The Most Desirable Passports On Earth Don’t Include America’s

I thought this particular freedom index only related to travel, e.g whether coming and going is easy, whether you are taxed for income earned abroad and so on?

You are ignoring the $10,000-per-year fines for failing to file FBAR forms that spooked a lot of expats with small companies abroad.

Also, you get Foreign Tax Credit for income tax paid abroad, which means that even if you earn more than the Foreign Income Exclusion Threshold ($100,800 in 2015) in practice you will only pay the IRS any income tax if you live in a country where the income tax rates are lower than the US federal income tax rates, which is not common (although state income taxes sometimes make this a bit more complicated).

In practice this means that US persons living abroad typically only pay US income tax if they make decent money and the local taxes are lower than those in the US and even then they only pay the difference.

You still need to file your tax returns every year though.

> most people won't be penalized

An American couple I know, ordinary people with ordinary lives and nothing special level of income, who live in Canada pay ~$5000 in legal fees every year to do their non-resident U.S. tax return and stay in compliance with U.S. law. They pay zero U.S. tax. But saying that filing the U.S. tax is merely "annoying" doesn't cut it. I would say $5000 per year can be described as being penalized.

This is true but the situation is substantially more complex than you suggest, including things like PFIC treatment of retirement plans in the foreign country (where you need to pay unrealised capital gains every year), differing treatment on capital gains of housing, Affordable Care Act penalties if you're in the US more than 30 days. Not to mention any use of the foreign tax credit means you need to calculate AMT.

Not to mention none of paperwork you need is nicely collected and presented in US Dollars for you. God forbid you live someplace like Australia that uses a July-June tax year.

I have to file my US taxes every year and the "cost" is usually $400 to $800 to hire a tax preparer who knows what they are doing and takes a fair amount of my time every year.

It is an annoying burden though. My wife is American and doesn't earn anything like that amounts, but really hates this thing. You easily end up in a situation where you didn't know you were supposed to file and you get get worked up because in typical American fashion these forms are filled with dire warning and threats of harsh punishment for making mistakes.

That is what I don't like about the US. They are not very accepting towards honest mistakes. The legal system frequently disregards intent when ruling and punishment for even small infractions can be quite severe in the US.

It is not a good thing when citizens are frequently genuinely afraid of their own country.

1. I would assume it's still annoying to file. I'm Belgian, and if I were to move abroad, I would have to file nothing with the Belgian authorities.

Heck, I have filled out US withholding tax forms in the past, and they suck.

2. If you do make more than +- the $100,000, you do obviously end up paying significantly more. There's no clean and reasonable way to exit for (wealthy) americans, if you would want to.

3. I think people should, in general, be able to move away from their home country if they want to without too much additional burdens. Definitely not the case for americans.

Foreign banks tend to not deal with customers with US tax residence though due to FATCA requirements.

So it might be a burden even if you are under the threshold.

freddie_mercury bellow touches most of it, and there are other issues: a friend of mine who lives abroad but maintains a mailing address in the us, has a yearly dance taking hours of calls, faxes and writing letters to explain that he does not need to file state taxes and that the state should not, in fact, put a lien on his assets.

Also, the filing requirements (fbar and fatca in addition to a lot of stuff on the "regular" form) are insanely onerous. The tax code essentially assumes that any financial activity a US taxpayer does outside the US (even if that's where they reside) is done with the intention of tax evasion.

When FBAR was created, it covered a few hundred to a few thousand presumed evaders. Now it covers millions to ten of millions with the same presumption of evasion.

What happens if you simply ignore filing US taxes? Do you get arrested if you return, even if it's just for visiting?

You must continue to file, claiming a foreign tax credit. Then there's the double-taxation issue, in that unless the country you're living in has a tax treaty with the US, any income over 100,000 has to have taxes paid in full to both countries, and there aren't that many tax treaties.

Then you have to file FBARs with FinCEN because likely you have a bank account with more than $10,000 in it, subject to forfeiture of 50% of the balance if you don't.

Then there's FATCA which is onerous enough that in many countries, banks will not do business with US persons in the first place, which will poses a challenge.

Then there's the fact foreign brokerages cannot have accounts for the benefit of US persons unless they're regulated by the SEC.

Then if you own a business abroad that you're the sole proprietor of you may well have a controlled foreign corporation (IRS 4.61.7, form 5471), have fun.

