“Eritrea taxes its nonresident citizens on their foreign income at a reduced flat rate of 2%.”
Hungary, unless the Hungarian has another nationality.
Then the US. That’s the list. Three countries.
In more limited circumstances:
Finland, for three years, UNLESS you demonstrate that you have no further ties to Finland.
Italy, as Finland + Italians who move to a long list of third world Tax Haven countries.
Spain, kind of a combination of Finland and Italy.
France, if and only if you live in Monaco.
Even including all seven countries in this list, the US is clearly exceptional in the burden of its tax requirements for expat citizens and the inability to avoid taxation altogether, which it shares only with Eritrea’s whopping 2% tax.
This is just getting silly and the goalposts are moving around so fast that it’s hard to keep up. This is a silly game. We’re chasing vague assertions implied but not clearly stated or supported.
The original
Fact: the USA is the only country in the world which has a tax on renouncing their citizenship. Not many countries, not any other single country has such a tax. That is because the USA is the only country to tax emigrant citizens besides Eritrea which has a low nominal rate of 2%.
In Spain, like in most of the world, residents pay income tax on their worldwide income and non-residents pay income tax on income generated in Spain.
In years past there were a bunch of lawsuits involving a bunch of Spanish sports figures who simulated residing in tax havens, mainly Monaco, to avoid paying Spanish income tax. Carlos Moyá, Boris Becker, Arantxa Sánchez Vicario, Carlos Sainz, Conchita Martínez all were chased by Spanish tax authorities for avoiding paying Spanish income tax by simulating foreign residency. This would not be possible if non-residents were still subject to taxes as if they were residents.
Because of the difficulty of proving presence in Spain for 183 days which is required to prove residency and to close the loophole of fictitious residency in tax havens the law was changed in 2006 so that a Spanish national who asserts a change of residency to a place listed as a tax haven (no income tax) is subject to Spanish income tax for the year of the claimed change and four more. There is a specific list of tax havens and one could move to a country with little or no income tax and not be subject to Spanish income tax as long as the country is not on the official list. Official list of tax havens for the purposes of that law That is the original list. The law says countries will be taken off that list is and when they sign a treaty with Spain allowing for the exchange of fiscal information and other measures so it is possible some of those countries are no longer on the list.
Spain does not tax its citizens residing in other countries except for a very, very narrow set of conditions which are not intended to tax Spanish citizens residing abroad but to discourage tax fraud. Spain does not tax its citizens residing abroad like America does. Period.
Then the goal posts were moved and it was an “expatriation” tax or emigration tax. This is not the same thing at all, it is a very different thing, but when I go to Wikipedia it has a very short list of countries and when I check the first one listed, Canada, it turns out it is not an emigration tax at all. Let us look at it.
Consulting the Canadian tax code given as reference in Wikipedia we find this:
As most tax laws this one can be obscure and complicated to the layman and would need an expert to interpret with certainty but the way I see it it is a benefit for the emigrant as it reduces his tax liability. Here is how it works:
A canadian resident (citizen or not, does not matter) buys asset X for 10,000 and 3 years later leaves Canada and the asset has appreciated by 1000. The tax code deems him liable for capital gains tax on that 1000 but he does not have to pay up until he actually sells asset X. Some years after he emigrated he sells asset X for 12000 but he only owes tax on the 1000 capital gains which were realized while he was a Canadian resident and not on the 1000 excess which accrued after he emigrated.
It exempts real and other property located in Canada which I assume would be fully taxed.
To liken this to the American tax on giving up citizenship is ludicrous. In fact the intent and effect is the very opposite. America is taxing its citizens abroad and taxes those who renounce their citizenship to avoid those taxes. Canada is exempting of capital gains taxes accrued or realized after the person emigrated.
Nazi Germany. They had such a law which was used for nefarious purposes but I understand they are not around any more. I thought I read it in the news somewhere.
Netherlands. Says it has tax treaties with Portugal and Belgium “allowing” them to charge tax (this is obscure and confusing) but that the Dutch Supreme Court has ruled the Netherlands could not impose such a tax. So another country off the list.
As already explained above Spain does not tax its citizens residing in other countries except for a very, very narrow set of conditions which are not intended to tax Spanish citizens residing abroad but to discourage tax fraud.
