PREP Podcaster - ”Success Favours The PREPared Mind”

When Democracy And Freedom Collide In A World Of Tax Confusion

December 13, 2021 - Participants Include:

John Richardson - @Expatriationlaw

Jimmy Sexton - @JimmySextonLLM

Our discussion this week does not focus specifically on the teaching of Charles Adams. That said, our discussion is motivated by our understanding of how taxation leads to the rise and fall of civilizations. We begin by discussing how the 2017 Section 965 Transition Tax was a huge benefit to a small number of US multinationals but a devastating blow to millions of individuals (particularly Americans abroad). Note that the benefits to resident Americans (and US corporations) makes it harder for the United States to see how destructive its tax policies can be to the lives of Americans abroad.

This week we discuss the general concepts of freedom and democracy and how:

- freedom and democracy  are not the same; and

- how democracy and freedom are fundamentally at odds.

What happens when a majority through the democratic process diminishes the freedom of individuals? What human values should be protected from the democratic majorities through human/constitutional rights documents?

We discuss President Kennedy's 1961 Berlin speech where he clearly distinguishes freedom from democracy - noting also that the US (at that time) had never had to "put up a wall "to keep our people in". (I wonder what President Kennedy would have thought of the 877A Exit Tax?)  Interestingly the speech focuses more on freedom than on democracy.

__________________________________________

Here is the text of the speech:

John Fitzgerald Kennedy

Ich bin ein Berliner Speech, June 26, 1963

I am proud to come to this city as the guest of your distinguished Mayor, who has symbolized throughout the world the fighting spirit of West Berlin. And I am proud to visit the Federal Republic with your distinguished Chancellor who for so many years has committed Germany to democracy and freedom and progress, and to come here in the company of my fellow American, General Clay, who has been in this city during its great moments of crisis and will come again if ever needed.

Two thousand years ago the proudest boast was "civis Romanus sum". Today, in the world of freedom, the proudest boast is "Ich bin ein Berliner".

I appreciate my interpreter translating my German!

There are many people in the world who really don't understand, or say they don't, what is the great issue between the free world and the Communist world. Let them come to Berlin. There are some who say that communism is the wave of the future. Let them come to Berlin. And there are some who say in Europe and elsewhere we can work with the Communists. Let them come to Berlin. And there are even a few who say that it is true that communism is an evil system, but it permits us to make economic progress. Lass' sie nach Berlin kommen. Let them come to Berlin.

Freedom has many difficulties and democracy is not perfect, but we have never had to put a wall up to keep our people in, to prevent them from leaving us. I want to say, on behalf of my countrymen, who live many miles away on the other side of the Atlantic, who are far distant from you, that they take the greatest pride that they have been able to share with you, even from a distance, the story of the last 18 years. I know of no town, no city, that has been besieged for 18 years that still lives with the vitality and the force, and the hope and the determination of the city of West Berlin. While the wall is the most obvious and vivid demonstration of the failures of the Communist system, for all the world to see, we take no satisfaction in it, for it is, as your Mayor has said, an offense not only against history but an offense against humanity, separating families, dividing husbands and wives and brothers and sisters, and dividing a people who wish to be joined together.

What is true of this city is true of Germany - real, lasting peace in Europe can never be assured as long as one German out of four is denied the elementary right of free men, and that is to make a free choice. In 18 years of peace and good faith, this generation of Germans has earned the right to be free, including the right to unite their families and their nation in lasting peace, with good will to all people. You live in a defended island of freedom, but your life is part of the main. So let me ask you as I close, to lift your eyes beyond the dangers of today, to the hopes of tomorrow, beyond the freedom merely of this city of Berlin, or your country of Germany, to the advance of freedom everywhere, beyond the wall to the day of peace with justice, beyond yourselves and ourselves to all mankind.

Freedom is indivisible, and when one man is enslaved, all are not free. When all are free, then we can look forward to that day when this city will be joined as one and this country and this great Continent of Europe in a peaceful and hopeful globe. When that day finally comes, as it will, the people of West Berlin can take sober satisfaction in the fact that they were in the front lines for almost two decades.

All free men, wherever they may live, are citizens of Berlin, and, therefore, as a free man, I take pride in the words "Ich bin ein Berliner".

(President Kennedy's first debate with (to be) President Nixon also focusses on freedom.)

 

 

 

A Proposed Pillar 3 For International Tax Reform: Individuals Should Be Tax Residents Of Only One Country At A Time

December 13, 2021 - Participants Include:

Dr. Laura Snyder - @TAPInternation

Dr. Karen Alpert - @FixTheTaxTreaty

John Richardson - @Expatriationlaw

_________________________________________________________

Tax Sovereignty: All countries (including the US) has the right to create its own domestic tax policy. The question is how to solve the problem of US citizenship-based taxation from an international perspective.