In the top-right corner of every US tax form, there is an OMB control number. It stands for estimated annual burden imposed on the public. The estimated burden consists of time spent multiplied by implied hourly cost. These estimates may appear innocent but they actually have a direct impact on the government, such as agency head count and budgets. The estimate for Form 1040 is as follows:

  > [0] The average burden for taxpayers filing Form 1040 is about 15 hours and $280

If I add up my time as well as the tax accountant's time and fees to file taxes, this is quite underestimated. However, this is anecdotal evidence. What would be great is to have two fields on these forms where tax payers can enter the actual amount of time and expenses required to complete them, as part of the feedback. The agencies can then use the median to update their assumptions and act accordingly.

[0] https://www.federalregister.gov/documents/2014/04/30/2014-09...

My understanding is that the this doesn't apply to self-employment tax either - so if you're consulting you on the hook for that as well.

The problem is that compliance is complex and enforcement random. Currency fluctuations can change your circumstances overnights.

Also lots of catch-22 situations. People who are American by virtue of birth can but never live here can get into trouble when they coke to the attention of the tax authorities. Renunciation is also difficult and creates other issues.

I'd much appreciate if people who comment also mention in how many jurisdictions they have paid taxes, so that one has a frame of reference.

> So the vast majority of Americans abroad are not paying taxes back to the US ($100800 / year is the cut off by the looks of it)[1].

Do you assume that he vast majority of Americans abroad are not making USD 100800? Because it doesn't say so in the source you provided.

That's correct. What this ranking is about is "world's most valuable passport for an individual who wishes to live and work in multiple countries around the world".

Still a valuable ranking, but it's a very specific one for a very specific type of person.

> how many want to get citizenship to the country issuing it (which for the US is quite a lot)

You're right that for the US it's a lot, though in my experience that's just because Hollywood is the best marketing agency on the planet, not because people make a well-reasoned decision on where to live.

I spent two years all over Latin America, and have now been in West Africa for 6 months. I meet people every single day that say they want to live in America. When I ask why, they say "because life is perfect there. Everyone has lots of money. Life is easy. There is no disease. There is no poverty. Everyone has lots of food. Everyone has a huge house with a beach view." etc.

When I explain that there are homeless people, people that lose their jobs, and people who struggle to make ends meet while working huge hours, people are completely disbelieving. They think I'm lying, because the TV told them otherwise, and of course people believe the TV more than some random guy.

When I suggest there are tons of other great countries (Australia, Canada, Scandinavian countries, etc.) they could live, they just shrug and say "I want America".

Hollywood has done a very good job of marketing America, but like all marketing, a lot of it is smoke and mirrors.

OP is correct. About 4m US citizenship applications per year. That's a LOT of folks wanting a US Passport.

No. The point of a passport is to travel/work abroad (ie. Not in the country issuing the passport).

This isn't a list of most desirable countries to live in.

I travel a lot and 'only' have two passports (Dutch/American.) I usually travel on my Dutch one because of visa restrictions, and I doubt using my Dutch one would at all prevent the US consulates from helping me.

That said, I get your point - it can be nice to know "if I get into serious trouble, the US will probably work hard to get me home safe". That's not to say the Netherlands won't, and I admire the foreign policy positions of the Netherlands, but ultimately "annoy the US" is a lot scarier than "annoy the Netherlands", and it's something valuable to keep in mind.

Does she (or you) have any evidence for that?

The US has a well-known policy of not paying ransom for kidnapped citizens abroad, and apparently doesn't even allow families to pay ransom [1]. Other governments huff and puff about it (nobody wants to encourage terrorist kidnappings), but by and large tend to bail out their citizens.

Furthermore, if you get in trouble with terrorists, I think the US passport is probably among the worst to have.

With law enforcement, I'm not sure. But, if you get in trouble with law enforcement in Iran or China or Vietnam, you think they'd be more inclined to be helpful to US citizens?

Either way, one would have to look at statistics and detail to make an informed decision, but at first approximation I think she'd be better off traveling on her Dutch passport on that score.

[1] https://www.bloomberg.com/view/articles/2015-06-04/u-s-ranso...

Are there any examples of this? Where Americans got rescued but people of another country were left behind? I only have vague recollections of articles of people complaining of the massive bills the US charges for rescue operations, and that Anthony Bourdain Beirut episode where the Americans were some of the last out, after such military powerhouses such as Sweden.

Wouldn't a country like Luxembourg have an agreement with an ally? You have countries where the US has no diplomatic presence - e.g. the US doesn't have an embassy in North Korea, and Americans have to use the Swedish embassy if they need protection.

>the propensity of certain governments (mostly the US and UK) to undertake extreme measures to get their citizens out of trouble in foreign countries

In Hollywood movies. In real life, from a lot of accounts I've read over the years, the local embassies/consulate/etc are not much help and not very eager to help either...

>That's a feature Luxembourg doesn't offer.

Yes they do. In small countries the situation is even more personal and usually the PM himself is involved every time a citizen is caught behind enemy lines.

