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Comment by gwd | Hacker News Reader

> The obvious loss is to government revenue, but the more subtle and still very real loss is the diversion of high-powered talent from what could have been gains in efficiency and productivity to focus instead on corporate reorganizations and tax evasion games.

It's also a loss to all of us who find ourselves owning a "foreign" corporation for legitimate reasons, and having to do a lot of work proving that we're not playing shell games.

I'm an American living in the UK; I've started what's now a one-man bootstrapped company and it just makes sense for it to be incorporated in the UK. I don't mind paying taxes, but I don't want to have to pay them twice. UK taxes are generally higher than US taxes, and there are tax treaties to avoid double taxation, so no problem, right?

Wrong. First, if a US citizen owns more than 10% of a foreign corporation, there's an insanely complicated form you have to fill out, two pages of which are incomprehensible questions ("Is your company considered an X corporation under sections Y and Z of the Blablablah act?") that simply require an expert to fill out.

Secondly, if a US citizens owns more than 50% of a foreign company, by default, income from that company counts as personal income, but taxes paid by the company to another government don't count as personal taxes. You can get around this, apparently, but it's even more complicated.

So because of [REDACTED] lawyers and accountants that have come up with these schemes, I have to spend precious starting capital to a bunch of accountants to prove I'm not evading taxes, rather than actually doing something useful with that money (and that accountant doing something more useful with their time).

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The "problem" you describe is your US citizenship requires you to pay tax on earnings from outside the US - that's a condition of US citizenship. If you don't want to pay those taxes, then renounce your US citizenship once you have, say, gained UK citizenship, if that works for you.

A famous bloke once said (probably in Hebrew, written up in Aramaic or Greek and badly translated into middle, modern and somewhat strange English): "Pay unto Caesar, that which is due to Caesar and pay unto God that which is due to God" or words to that effect. Substitute IRS for God and you have a suitably cynical aside!

If your firm over here is good enough and you are reasonably settled then why not go all in? I'm not sure what the rules are on reconnecting with the US if you have formally renounced citizenship. However, I'm sure a birth cert from Yeehaw, TX or wherever will go some way. Even so, UK citizens are generally welcomed in the Land of the Free. An ESTA (great scheme IMO) costs about £20 for two years coverage - more than enough to visit the relos.

I know from second hand experience that our bureaucracy is just as convoluted as any other and it will take roughly one to two years (that was about 10 years ago) to get citizenship and probably involves a test that I would fail!

You might like to look into where your company is actually registered. A Ltd is not you - it is a separate legal entity and the UK (etc) is quite a complicated setup within quite a complicated environment. You might explore Jersey and the Isle of Man for places to headquarter. Don't overlook Eire either (EU with UK to the north, with special arrangements)

Anyway, the snag you have is solely US based and not UK (for a change).

> I'm not sure what the rules are on reconnecting with the US if you have formally renounced citizenship. However, I'm sure a birth cert from Yeehaw, TX or wherever will go some way.

It doesn't. Once you've renounced your US citizenship you're on exactly the same footing as any other foreigner in terms of visiting or living here.

And that's assuming you're smart enough not to admit to the government that you're renouncing your US citizenship for tax purposes. If you make that mistake, you've made yourself permanently inadmissible to the United States under INA 212(a)(10)(E).

"And that's assuming you're smart enough not to admit to the government that you're renouncing your US citizenship for tax purposes. If you make that mistake, you've made yourself permanently inadmissible to the United States under INA 212(a)(10)(E)."

Blimey, that's a bit harsh!

I wonder if Mr Adams and co, when throwing off the yoke of something, something, imperialism and that, and those jolly beastly Britons, would approve of INA 212(a)(10)(E)?

That is some legacy for those freedom fighters. cough terrorists (sorry - I'm a Brit, its only been 250 odd years!)

It’s a hang over from the civil war I believe.

hahaha, nothing beats a spoon of redcoat tears in a cup of salty boston tea

Mr Adams recently wrote about the possibility of spending a year dead for tax purposes.

> The "problem" you describe is your US citizenship requires you to pay tax on earnings from outside the US - that's a condition of US citizenship.

imo a feature, not a bug.

How so?

You enjoy benefits as a citizen, even if living abroad. You should pay for those.

What benefits?

The rights your passport gives you + the legal and embassy protections given to American citizens. Like the American civilians held in Russia that Biden recently traded Russian spies for.

You still have access to vote absentee, as well as collect social security benefits.

You can use US bank accounts and other institutions.

