A few hundred years ago some British expats who were mostly settling in a new land (some still travelling back and forth for business, with homes in both places) started to grow increasingly frustrated by taxes levied by the Parliament on the other side of the ocean.
The crux of the matter was that in 1689 the English Bill of Rights forbade the imposition of taxes without the consent of Parliament. So how could all these expats in this new land, who had no representation in Parliament, be taxed by Parliament?
That idea was simply unjust.In 1765 a local politician in this new land, James Otis, stated that ‘taxation without representation is tyranny.’
Then in 1766, Benjamin Franklin, another well-respected resident of this new land travelled across the ocean to speak with Parliament. He said that, “an internal tax is forced from the people without their consent if not laid by their own representatives. The Stamp Act says we shall have no commerce, make no exchange of property with each other, neither purchase nor grant, nor recover debts; we shall neither marry nor make our wills, unless we pay such and such sums; and thus it is intended to extort our money from us or ruin us by the consequence of refusing to pay it.”
We all know the result of these colonists’ objections. They formed their own country and fought for independence from a government that refused to work justly with its people wherever they lived.
American school children learn how unfair the situation was for those early American colonists. Americans grow up knowing that Taxation Without Representation is a terrible way to treat people.
Americans know that taxing people who are not benefitting from representation or services is Wrong.
You can see where I’m going with this.
Although American expats around the world are not colonists, we are taxed without receiving the benefit of those taxes. Benjamin Franklin would not be impressed.
It was the American Civil War that introduced expat tax. Americans who moved overseas we taxed more than Americans who stayed, to discourage people from leaving the country and their obligations at home during a time of war. The citizenship based tax stayed, even though life and political models changed. Now, a country that is increasingly criticised for being isolationist and who’s citizens are ridiculed for not getting out a bit more in order to understand the world better, the government is still, unjustly, punishing expats for leaving the country.
There are over 7 million American expats. This is more than the population of many states. Apart from lobby groups, such as the American Citizens Abroad, we have no political representatives in congress. This means no politicians who will fight our corner, or make our distressful plight known.
No other country (apart from Eritrea) requires citizenship-based tax. For an interesting and entertaining article on what life would be like for many famous Americans if all other countries had the same unjust laws as these two countries, see this, US Citizenship Based Taxation: Unique or Outrageous?
Most of the 7 million Americans overseas don’t earn enough income that they have to pay. I mean to say, they don’t have to pay taxes to the US. But because of the complicated forms, and the additional forms expats need, and the unnecessary jargon overflowing from the forms, many people will resort to paying an accountant anywhere from $300 upwards to several thousand dollars to help them wade through the IRS sludge. And they impose harsh fines for filling it out incorrectly.
Every year. Even if they don’t owe taxes, if American expats choose to ask a professional for help with a system that has been made too complicated for ordinary people to easily fill out correctly, they must pay an accountant to help them.
If you want people to comply with rules, make it easy to comply with rules.
As a result of these illogical laws, millions of loyal, proud Americans are being forced to choose between hundreds of hours or hundreds (or thousands) of dollars of each year of their lives sorting through the IRS forms and jargon, or giving up their citizenship. Both options are heart breaking to many of us.
We have been put in a position where we are a burden on employers, financial institutions and non-American partners. We are being treated like potential tax cheats by our home country. We are threatened with financial ruin if we fail to get forms filled in correctly.
And that is only the expats who know about this. Many expats are living completely immersed in their host countries. They have local families and work and plan to live out their lives like this. They have no idea they need to file income tax forms or FBAR forms. But if the IRS finds out about them through FACTA (the agreement that many international financial institutions have signed to share information about American clients with the IRS), they potentially face massive penalties for ‘crimes’ they don’t even know they have committed.
Morally, these people have done nothing wrong. It is the US government who is wrong.
How just is it that the US impose these laws, and the recently increased tightening of these laws, without fair warning or communication of any sort to the people around the globe who are affected by the laws?
How just is it to impose the laws in the first place?
Some people who have foreign bank accounts are hiding millions (or billions) of dollars. Some Americans who move overseas do so to cheat on taxes. But if the figure of 82% of American expats who fall below the tax threshold citied in the linked article above is correct, then this system for reporting is clearly flawed. There must be a more efficient and morally rigorous system.
The blanket approach to income reporting for all expats is indefensible.
For those who are not Americans the best way I can explain my American expat tax situation is this:
You are born and grow up in London. You pay council tax in London, then move to Edinburgh and pay council tax to Edinburgh. But London still wants you to fill in three forms (or more depending on one or more factors) because you might or might not have to pay tax in London as well as Edinburgh. But if you’re self-employed make sure you also get a certificate from Edinburgh that says Edinburgh will pay your social security there if you need it because otherwise London will expect you to pay for social security in London. And you also need to send London details of any bank accounts that have your name on them if they go over a certain amount. Yes, even if it’s a joint account with your Edinburgh partner and even if the money in that account is all from his salary. That’s right; London will then be able to snoop through your Edinburgh partner’s financial details. And if you don’t do that correctly you’ll be fined huge fines. And yes, if you don’t work, that means your Edinburgh partner will be paying the fines for you.
I lost you didn’t I. That’s okay because I have a long list of people you can pay a lot of money to who will help you figure it out.
Many of us have been some of the very best representatives for our beautiful homeland for many decades. We have lived quietly amongst other nationalities, showing them that Americans are not all that they see in the media, that we are also respectful and intelligent and curious to learn about the world. We have endured social gatherings where non-Americans have criticised our governments, or made fun of the everyday people interviewed during elections, or been derisive of the low percentage rate of Americans who own passports. And we have thought of intelligent answers to diplomatically agree with some assessments while educating the world on areas where they’re ill informed.
In spite of our choice to live overseas for whatever reason, in my case my husband is British and his job prevents him from moving outside the UK, we still celebrate the country of our birth. Some of us celebrate American holidays, some of us bring our foreign families ‘back home’ every year, and some of us decorate our house with things from home.
Many of us are just quietly content with our token American status wherever we live because we are proud of the original ideals of our homeland and our founding fathers. And in exchange for our allegiance to the flag, and to the Republic for which it stands, we do not receive justice for all. Our government has betrayed us.
Michelle Garrett is an American expat making a life in Britain for over 20 years. Yes, she's still homesick for the States and yes, she'd be homesick for Britain if she moved back there!
Michelle is a freelance writer and blogs at The American Resident.