Happened quite a lot when the US started messing around with Gaddafi. Lots of Europeans working there were very reluctant to leave and then they returned there immediately after and had to be rescued again.

Watching episodes 3, 4 & 5 of Captive on Netflix may disabuse you if that notion. Sure, if you end up in a situation that's politically advantageous to get you out of, and/or your family has good connections or can market your case well, you may get some state assistance. But it's far from a sure thing.

I'm sure US citizens who have been trapped in Yemen for years without any assistance from their government will beg to differ.

The USG's propensity to help its own citizens abroad is a function of local power politics and the ability of the petitioner to create waves in Washington. Tread carefully before getting into trouble abroad.

That cuts many ways. The US and the UK has also been rather quick to ditch your citizenship and drone their own citizens to death abroad. Doesn't make their citizenship very dependable. Also with an American or UK passport you are more likely a target by baddies, and should there be a hostage situation you have the problem that the US typically don't negotiate.

If being a US citizen was such an advantage, Americans wouldn't be traveling the world with Canadian flags sown onto their backpacks.

Nor Canada. (Notorious for this)

Nor US. (Didn't evacuate citizens)

Pick any country you think does this well and I'll find examples where the country dropped the ball.

One of the odd upsides to being Northern Irish is that everybody here gets both a British and an Irish passport if they want one.

With the Irish passport, you will have an easier time getting into and travelling between many countries, but if things go south, the UK passport may help in getting out of the Country.

This will become more prominent after Brexit, as Northern Irish citizens will still be able to move and work freely throughout the EU with their Irish passport, whilst retaining the benefits of their British one (unless a United Ireland happens).

The US has a well-known policy of not paying ransom for kidnapped citizens abroad, and apparently doesn't even allow families to pay ransom [1]. Other governments huff and puff about it (nobody wants to encourage terrorist kidnappings), but by and large tend to bail out their citizens.

Furthermore, if you get in trouble with terrorists, I think the US passport is probably among the worst to have.

It would be very interesting to get some hard facts on this from international insurers or so that deal with these things. It's unclear to me whether that eigenvector's (fairly prevalent) opinion holds water outside Hollywood movies.

[1] https://www.bloomberg.com/view/articles/2015-06-04/u-s-ranso...

That wouldn't be that hard, really. Norway doesn't allow it... but there are exceptions.

Currently, many folks from the US don't have to give up their American citizenship because the fee is considered a burden if it is over 4% of income (2% if one has children). Some countries find it treasonous to get drop their citizenship, and some just refuse to do things or take so long the regulation is a burden.

Ten percent of the Netherlands holds dual passports? That sounded high to me (dual Dutch-American citizen) so I looked it up, figured I'd post the stats I found:

The Dutch population is 17.1MM, there are 1.3MM people with dual Dutch nationality [0]. The majority are Moroccan (321k) and Turkish (312k) people who acquired both Dutch and Turkish/Moroccan citizenship upon birth. Another 270k or so are EU citizens, plus a handful of Asians. Depending on the country, between 30-70% of people will have a passport, so my estimate is that 60% of dual citizens in this case will have two passports (may be lower as Turkish citizens can enter Turkey on another passport.)

If 80% of dual citizens have both passports, then 6% of Dutch citizens own two passports; if 60% of dual citizens have both passports then 4% of Dutch citizens own two passports.

Also worth noting there can be some very strange situations here - for example I (a Dutch/US citizen) moved from the US and lived in the Netherlands for almost a year before acquiring a Dutch passport.

[0] http://statline.cbs.nl/Statweb/publication/?VW=T&DM=SLNL&PA=...

The main downside of Brexit, practically speaking, is that you can no longer randomly move to an EU country and get a job (I'm very much pro-remain). The ranking seems to only weight visa-free travel, which will almost certainly remain after we leave the EU. We would probably lose out in the perception score, but I suspect that's more "Are lots of terrorists from your country?" than "Boo, you left the EU".

Currently we can access 175 countries visa-free, that's unlikely to change much. https://en.wikipedia.org/wiki/Visa_requirements_for_British_...

The exceptions that people are most likely to encounter are Russia and China. The remaining countries are largely in unstable parts of Africa and the Middle East. The differences between the top countries is mostly statistical noise. Oddly enough you can travel to Mongolia without a visa if you're a German citizen, but not if you're British. Germany also gets visa-free access to Iran, which the UK doesn't.

Thanks! A moderator updated the title.

Agreed; I thought this article would be about countries who treat you unfavourably if you've gotten a visa to visit the US.

The original title doesn't include "Visa".

Thank you, a moderator updated the title a little while ago.

Mostly India and China?