You and your children have the right to return if you ever desire it.

> You can use US bank accounts and other institutions.

Recently found out that this is more and more difficult because most banks are requiring 2FA with a US phone number which is difficult to get if you don't live in the states.

It's not any more difficult than buying a phone and calling a carrier to activate it. They'll take a PO Box for a billing address no problem.

My bank lets me use Google Authenticator as a 2FA.

> You still have access to vote absentee,

Most other countries allow their expatriate population to vote without this taxation requirement. Why should the US be different?

>as well as collect social security benefits.

Absolutely incorrect. The times I've lived abroad have not count towards my SSN contributions; I've had to make up for them after returning, in a sense. I now have to figure out how to collect a smattering of "social security equivalent" payments once I retire from a foreign country as a result.

> You can use US bank accounts and other institutions.

Actually, you're not supposed to in most cases, and most banks will basically force you out if they find out you're not in the US. Only a few brokerages will actually work with you (ibkr is best iirc, Schwab can also work). Pretending to "exist" at a relatives house for your bank may be living on borrowed time, though in practice it is possible to do for years if one leaves. Newcomers can't open a bank account with US citizenship if they're non residents (again, except for a few brokerages).

> You and your children have the right to return if you ever desire it.

Why should I pay for the option to do so? Why not do like every other country and pay if I actually exercise the option and return (and pay taxes)? Just like every other country (except Eritrea and North Korea, but do we want to be in the same camp as them?).

As others have pointed out, this is far from correct. If you have a US bank account and they find out your residence has moved to another country they are very likely to close the account immediately.

I have US citizen contractors right now who live abroad that I pay into their legal US bank accounts for years now.

So why does no other country in the world do it then?

Perhaps because no other country goes to the same lengths to help its citizens abroad in times of trouble. When there's geopolitical trouble brewing, it not uncommon for other nationalities to take advantage of American evacuations. Few countries come close the US in leveraging intelligence and logistics to help citizens; France is probably #2.

Let’s suppose I travel for business and am not a teenager working through power fantasies. What’s in it for me if my concerns are not childish?

You know the usa bills people for evacuating them right :)?

https://travel.state.gov/content/travel/en/international-tra....

Also, read up on Americans stuck in Gaza with no way out.

"It limits the reimbursement to the cost of a reasonable commercial airfare."

How kind of them :)

I just mentioned it because the real cost must be much, much higher in many cases, and I imagined being on the hook for a million dollars.

True, but it is kinda like paying for insurance and then when you need it you get a giant surprise bill.

Although ironically much like the American health care insurance system which is much the same. Pay every month for “insurance”, and when you need it you also pay for it.

Fun times.

I did come to think of how a US ambulance ride could be more costly than being evacuated...

maybe we can get the Marines to start running ambulances regionally :)

slap a turret on the ambulance and it can be training for the corpsmen

This doesn't apply for the majority of Americans living abroad, in safe countries where the USA recognises the taxation.

(The US is only extracting someone from the UK if they've killed a teenager while driving drunk.)

> France is probably #2

I don't know what it's like for Americans living abroad but indeed, as a French citizen living abroad I do believe that France spends enough resources to justify taxing me (with guarantees against double taxation, and the various complications and edge cases it implies).

As far as I know, American citizens can't really vote abroad (they have to be registered to a place inside the US and vote by correspondence, I think?) while we have voting booths in most countries where France has a consulate[0].

Since there are many French citizens where I live, there were 14 booths across this country for the last elections so you're probably never more than 50 kilometers from one (in addition to being able to vote through Internet). There were 23 of them in the US, 33 in Canada (20 of them in Montreal apparently), etc.

That's a whole lot of effort for people who are voting for things that will not affect them directly and who don't pay taxes (even a token tax) for France, and it's great, and I think it's normal to devote efforts for all citizens wherever they are, but it means I couldn't honestly complain about reasonable taxation.

[0]https://www.legifrance.gouv.fr/jorf/id/JORFTEXT000049516393

> As far as I know, American citizens can't really vote abroad (they have to be registered to a place inside the US and vote by correspondence, I think?) while we have voting booths in most countries where France has a consulate[0].

French expats also have their own representatives to the National Assembly, on top of voting for national elections (mostly presidential and the occasional referendum). It’s like if there were representatives for Europe in the US congress.

Honestly? Because they can't. If any other country had control of the world's reserve currency, they would do it, too.

It's the same reason why the US can place sanctions on Russian individuals in a way that, say, India cannot.

