may even pay much less in service fees for her local banking services. This alone is reason enough to renounce US citizenship and it is my main reason for doing so.

  3. If I knew then what I know now about the IRS & US Tax Law, I would have strongly considered staying in Japan &/or Germany and 'toughing it out', and disavowing. It's very telling that no other country (AFAIK) subjects its "citizens" to such convoluted laws. Americans are not 'citizens' of their country, they are _subjects_.

  4. It should not matter where in the world you keep your money. All these forms are just another way for the ruling class to extract money from the ruled class, who actually work at a job that produces something besides paper or computer storage files.
    if we went with the FairTax, we could forget being economic prisoners. Every tourist who visits the U.S. and spends money here, would generate more taxes than the Citizenship based tax system we now suffer under.
    Politicians, Tax preparers, Tax Lawyers,IRS employees, Socialists, and all Marx leaners, love the Marxist Income Tax. It keeps that class in work that produces no goods or services and is geared to skimming the cream from the milk before those who worked for it ever sees a penny.
    Some time soon, we will see Tax Gulag or work camps for those who simply cannot live after every taxing body takes their cut......It is sooner rather than later.

  5. Soon we will need a Gulag to house those of us who tried but cannot afford all the accountants, tax lawyers, tax preparers and experts to surf the tax code and glean what we need to be compliant. There is a way around all this.
    What we should do is descend onto the capital in D.C. and lye on the ground around the capital until they Pass the FairTax and start living again.