 

The problem: US citizenship-based taxation means that US citizens are tax residents of the United States even when they are tax residents of other countries. Interestingly US tax treaties contain a provision called the "saving clause" which denies US citizens the benefits of a tax treaties. See for example Article XXIX of the Canada US Tax Treaty. Tax treaties generally include a residence tie breaker (usually Article IV) which allocates the tax residency of dual tax residents to one country or another. See for example Article IV of the Canada/US Tax Treaty. The "saving clause" denies residency tie break provisions to US citizens.

A solution: The saving clause always contains provisions that specify circumstances where the saving clause would not apply (double taxation, pensions, etc.) If the Article 4 residency tie breaker were added to the list of exceptions to the saving clause, then under the treaty:

1. US citizens would be eligible to benefit from residency tie break provisions; and

2. The treaty would allocate tax residency to the country where the individual actually lived and would specifically mean that US citizens would NOT be tax residents of the United States.

Notice that this solves the problems for individuals in all countries without discussing the specific problems that citizenship-based taxation causes in any one country.

A new multilateral agreement?

In addition (or as an alternative) to amending existing tax treaties, it would make sense for there to be a new multilateral agreement which would establish the principle that individuals can be a tax resident of only one country at at time.

 

_________________________________________________________

 

Further reading ...

Should Overseas Americans Be Required to Buy Their Freedom? Tax Notes, July 12, 2021

Mission Impossible: Extraterritorial Taxation and the IRS, Tax Notes, March 22, 2021.

Taxing the American Emigrant, The Tax Lawyer, Feb., 2021.

A Simple Regulatory Fix for Citizenship Taxation, Tax Notes, Oct. 12, 2020.

The Criminalization of the American Emigrant, Tax Notes June 29, 2020.

The Implications of Tax Residence for Human Rights (Paper prepared for the Accounting & Finance Association of Australia and New Zealand (AFAANZ) 2020 Annual Conference 1-11, July 5-7, 2020).

Callous Neglect: The Impact of United States Tax Reform on Nonresident Citizens, draft Jan. 8, 2019.

Investing with One Hand Tied Behind Your Back – An Australian Perspective on United States Tax Rules for Non-Resident Citizens, Jan. 8, 2018

SEAT's survey, May 4, 2021: http://seatnow.org/survey_report_intro_page/

When It Comes To Investing It‘s More About The Investor Than About The Investment - Discussion with Dan Mazzola, CFA and CPA

December 9, 2021 - Participants Include:

 

Daniel Mazzola, CFA, CPA  - American Portfolios

John Richardson - @Expatriationlaw

Charlie Munger Quotes and Wisdoms

 

 

On living within your means “Live within your income and save so that you can invest. Learn what you need to learn.” Charlie Munger

__________________________________________

On December 2, 2021 I joined Dan Mazzola in a discussion about the importance of Social Security. Social Security is one part of a financial planning plan. But, it is only one component!

As fewer and fewer people benefit from company pension plans it is becoming more and more important that people take personal responsibility for investing. To put it simply: investing and financial planning is not optional. It is an aspect of personal responsibility to yourself, your family and your country. 

In this discussion we develop the theory that successful investing is much more about the habits and mindset of the individual. The actual investments are (in the long run) less important. As Benjamin Graham would have said:

"The investor’s chief problem - and even his own worst enemy – is likely to be himself."

It's important to ensure that investing is a long run decision and life style.

Investing is a marathon and not a sprint. But, the marathon of investing requires certain habits and a certain mindset.

There are many people who know what to do, but can't do what they know!

You will enjoy this conversation with Dan Mazzola.

 

 

 

For Good And Evil: The Teaching Of Charles Adams Lesson 7

December 6, 2021 - Participants Include:

John Richardson - @Expatriationlaw

Jimmy Sexton - @JimmySextonLLM

 

Continuing our podcast series:

For Good And Evil Podcast 1 - October 25, 2021

For Good And Evil Podcast 2 - November 1, 2021

For Good And Evil Podcast 3 - November 8, 2021

For Good And Evil Podcast 4 - November 15, 2021

For Good And Evil Podcast 5 - November 22, 2021

For Good And Evil Podcast 6 - November 29, 2021

In this episode we continue the teaching of Charles Adams - Lesson 7:

______________________________________________

7. "All citizens, from recruits in the military to the chief leaders of society, should serve the state unselfishly, and if possible, without pay, motivated by a love for their country and an obligation to serve. Their primary reward should be the praise they receive from their fellow countrymen for a job well done."