I am not going to study in detail every other country listed but in general they seem nothing like an expatriation tax in the sense used in this thread.
Then we have the USA:
American tax authorities are pretty much unique in this greediness and it is just not true that “many countries have such a tax” even when we move around the meaning of “such a tax”.
The bolded part is interesting to me. So as a dual US/Canada citizen*****, I’ve been required (and utterly failed) to report my income to Canada?
[sub]***** Born in US to a US father and Canadian mother. Lived my entire life in the US, but have visited Canada numerous times, but never for more than 3 weeks at a stretch.[/sub]
If you do not reside in Canada then no. That’s the whole point we are discussing. If you go live in Canada then the USA will still have their hand in your pocket but not the other way around.
Yes, sorry I wasn’t clear. I was in exactly your situation. When I was about to move to Canada for the first time, I called Revenue Canada with a great deal of trepidation, about to fess up to a lifetime of tax evasion. They just laughed.
Now that I’m a resident of Canada, I have to report all income to both countries. When I was in the US, Canada didn’t care, even though I hold both citizenships.
It’s odd to me that the US is unique in this. If you are a US Resident living abroad, don’t you still use US Gov’t services? Embassies and consulates and such? So other countries just provide those services gratis to their foreign-living citizens? “Hey, home citizens, we’re sure you won’t mind paying for services to be provided to people who don’t live here and don’t contribute to the system, right?”
Also, doesn’t the US charge tax but credit you for any tax paid to your country of residence? So we’re really only collecting the difference.
(Edit: you are correct, but that’s not the objection.) This statement could only be made by someone who has never done it.
Canadian taxes are exactly as complicated as US taxes, but in a different way. Imagine doing a complete extra set of taxes, knowing you owe nothing, with a few extra forms and having to recall exactly how many nights you spent in which countries and converting currency for every paycheck and deduction. It’s just a giant exercise in pointlessness in the hopes of snagging a few super-rich tax evaders, who frankly are probably smart enough not to get caught this way.
Providing details of our bank accounts is the same.
As far as giving citizens abroad a free ride, it’s like the postal system: the subsidies to non-tax-paying citizens abroad are paid for by the taxes non-citizen residents pay here.
In my opinion it is not even the hope of snagging a few super rich tax evaders because in that case they could limit the obligation to file to people making more than X dollars. I think it is a matter of plain gathering of information which the US government loves to do. Contrary to what most Americans believe, the US government gathers and keeps information about their people like no other government of the world. The US government just loves to control everything and this is a lot of information.
Tax information, bank information, credit card information, they want it all, they know it all and they will use it against you if they want to. The American people are the most closely surveyed by their government in the world. No other one comes close.
But furthermore, the US government collects as much information as it can from foreign individuals too. They want the information and they will get it any way they can, legally and illegally.
I remember many years ago reading Charlie Chaplin’s autobiography. In the shameful years of McCarthyism he spoke up against the witch hunt and for this was harassed by American authorities. One of the tools they used was his taxes as well as his residency authorization. I remember reading in shock and disgust how they very obviously used his tax situation to threaten him. “Before you leave the country you need to show us that you don’t owe any taxes” and this certification, issued by us, can be delayed indefinitely". Which was ridiculous since all his assets were in America. Stalin would be proud.
I read this like 20 years ago and do not remember the details. I do not have the book now but I wish I could read it again. Charlie Chaplin left America for Switzerland and had to keep his mouth shut while he sent his wife to America to quietly dispose of their assets and get the money out of the country. The whole thing was just shameful.
That was iin the 1950s and things have only gotten worse since then. Now they have and keep much more information about every individual.
And if they can do that to Charlie Chaplin who was rich and powerful just imagine how unprotected the average Joe would be.
In my view the American government wants information and control much more than money.
An American residing in Spain has to file with the IRS even though she will owe nothing. She is married to a Spaniard and they own a small travel business together. Being married to an American he is obligated to disclose his life to the IRS even though he does not owe them anything, he is not an American and he is living in Spain, his own country. He refuses to file so they don’t file and they are both breaking the law. He refuses to travel to America so he should be safe but she has family and bank account in America and travels there. Any time American authorities want to harass her they’ve got her by the balls… so to speak.