That is a completely warped and incorrect view. There is no political will to do so. I’ve never even seen it suggested even by the cringiest parties in any country in which I have lived. Besides, the simple fact that North Korea and Eritrea have comparable policies, and only them, is a strong indication that this idea is completely wrong. Neither has any kind of international clout to enforce this, and yet they have it for a reason.

Assuming that everyone else would do just like the US if they could get away with it is pure projection. Yes, it’s how the US work. No, it is not normal or even common.

> There is no political will to do so. I’ve never even seen it suggested even by the cringiest parties in any country in which I have lived.

No, you've just got MPs proposing to strip "tax exiles" of their citizenship and pointing to the US system at the same time: https://www.sudouest.fr/politique/depardieu-et-les-exiles-fi...

If you phrase it as "taxing expats" then, sure, no other country is proposing it. If you phrase it as "making sure the rich don't skip out on their taxes by moving to a low tax country" then it's going to be a lot more popular.

You realise that these things are completely different, right?

Stripping people from their citizenship as a punition for a crime has nothing to do with taxing people who renounce their citizenship. The only thing they have in common is that citizenship and taxes are involved. As an aside, because you mention France, there would be significant constitutional challenges to do this for something that is not high treason. It is not going to happen in the near future. The far right barks often, but when push comes to shove their only way to win votes is to soften their rhetoric and there is no support for this so they are not going to die on this hill.

> If you phrase it as "taxing expats" then, sure, no other country is proposing it.

That was the whole premise of the discussion, though.

> If you phrase it as "making sure the rich don't skip out on their taxes by moving to a low tax country" then it's going to be a lot more popular.

That's already being done. There is political will for that (though not from the fringe parties who'd be the most likely to go after expats, including the barking far right). It does not require sending a bill to people renouncing their citizenship, or taxing non-resident citizens.

I think it's because the US has the clout to indirectly compel foreign institutions to cooperate in a way that other western countries can't.

For example, for a US expat living in the UAE the various branches of the US government can threaten the UAE government, banks etc. to make them cooperate and tell them how much the US citizen is earning to ensure they pay their US taxes - if you're a bank anywhere in the world, you do not want to be cut off from the US dollar system.

If the UK, France, Germany etc. tried to tax their citizens globally it might work in other western countries, but in places like the Middle East they might struggle to get foreign entities to comply making it impossible to enforce.

Okay, well, “They do it because they have the power to” isn’t the moral argument I was originally presented with.

US citizen and long-time expat calling bullshit on this. That's not the purpose of taxes and that's not how citizenship works in any other country except North Korea.

Looking at the list of "benefits" another person posted:

> The rights your passport gives you Are no different than the rights an EU passport gives you, except when entering the US-- but then again, an EU passport gives you better rights when entering the EU, so this is not an exclusive.

> + the legal and embassy protections given to American citizens. Like the American civilians held in Russia that Biden recently traded Russian spies for.

Note that the US doesn't have jurisdiction outside of US territory, so it cannot give legal protection and explicitly embassies do not give legal advice. Yes, there may sometimes be trades like above, but on the other hand, if the US prisoners were not US people, they probably would not have been jailed by the Russians in the first place.

> You still have access to vote absentee, Voting is a responsibility, not a benefit.

>as well as collect social security benefits.

Wrong-o! You only get social security benefits you have paid for. If you are living outside of the US, you are not contributing to soc. security.

> You can use US bank accounts and other institutions.

So can non-citizens. US bank accounts do not require citizenship. Nor does owning real estate. Nor forming companies.

You and your children have the right to return if you ever desire it.

As a US citizen, the US will send in the seals to rescue you from kidnappers, so you will get some benefits

As a US citizen, you're more likely to be captured by kidnappers and terrorists too. Real benefits there.

Not sure why US citizens believe this. I've been in situations where there was genuine peril and the look of shock the US citizens had when someone from their embassy said the only thing they'd do is organize a convoy of private vehicles if everyone turned up at x time and place. They really expected the US army to turn up to save them. Honestly I don't think I've seen the US do any more than any other western country for their citizens in these situations.

https://www.theguardian.com/lifeandstyle/article/2024/sep/05...

I'm not an American, but I have seen similar cases from my own country. The reactions varies a lot. Some people are well connected or are lucky enough to get media coverage, that forces the government to act.

Example:

1. A "stoner" didn't have enough money to pay a bribe in India after a "random" drug search (small amount of cannabis) and spent several years in prison and was sick most of the time due to the conditions. Almost no reaction from the government... in the end someone in the Indian government pardoned him for humanitarian reasons because he had suffered enough.