____________________________________________________

 

FATCA Thoughts From 2019: @Tpsmyth01 - @ADCSovereignty Trial Podcast

February 28, 2019 - Participants include:

 

John Richardson - @Expatriationlaw

 

Tim Smyth - @Tpsmyth01

 

_______________________________________________________

In 2014 the Alliance For The Defence Of Canadian Sovereignty filed its FATCA lawsuit against the Government of Canada. The trial was held in January of 2019 in the Federal Court of Canada. In July of 2019, the court ruled in favour of the constitutionality of the FATCA IGA and against the ADCS plaintiffs. The appeal of the ADCS-ADSC trial is being heard on December 13, 2021. In other words, it's almost three years since the trial. (Incidentally it took a full five years for the trial to be heard.)

Win lose or draw, we fully expect that the case will eventually be heard by the Supreme Court of Canada.

_____________________________________________________

This podcast was created in February of 2019 after the FATCA trial. The podcast was organized by Tim Smyth. I thought it would be interesting to repost this podcast in order to understand the perspectives at that time.

 

 

 

Smarter Social Security With Dan Mazzola, CFA, CPA - Don‘t Leave Money On The Table (especially Americans abroad)

December 2, 2021 - Participants Include:

 

Daniel Mazzola, CFA, CPA  - American Portfolios

John Richardson - @Expatriationlaw

___________________________________________________

The retirement planning opportunities offered by entitlement to US Social Security are enormous. US Social Security payments are comparatively larger than equivalent plans in many other countries (including Canada Pension Plan).

Furthermore, U.S. Social Security offers benefits to:

1. The spouse of the individual entitled to Social Security

2. The survivors of the individual entitled to Social Security

3. The former spouse(s) (if married ten or more years) of the individual entitled to Social Security

Furthermore, for the most part citizenship is irrelevant to Social Security entitlement.

This is my third podcast discussing US Social Security.

The first podcast with Virginia La Torre Jeker focussed on the continuing entitlement to Social Security after renunciation.

The second podcast with L.J. Eiben of Raymond James focussed on Social Security for Americans abroad generally (in Canada particularly).

This third podcast with Financial Consultant and planner Dan Mazzola focuses on how US Social Security benefits work on a more granular level and what I would call "derivative benefits" (entitlement to benefits based on your relationship to somebody else entitled to benefits. In addition, Dan explains why (regardless of what an actuary says) it is to your benefit to wait as long as possible (not later than age 70) before collecting Social Security. A very high percentage of people rely on Social Security for a significant portion of their retirement income.

As Dan says on his site, it's important to consider the:

 

• Integration of Social Security with retirement assets to generate predictable income stream that will span your lifetime.

 

Why The Fate Of Americans Abroad Is Not The Same As The Fate Of The Passengers On The Titanic

November 27, 2021 - Participants Include:

Dr. Laura Snyder - @TAPInternation

Dr. Karen Alpert - @FixTheTaxTreaty

John Richardson - @Expatriationlaw

Question:

Are Americans abroad part of the US community/society?

"When The US Taxes Americans Abroad But Excludes Americans Abroad From The Benefits Offered to US Residents ..."

The list is endless. It's worse than Americans abroad being subject to US taxation (even when they don't live in the USA). In fact, Americans abroad are actually subjected to a separate and more punitive system of taxation than resident Americans!

Think of it! In every other country of the world (the US is far worse than Eritrea) when an individual moves from the country and establishes a bona fide residence in the new country, the taxation stops. Not so for Americans. If an American moves from the USA and establishes residence in a new country he/she is taxed worse!

The punishment of those who more from the USA is truly the American way. See Laura Snyder's article where she discusses the criminalization of Americans abroad.

But, it gets worse! Americans abroad are specifically excluded from many of the tax benefits available to resident Americans. Some of these denials are discussed in this podcast. (And don't forget that Americans abroad are good enough to tax, but not good enough to vax.)

But, the most interesting part of this podcast is actually when Dr. Laura Snyder explains why:

The Fate Of Americans Abroad Is NOT The Same As The Fate of Some Of The Passengers on the Titanic.

But, this does depend on Americans abroad uniting behind the common purpose of ending citizenship-based taxation. Unfortunately, to date it appears that most Americans abroad are NOT willing to unite to achieve the goal of pure residence-based taxation.