And that’s what American authorities like and want. They want to know everything about you and have you by the balls. Those who say “If you’ve done nothing wrong then you shouldn’t care” have no idea what they are saying. Everybody has done something wrong at some point, even if they did not know it, but it does not matter. What matters is that the American authorities have a ton of information about you and have the right to harass you on technicalities even if you have done everything right. Most of the time they don’t care and they let you get on with your life but if for any reason they take an interest in you or by mistake your name gets on some secret list then you are done. They can and will harass you to death and your tax information, credit card transactions etc are just part of their large set of tools.
Even if you have done everything right when they have you in a small room and ask you about some bank records showing you sent money to Al Qaeda you can deny it all you want but they just say they have it and what are you going to do? They can terrorize anyone they want pretty easily and they do it regularly whenever it suits them.
Did you ever tell the smallest lie? Can they claim you told a lie even if you didn’t? Then they will get you with USC, Title 18, S. 1001.
Forfeiture laws are another tool which can be used at their discretion. It is just unbelievable that these things could happen in America but they do.
And the worst part is that often they are just mistaken and incompetent. They got the wrong guy or just some guy who is on some list for no reason or some border guard is having a bad day and decides to pick on some guy for no reason.
So what if someone’s life is ruined? Ernestine said it best: “We don’t care. We don’t have to. We’re the U.S. Government.”
OK, so Bill Gates enjoys tax deferral on his Microsoft shares until he sells them. Right before he sells them, do you think he should be able to move to Monaco and sells the shares and pays no tax? Who gives a shit what other countries do?
The expatriation tax taxes built in gain on anything you own when you leave the country. I think they give you ten years to pay that tax.
Its a matter of enforcement. We’re the only ones that can really enforce this
It can get pretty complicated. There is also an exclusion on about $100,000 of your income. So you compute your taxes as if you were here then you deduct that $100,000 to get your US tax liability. Then you get a credit for income taxes that you pay in other countries (not all taxes that purport to be income taxes are actually income taxes or even taxes at all).
Why do you ask me this question? I have not stated any personal opinion on how things should be. I have only countered some assertions of facts made in this thread:
Many countries have a tax on renouncing their citizenship - false, no other countries do.
Many countries tax their citizens residing abroad - false, no countries do it like America.
For the first five years Spain taxes its citizens residing abroad - false as noted.
I have no idea how the Bill Gates scenario would be handled in real life so I am not going to comment. I am not knowledgeable about how this type of event would be handled by different countries. And, in any case, I do not see why or how laws should be made thinking about the most improbable situations. In my opinion laws should be made so they have the most beneficial effect for most of the population not to prevent a very improbable scenario.
Well, when the entire developed world does things one way I would think hard on why America should do it a different way. America is different not only in this issue but also regarding health care, death penalty and other issues.
When your country is diametrically opposed to the rest of the civilized world on some issue there’s a good chance you are mistaken and being stubborn does not change that. If we look back in American history at issues like slavery and civil rights America was not right, it was just late and stubborn in recognising what other civilized countries had already accepted long time before. Is there a chance that in issues we face today America is just running late?
Not at all. That’s just silly. Of course other countries could implement and enforce such laws. And some have in the past. Nazi Germany has already been mentioned. The comunist countries used to take the property of those who escaped. Cubans who want to leave have to pay huge, dissuading, amounts to the state. You can see in what company you are and that would make me think hard.
In Cuba they say the State paid for your education and health care and if you leave you have to pay them back before you leave. Well I suppose it’s one way of looking at it. America has a similar view that no one should get anything for free and so your bad health can make you bankrupt and your student loans are not forgiven even then. Well, that’s your choice but it is at odds with the rest of the developed and civilized world. In Europe the state will pay for your health care and education and they don’t seem to mind if you leave for another country. You might consider that a waste of resources but Europeans seem to see it differently.
Hell, now that I think about it I believe even China will pay for your studies and not demand repayment when you decide to go live in Europe or America. I will have to confirm this.
If you think about it what those countries who have such departure or extraterritorial taxes have in common is a veneration of the state as being separate and above the needs of the people. The State must be all-powerful and control all aspects of your life. The individual must submit to the State without question. That is the common American attitude, the same as those authoritarian countries I mentioned.