2. Two upper-class young girls smuggled several kg of heroin and was caught. The government moved heaven and earth to get them to serve prison time in their home country.

> probably in Hebrew, written up in Aramaic or Greek

It is generally agreed upon by scholars that Jesus’ primary language, like in Palestine generally, was Aramaic, not Hebrew, which was already well on its way to becoming a liturgical language (although Jesus probably knew Hebrew well, as he was called “rabbi”, and likely Greek as well): https://en.m.wikipedia.org/wiki/Language_of_Jesus. Certainly for the context of this quote, it’s likely that he was speaking in Aramaic, given that in the chapter he was responding to questions from a variety of local people.

> If you don't want to pay those taxes, then renounce your US citizenship once you have

Haven't you heard of exit tax? If you renounce citizenship (or surrender your 8+ year green card), you must pay 30% of your worldwide assets' value (as if you sold it for cash) to the IRS. And if you own something illiquid, you're deep in trouble!

So no, people can't renounce their U.S. citizenship easily, the IRS has accounted for that...

Wow I knew of the tax thing but not this. That's tough.

It's only if you qualify as a 'covered expatriate' though. I'm not a lawyer or an accountant but a plain reading of the standard suggests the vast majority of Americans would not be covered.

https://www.irs.gov/instructions/i8854#en_US_2023_publink100...

I think the key would be how they arrive at the net worth numbers. If it's just a calculation of all your assets as if they were sold at FMV, ~90% of the US is below the net worth threshold.

https://dqydj.com/net-worth-percentiles/

The average tax liability standard looks like it would take 5 years at $600K+ of adjusted gross income, too. Plenty of people would meet this standard. Most people would not.

You're a covered expatriate also if:

" You fail to certify on Form 8854 that you have complied with all federal tax obligations for the 5 tax years preceding the date of your expatriation. "

I agree you should pay up your taxes but this will not only recover the due taxes but it will take more.

So it basically says if you net worth is over $2 mil, you're need to pay exit tax, right?

If a house and 401k also counted towards net worth, it could impact quite a few Americans. Besides, those who expatriate for tax optimization purposes usually have a significant amount of wealth.

> If a house and 401k also counted towards net worth, it could impact quite a few Americans

I have no sympathy for people who want to dodge taxes being forced to pay a tax on income that the government has deferred taxes on while they were a citizen making taxable income in the US, and presumably if you're abandoning your citizenship you're not keeping your home and would have already paid sales and capital gains taxes on it when you sold it.

That doesn’t make any sense. I’m not a citizen any more, so clearly I’m not accountable for any tax.

If you're no longer citizen you won't be accountable for any tax accrued after you're no longer a citizen.

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...

> 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

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.

In Switzerland, almost no bank wants to deal with you if you have US citizenship. Its easier to just avoid creating whole new department for that reporting, risk getting sanctions if you make a mistake etc.

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.

The US is a bully because wealthy people want to live, work with, have assets, or even have citizenship in the US. The US is very business friendly and offers top-tier everything if you have money.

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.

Its like saying you need to be hard on terrorism or drugs problems, so that you can actually fix that. We know how that worked in past 100 years...

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.

All taxes are arbitrary. It doesn't need to "make sense". The only reason countries tend to tax their own citizens is more because of the practicalities of enforcement rather than any stance on the philosophical nature of taxation; as this particular rule illustrates.

It's actually a pretty common law to have in some form to penalize tax evasion and capital flight.

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's actually a pretty common law to have in some form to penalize tax evasion and capital flight.

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...

> 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.

There is one group in Congress dedicated to representing Americans abroad. Since 2007 they've been working to reform the tax code and make the voting process easier. No politician in my state has ever joined - and the tax code remains the same.

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.

What a load of whinging. You do get the same benefits: Americans abroad can collect social security and medicare benefits, your children can apply to US universities on equal footing with US residents.

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.

> What a load of whinging.

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?

Yes, I've lived abroad for the last ten years and done my taxes myself the whole time. FACTA is a minor irritation that requires good record keeping on my part, and some annoying paperwork once a year.

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.

> Does it merit your overwrought hysterics? "Cruel and unusual"? Absolutely laughable.

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.

You're so disproportionately upset about some minor administrative hassles. I certainly don't find it "exploitative" or "unjust" that Americans retain the rights and responsibilities of citizenship worldwide.

