But you're still accountable for debt, so all they need is to frame this as taxes on earnings and property that you have accrued while you were a citizen and you keep to be accountable for your debts even after you renounce the citizenship.
Now, what can the US government actually do to you while you're no longer a citizen depends a lot where you live and whether you care traveling or doing business with the US again
https://www.irs.gov/individuals/international-taxpayers/expa...
In most western country anything involving a (even local) bank will be a headache already when you're an American citizen. I can't imagine it would be easier if you're a former American citizen with a large debt towards the US.
US in this case is a global bully, based on some talks with people involved in such processes also arrogant, very aggressive in enforcement, at the end punishing its own citizens just because they can.
Their choice, but if I or my kids would ever be in the situation of potentially gaining citizenship or green card (that probably won't ever happen, life here is much higher quality overall for people like me), this alone is good enough reason to not do it.
Wealthy people though are accustomed to having their cake and eating it too, so naturally they will try to take as much as they can while giving back as little as they can manage. Their wealth will carry them very far towards this goal, so the US cannot be soft when it comes collecting.
What it will collect is totally negligible in US budget and won't make dent in anything (compared to say companies like Apple or Google skimming paying taxes by tens of billions yearly), and it won't make many friends to US.
But sure, chase them, chase them hard, I have literally no skin in that game. I guess as long as really serious problems are ignored government is happy.
Most higher developed countries have it in some form (with varying degree of strictness, scoping etc.).
Technically you also pay the tax in the process of losing your citizenship not after losing it.
A more "fair" approach probably would be if capital (especially bound capital which generates more capital, like companies) are "pinned" to a country and transferring it from there involve paying tax (oversimplified).
Then when renouncing US citizenship you would only need to pay "exit" tax if you also move your capital out of the US (e.g. your US company) but if you have a UK company it would already be pinned to the UK and you wouldn't pay exit tax on it (but you would have had to pay taxes on moving capital from the US to the UK to found the company).
But I mean it's a purely hypothetical approach:
- it is very much in conflict with globalization and investing in foreign companies (you have to pay exit tax on the money you invest outside the US!). This means it also hinds projection of US power by getting influence into foreign companies through investments.
- it's not really viable to retroactively apply it
- it kinda requires all countries to agree on this law
- it would mess with investment banks, fond etc.
- it's a mess when it comes to international buying of goods (as you want to prevent laundering capital moving through unusual good buying schemes)
It really does not sound common at all. In all countries where I have lived, my citizenship did not enter the picture for the local tax authority or that of my country of birth. All that matters is my resident status. I did not renounce any citizenship (because why would I? It comes with no downsides), but I cannot see them going after my foreign possessions, considering they entirely ignored them for years. And if they did, a loophole would be to not renounce it because again it comes with no downsides.
I actually checked with my country of birth, and renouncing simply requires me to send a declaration to the authorities and they have 2 months to accept (it’s accepted by default if they do not reply within 2 months). No other requirements or anything.
Do you have many examples of countries that do what you described?
they do often work slightly different based fundamental differences in tax and law models so it's not always coupled to citizenship but practice still quite the same as in you get taxed when moving "capital" (mainly companies) out of the country
Anyway, this is not what was discussed here, and has nothing to do with citizenship. The example was a non-resident's business abroad being taxed when giving up their citizenship. As far as I know, there is no European country that does anything remotely equivalent. I am willing to accept that there might be some, but this is far from the norm.
Moving stuff across borders is something entirely different.
In basically every other country you don't get taxed when you haven't even lived in the country for years/decades.
I think the only other countries that tax their citizens in other countries like that are North Korea and Eritrea.
It's about as definitive a form of taxation without representation as I can imagine...
American citizens retain the right to vote in US elections no matter where they live. They have representation.
Americans abroad are taxed on worldwide income, but don’t get the same benefits; healthcare, infrastructure, education, etc. We pay full price for a system we barely use. The laws on starting a company abroad are arcane; cruel and unusual.
... So I don't feel very represented*.
Again, no other country outside North Korea and Eritrea (a combined population of 30m people) treats their citizens like this. The US just started it because it needed to raise funds during the Civil War, and keeps it because it's a useful way to siphon money.
Non Americans are shocked when they hear of these rules - it's unthinkable. Even Americans are surprised, most have never heard of such a thing.
* Tbf, neither do most Americans these days. According to Pew, only 20% of Americans are 'satisfied with how democracy is working'. 10% feel "hopeful" when thinking about politics, compared to 65% who feel "exhausted".
60 years ago, 77% of people trusted the US govt. Today, 77% of Dem voters wish we'd stop arming war crimes.
The US has tax treaties with almost every country, so you absolutely do not "pay full price" to the IRS unless you're too lazy to deduct the taxes you're paying in your local jurisdiction.
Aka 'facts you don't like'.
> You do get the same benefits
Nope. Definitively, categorically, obviously not.
> Americans abroad can collect social security
Social Security eligibility depends on having paid into the system for a certain number of quarters, and some countries do not have Social Security agreements with the U.S.
> and medicare benefits
Medicare does not cover healthcare costs outside of the U.S.