Encounters with the police in America are confrontational and you better submit without question or delay or you are liable to get beat up or shot. And Americans as a whole believe this is the way it should be. The rest of the developed world is different in this.
Per capita America has the highest prison population in the world. Other developed countries have programs and policies to try to help and integrate people but America does not believe in this, only in incarcerating those who do wrong. This is specially true when it comes to drugs. Other countries have programs which recognise the problem and try to alleviate it. America has a simplistic approach which just imprisons people because anything else is seen as spending money on those who don’t deserve it. It is so simplistic it is plain stupid.
Why should I pay taxes for drug prevention and rehabilitation programs?"
Um, because if you don’t then you pay even more in taxes for police, prisons, etc?
I don’t care, it’s the principle of the thing dammit!
Same with sex education and other issues. Americans want an all-powerful state for the sake of having an all-powerful state, not for the sake of having a social state that helps the common people and makes their lives better. They want powerful military, powerful police, powerful border controls, powerful CIA and FBI which can monitor and control every single person, American or foreigner. If individual people are hurt in the process then that’s just too bad but the security of the State demands it. “We don’t care; we don’t have to; we’re the US Government!”
I guess that’s the choice of the American people who prefer to have an imperial government than a social government.
As has been said, the tax filing requirements for Americans residing abroad results in the immense majority of them not having to pay a dime but having to suffer the hassle of filing. The objective here is not collecting money, it is collecting information without regard to inconvenience. And you have to pay your own tax consultant. In Spain the State does your taxes for you and you only have to pay them but in America on top of paying for your taxes you have to pay for the tax preparation. Sort of like what they say that in China the man about to be executed has to pay for the bullet that will kill him (which obviously isn’t true but Americans like to believe anyway).
I cannot recall the last time I used any US consular service. What would I need it for? Yes, I have a US passport, but I pay for that. I do file US tax returns, although I never owe anything and it is a real PITA. Especially the report on foreign bank accounts. If I should leave Canada I would have to pay imputed capital gains on all assets and nothing else. My pension and Quebec pension would continue unchanged and taxed a flat rate (25%) which would give a tax credit against US taxes. And that would be that. No other Canadian taxes would be payable.
By the way, does anyone know why FATCA doesn’t violate the Constitution? “The right of the people to be secure in their persons, houses, papers, and effects, against unreasonable searches and seizures, shall not be violated, and no Warrants shall issue, but upon probable cause, supported by Oath or affirmation, and particularly describing the place to be searched, and the persons or things to be seized.” It seems to me that FATCA is an unreasonable search without a warrant, but I’m probably missing something. Living abroad isn’t probable cause to be a tax criminal.
I find there is an interesting aside to all this, which may moderate the idea of seeming US unfairness.
We are all aware of the statement ’ No taxation without representation’, and this cuts both ways with US citizens, and perhaps it should also be the same with other nations.
In the UK, and I expect in other Anglo nations, and perhaps even wider, non-taxed expatriates who may contribute absolutely nothing to the UK economy are still entitled to a vote in elections. Add to this that when things go tits up in Eastern Obeyonga Bumfuckland and UK expats will expect some sort of UK intervention.
So there is a tie and an expected obligation on the part of those expats.
Now lets look at the domestic political scene, expat voters are also allowed to have their vote submitted by another nominated UK resident, voting franchise - you can start to see what I am getting at.
In some UK national elections, the expected outcome is so close and uncertain, that there is an advantage for one political party to ensure that expats use their vote, directly or indirectly through franchise. It turns out that the demographic for expats tends to vote more for one political party than the others, and this can have a significant impact upon our elections, and yet the outcome of that vote may well have no direct impact upon the expat whatsoever.
So what we have is representation without taxation, and that seems kind of wrong to me.
Our tax system isn’t perfect but we have enough assholes here that would leave the country as soon as they were ready to retire to avoid paying taxes on the capital gains they earned while they were here.
Tax expatriation is not an improbable event among the wealthy.
Right, because our tax system is like slavery :rolleyes:
I get the feeling that you don’t think America is the best country in the world. So if given a choice why do more people want to emigrate to America than anywhere else in the world? Because its such a shithole?
The US also taxes people who cannot vote (see non-citizen residents).