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)

> You're so disproportionately upset about some minor administrative hassles.

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.

¯\_(ツ)_/¯ Fundamentally, I don't think it's bad to require that wealthy citizens pay taxes. I don't think I'm being "robbed" - I pay higher taxes where I'm resident, so I just fill out some forms to tell Uncle Sam what I've already paid and it zeroes out my US tax liability.

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.

Any time I hear an American talk about US taxes they sound like it's a major pain in their backside though.

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.

US taxes are objectively more annoying than most countries' and attempts to simplify the process are stymied by people with political axes to grind (e.g. Grover Norquist) and for-profit tax prep firms that stand to lose lots of money: https://www.propublica.org/article/how-the-maker-of-turbotax...

Things might finally be shifting. In recent years, the IRS has introduced its own software that will handle most taxpayers' basic situations.

Is that all voting where you used to live, or just some subset of elections?

I've only heard of US emigrants voting in the presidential election.

Whether you get to vote in local and state elections depends on whether you declare yourself to have moved abroad indefinitely or temporarily (e.g. study abroad, temporary work posting) - https://www.votefromabroad.org/faqs/FP7

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.

> It's actually a pretty common law to have in some form to penalize tax evasion and capital flight.

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?

pretty much every EU country has a similar law

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

"pretty much every EU country" is not an example, so I guess no, then.

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.

That’s why you put everything into trust first.

I know a few folks who gave up their US citizenship over tax, and both had to plan for about a decade to do so without paying exit tax - and their lives continue to revolve around being tax exiles - 89 days here, 44 days there, etc. etc.

I’m glad to be a Brit, if only because the revenue doesn’t pursue me around the planet.

> The "problem" you describe is your US citizenship requires you to pay tax on earnings from outside the US

No, I think you're missing the issue.

Suppose the company (let's call it XYZ Ltd) is owned 100% by my spouse. Let's say XYZ has $XYZPROFIT in one year. It then pays $XYZUKTAX on that profit, but the US isn't involved whatsoever. If it pays me $MYSALARY, XYZ reports that to the UK government and pays $MYUKTAX. I then report the US government $MYSALARY and $MYUKTAX, calculate $MYINCOME, and then calculate $MYUSTAX (which is normally $0, since UK taxes are higher than US taxes).

Now let's suppose I own more than 10% but less than 50%. Now I basically have to report to the US the same information about XYZ's financials that the company reports to the UK government, as well as answer 40-60 questions each of which would take a few days to understand the meaning of. Thankfully that's where it ends under normal circumstances; pay an accountant to prove you're not cheating the system and you're done.

Now suppose XYZ is 100% owned by me. It has $XYZPROFIT for the year, and pays $XYZUKTAX on that profit. Now, by default, $XYZPROFIT is included in $MYINCOME, but $XYZUKTAX is not included in $MYUKTAX; meaning by default I'm going to be double-taxed. I can avoid this, but only with 1) extra paperwork, and 2) forgoing any tax breaks for start-ups that the UK government has.

> "Pay unto Caesar, that which is due to Caesar and pay unto God that which is due to God" or words to that effect.

As I said, I don't mind paying taxes, but I don't want to pay it twice.

> If you don't want to pay those taxes, then renounce your US citizenship once you have, say, gained UK citizenship, if that works for you.

Boris Johnson - the ex UK prime minister - was born in the US, and complained loudly and frequently about having to pay taxes to the US - and appears to have refused to do so atleast partially. Having to pay tax on profits from the sale of his family home (which is tax free in UK) was the trigger to get him to renounce citizenship.

https://www.forbes.com/sites/robertwood/2022/07/10/boris-joh...

If you renounce your citizenship to avoid taxes, you are barred from ever entering the US or its territories again. Take one quick look at the EEZ of the US and tell me if you are OK with never traveling through those places again.

Looking at all the corpo legal/HR departments really has to make you think - those are people that are paid to aggresively look for legal loopholes, to defeat the spirit of laws and to make sure that the corporation always has the advantage against the society and workforce they exist nearby. There's decades upon decades of man hours being put into chipping away the effectiveness of tax, workplace and other laws and finding loopholes to make them ineffective. We've been at war and we never even noticed.

This is completely unrelated to the post.

What you're complaining about is overreach by the IRS in relation to foreign assets held by US citizens (ie FATCA) and the reporting requirements (eg Form 7938 and FBAR). It's worth noting that real estate is carved out as an exception for reporting purposes somehow, even though it's a common vehicle for money laundering.