Expats would have to return to the U.S. to use any Medicare benefits, and even then Americans face issues.
> your children can apply to US universities on equal footing with US residents.
On equal footing?? No. And again you need to be in America to take advantage of that.
U.S. universities often treat students living abroad as international students when assessing financial aid or admissions. Access to loans, scholarships, financial aid can be more difficult because of residency status, financial circumstances etc.
Besides all of which, why wouldn't I be equal to other citizens when applying for college? If I were in US college I'd be paying US taxes.
> The US has tax treaties with almost every country
FEIE and FTC help reduce the tax burden, but they require detailed reporting. Complex U.S. tax forms means costly & time-consuming filings - even if no taxes are owed - on top of any weird interactions with the local tax code.
And, not all foreign taxes are deductible. Foreign investment income, pensions, Social Security-equivalent benefits, etc, aren't always fully excluded.
> you absolutely do not "pay full price" to the IRS unless you're too lazy to deduct the taxes you're paying in your local jurisdiction.
That simple is it? Just navigate the US tax code, and all the interactions of it with the country you're in, every year, and let's not even talk about setting up a company. Simple, lol.
... Have you ever been through this process yourself? Did you ever even pay an accountant to do it?
Could it be simplified and streamlined? Absolutely. Does it merit your overwrought hysterics? "Cruel and unusual"? Absolutely laughable.
If you're wealthy and lazy, then pay an accountant to do it for you - most wealthy, lazy business owners do! If not, do it yourself.
It really is not that bad! I don't understand how anyone who writes software for a living can be intimidated by IRS forms. I'll fill out Form 8833 twenty times over before I'd fight with cmake or helm charts.
We have established that it's unusual. Only the US, NK and Eritrea demand this, and you've wisely not argued that point.
As for cruel: yes, definitively so. It causes needless hardship for many and is decidedly unfair. You agree that it's unnecessarily complex, and you seem to have given up on insisting that citizens abroad are equally represented.
So what's 'hysterical' about calling it cruel and unusual - when it clearly is? What's "laughable" about any of this?
> I don't understand how anyone who writes software for a living can be intimidated by IRS forms.
Congrats - you don't have any issues which would prevent you from having trouble with that kind of form and all the work that goes into it.
Unfortunately, you apparently lack the empathy, or theory of mind, to understand that many if not most people feel quite differently about it.
There are all sorts of reasons that people (even software programmers) can have a different view on this to you: ADD, form anxiety/aversion, math issues, lack of financial knowledge, fear of legal repercussion, record keeping difficulties, life events, language barriers and issues with legal jargon, cognitive disabilities, accessibility issues, growing up poor, empathy for others, etc.
Denying their experience to defend something so obviously exploitative, unjust and unnecessary is a really strange hill to battle on.
What would you personally lose if this situation were corrected? Absolutely nothing. What do you gain from it? Absolutely nothing. You would immediately benefit if these rules were changed. So why are you on this hill bro? What are you trying to do here?
Why is that whenever someone points out an injustice, there's always someone telling them to stop complaining? (And not politely either.) Often they'll say something like "Well if you hate our rules so much, leave!" - except in this case, I already did, and I'm still affected.
No one's stopping you from renouncing your citizenship if you're really this upset about it. (I'm sure this suggestion will trigger a long screed about how tragic the exit penalty is)
Aka getting robbed, in a way no other country would dream of doing. We've been over this...
> I certainly don't find it "exploitative" or "unjust" that Americans retain the rights and responsibilities of citizenship worldwide.
Being this disingenuous is generally considered bad faith and rude.
> No one's stopping you from renouncing your citizenship if you're really this upset about it.
There's literally all kinds of exit penalty...
> I'm sure this suggestion will trigger a long screed about how tragic the exit penalty is
Well, no, because other people have already pointed this out.
Also, it's obviously bad, because no other country in the world charges a higher exit fee, or gets so petty about renouncing citizenship.
And even though you know all this, even though it's literally the worst in the world, from multiple angles, even though it's costing you time and money for no return, even though you get absolutely nothing out of it - you will get into a three day argument rather than accept that it's uncool. Bizarre.
... "Please Uncle, tax me more and make me do more forms, and make everyone else do it too so I can flaunt my fantastic form-filling skills". Truly, the diversity of humans on the planet is something to behold.
Far from being unjust, I think it's good and proper that you can't run away to Dubai to skip out on your obligations.
The US government does plenty of things I consider unjust. To take one obvious example, it has, without due process, killed its own citizens in drone strikes. I just don't consider making wealthy business owners do paperwork among its crimes.
I just fill "Overseas Income: $xxxxx in xxxxx" and my tax report rolls out as €0 every single year. Because I've already paid my taxes in the country I'm living.
I can also do this without any specialized software or accountants, which seems to be something kind of iffy in the US.
Things might finally be shifting. In recent years, the IRS has introduced its own software that will handle most taxpayers' basic situations.
I've only heard of US emigrants voting in the presidential election.
But all US citizens (even those born overseas who have never resided in the US) are eligible to vote in federal elections, not just the Presidency but House and Senate races.