How many countries demand that their citizens, when living in a foreign country, still pay taxes to the government, even though they are also paying taxes in the nation where they are residing?
What are they?
North Korea and the United States.
Every other country assumes, since you are paying for services, that you should only pay the taxes of the country where you are living. You don’t pay taxes to your own government until you move back home under its, uh, “care.” Of course, most expatriates get the support of the embassy of their government. But one could argue that this is an exchange. Germans living in the US pay taxes that support US embassies in Germany that help out American citizens living and working there. Nevertheless, the US government demands double taxation.
But the situation has even gotten worse. Back in 2010 Congress passed FACTA—the Foreign Account Tax Compliance Act. It will take full effect in July 2014. Supposedly, FACTA was aimed at Americans keeping foreign accounts to avoid taxation or launder money. But for American expatriates living abroad, it simply pushed on them a new level of harassment. The law demands that banks holding the accounts of American citizens send detailed financial records to the IRS.
According to Jackie Bugnion, the head of the tax team for American Citizens Abroad in Geneva, a nonprofit advocacy group for American expats, foreign banks are deciding that “it is easier to eliminate Americans as clients” rather than bear the expense of meeting FACTA’s disclosure requirements.
According to the news radio program, The Takeaway, the FACTA requirements are so disruptive and onerous that expatriate American citizens are giving up their passports and renouncing American citizenship. In addition to the hardship there is a resentment factor. These Americans believe their government is wrong to treat them like criminals. They aren’t money launderers or tax evaders. They are just people who happen to live and work outside their nation’s borders. They shouldn’t be harassed.
In addition to interviewing Bugnion, the program also talked to Ruth Freeborn (No, I am not making up her name). Freeborn lives in Canada. In her case, not only was she pressured because her bank was going to have to spend the time and expense to comply with FACTA, but also her husband was being targeted. As a housewife, Freeborn didn’t have her own income or bank accounts. Her Canadian husband brought home the income for the household. Sp FACTA was demanding that all his account information be sent to the IRS.
How would you feel, if you were an American living and working in the US who happened to fall in love with and marry a foreigner, if that foreign government demanded all your financial records so they could tax you? Exactly! Freeborn’s Canadian husband objected strenuously to being treated in this way by a foreign government. She renounced her citizenship.
Who can blame her?