That has literally nothing to do the Double Irish Dutch sandwich, which has historically been used by US companies (particularly Big Tech companies) to avoid taxes by moving their IP to a foreign subsidiary and then paying "royalties" to avoid paying US taxes.

You seem to think that the IRS doing that just for a laugh, or just because they hate rich people, and that Big Tech companies are the only ones playing shell games with their revenue in order to shirk paying their fair share to support the society they've benefitted from.

I think it much more likely that rich people also play shell games with their assets / revenue to avoid paying their fair share to support the society they've benefitted from, and that the IRS requires the extra reporting to try to counteract that.

This article is specifically about a specific loophole invented by unethical accountants and lawyers, but it's also generally about all the effort spent by unethical accountants and lawyers to come up with such loopholes, causing not only harm to society (in the form of free-riding on those who are paying taxes), but which in turn forces effort on the part of tax agencies and legislatures, which then forces effort on normal people like me who just want to make some money and pay our fair share. It's pure wasted energy.

> and that the IRS requires the extra reporting to try to counteract that.

The extra reporting largely exists because of the fundamental and rather unique misdesign of the US tax system - taxing citizens’ worldwide income for life. Most countries only tax (1) worldwide income for residents (2) in-country income for non-residents

> What you're complaining about is overreach by the IRS in relation to foreign assets held by US citizens (ie FATCA) and the reporting requirements (eg Form 7938 and FBAR)

A big problem is the US is one of the few countries in the world which taxes its citizens (and green card holders) worldwide, for life, no matter how long they’ve been outside the United States. Most countries don’t tax non-resident citizens, or only do so for a limited period of a few years.

The only other country that does it, that I know of, is Eritrea - and it has been widely condemned by the international community for its “diaspora tax”. But no condemnation for the US diaspora tax, despite actually being far more onerous than Eritrea’s is

I believe they may have been referring to the Global Intangible Low-Taxed Income (GILTI) tax, which from what I've read is as bad as the OP describes in their post.

https://www.investopedia.com/global-intangible-low-taxed-inc...

That might be so but it's also, like I said, completely unrelated to the post.

Like, how is it different from coming onto this thread and grinding an axe about laws against municipal broadband?

Secondly, if a US citizens owns more than 50% of a foreign company, by default, income from that company counts as personal income, but taxes paid by the company to another government don't count as personal taxes. You can get around this, apparently, but it's even more complicated.

This is the GILTI regime, which was intended to target foreign income from intangible assets. But, like most GOP legislation of the last two decades, it was written in a rush without regards to the practical consequences.

Note however that if the foreign income (from the company's perspective, local income) is being taxed at a higher rate than 90% of the applicable U.S. tax rate on that income (currently meaning, 18.9% foreign tax rate or higher) then the income does not get included in its owner's income (aka the high-taxed exception).

Also note that if you are for some reason subject to GILTI, you've basically just prepaid your taxes on actually receiving that income, meaning that you don't pay taxes again when the foreign corporation actually pays the income to you as a dividend.

This was super complicated for a year or two until the IRS released guidance clarifying some points. Now, for any accountant worth their salt, it's pretty straightforward and if they're still complaining about it, find a new accountant.

Why is the top comment on this post a mostly unrelated rant about USA individuals being taxed in weird ways? The actual post is about global corporate shenanigans that enable them to evade astronomical amounts of taxes.

Yeah it's become an absolute nightmare now if you're an individual or small business involved in anything cross border.

Even if you're not unlucky enough to be a US citizen, if you're tax resident in one country and incorporate in another for completely legitimate reasons, as an individual you're just screwed if you want to be compliant. Rocket science is significantly easier.

You need some KPMG-tier advisor to work it out for you for $crap-ton/hr. Few sole operators have the revenue to afford that.

>Secondly, if a US citizens owns more than 50% of a foreign company, by default, income from that company counts as personal income, but taxes paid by the company to another government don't count as personal taxes. You can get around this, apparently, but it's even more complicated.

Curious, what are the even more complicated ways?

The guild will get its due! Ironically this is also what the productivity gainsgames produce in the long run. All that excess human capability goes into bureaucracy labyrinths and highway robbery sometimes with the law behind and armed with subscription. The entrepreneur producing the beast that strangles him.

Be careful it might be more complicated than that. I am not 100% sure but I think you might be required to pay taxes on unrealized gains for your company (or whatever assets you are owning).

Would this be avoided if you renounced your US citizenship and became a UK citizen instead?

Would this encourage shell company ownership behavior?

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