 

 

 

 

Renouncing US Citizenship: Two Solitudes - Separating Immigration/Nationality From Tax

November 29, 2021 - Participants Include:

Virginia La Torre Jeker - @VLJeker

John Richardson - @Expatriationlaw

 

Two Solitudes = U.S. State Department and U.S. Treasury

Virginia and I continue our podcasts in which we clarify myths and misconceptions about renouncing US citizenship. This podcast emphasizes the difference between the immigration/nationality aspects of renunciation vs. the tax aspects of renunciation.

Although tax compliance is NOT required to renounce US citizenship, renunciation without tax compliance does have tax consequences.

This podcast focuses on more areas of misunderstanding and confusion ...

Renouncing US citizenship triggers issues under each of:

1. The Immigration and Nationality Act under 349(a); and

2. The Internal Revenue Code under sections under 7701(a)(50), 877A and 877, 2801

To put it simply: There are a lot of moving parts.

In this podcast Virginia La Torre Jeker and John Richardson continue our discussion including:

Immigration/Nationality Issues:

- is tax compliance required to be allowed to renounce US citizenship?

- what are the legal requirements to renounce US citizenship?

- is a second citizenship required in order to renounce?

Tax Issues:

- what is a covered expatriate?

- what does it mean to be subject to the US 877A expatriation tax?

- how are different kinds of assets treated for the purposes of expatriation?

- pensions vs. property ...

- ways of avoiding covered expatriate status (gifts, pre-renunciation sales, etc.)

- what about post-renunciation gifts from covered expatriates to US citizens?

- Relief Procedures For Former Citizens

Previous podcasts with Virginia include:

How Does Renunciation Of US Citizenship Affect Entitlement To US Social Security Payments?

Is It True That Renouncing US Citizenship Will Result In Being Barred From The United States?

 

 

 

 

For Good And Evil: The Teaching Of Charles Adams Lesson 6

November 29, 2021 - Participants Include:

John Richardson - @Expatriationlaw

Jimmy Sexton - @JimmySextonLLM

David Lesperance - Lesperance Associates

 

Continuing our podcast series:

For Good And Evil Podcast 1 - October 25, 2021

For Good And Evil Podcast 2 - November 1, 2021

For Good And Evil Podcast 3 - November 8, 2021

For Good And Evil Podcast 4 - November 15, 2021

For Good And Evil Podcast 5 - November 22, 2021

 

In this episode we continue with The Teaching of Charles Adams Lesson 6:

 

________________________________________________

6. "Nature will not bestow wealth equitably. A few citizens will inevitably acquire great wealth, which by natural justice they should share with the community. But this sharing should be enforced by moral persuasion and a strong public opinion, not force and confiscation."

_________________________________________________

This lesson invites the discussion of how (or whether) the wealth acquired by the wealthy should be made available to society for the greater good.

Government: On the one side we have:

Governments who will simply confiscate wealth through confiscatory confiscation.

On the other side we have:

Private Philanthropy: Private individuals who through gifting choose the causes that the wish to support.

Can wealth be better deployed for the public good through individual giving/sharing or through government confiscations? In the 1960s Sir John Templeton (when the Subpart F rules were enacted) renounced his US citizenship. Free of US taxation he was able to deploy his wealth (and he most certainly did) for the benefit of mankind.

The current trend is to more confiscation. There is evidence that the trend toward confiscation is continuing to encourage more and more expatriations.

Listen to our discussion ...

 

 

 

 

The Good, The Bad and The Ugly: SEAT Analyzes Beyer HR 6057 - Is It Really Tax Simplification For Americans Abroad?

November 24, 2021 - Participants Include:

Dr. Laura Snyder - @TAPInternation

Dr. Karen Alpert - @FixTheTaxTreaty

John Richardson - @Expatriationlaw

___________________________________________________

On November 19, 2021 Congressman Beyer introduced HR 6057, the "Tax Simplification For Americans Abroad Act". This bill was the subject of two blog posts at:

- SEATNow.org

- CitizenshipSolutions.ca

You can read the text of the bill here.

___________________________________________________

In this podcast we discuss the groups affected (or not) by this bill as follows:

The Good: Those with income of below $108.000 who are NOT the owners of CFCs.

The Bad: Those with incomes in excess of $108,000 who are NOT the owners of CFCs.

The Ugly: Entrepreneurs abroad who own CFCs.

We are of the view that should it become law that the primary effect would be to divide Americans abroad even more.

We firmly believe that:

Pure residence-based taxation is the ONLY solution that solves the problem for ALL people ALL the time!

No left outs! No carveouts! We advocate PURE RESIDENCE-BASED TAXATION FOR ALL!