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Archive for John Richardson

Biden Administration Overriding Tax Treaties. Does This Mean Existing Treaties Are Worthless?

Biden Administration Overriding Tax Treaties

(The above tweet was a response to a recent article in the Financial Post.)

Introduction

This post is a comment on yesterday’s Tax Connections post “Ranking Members Warn Against Bypassing Treaty Process“. As is well known the United States has been hugely supportive of the International Tax Reforms known as “Pillar 1” (granting source country taxing rights to certain profits earned by certain multinationals) and “Pillar 2” (establishing a global minimum tax on the profits of certain multinationals). Apparently 136 of 140 countries have agreed to the two Pillars of international tax reform. The agreement signified a country’s commitment to make the necessary domestic changes to meet its international obligations.

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Eroding The Tax Base Of Other Countries By Imposing Direct U.S. Taxation On Residents Of Those Countries

Eroding The Tax Base Of Other Countries By Imposing Direct U.S. Taxation On Residents Of Those Countries

This is the fourth of a series of posts about international tax reform generally and how FATCA, CRS, citizenship-based taxation, GILTI, etc. work together.

The first three posts were:

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How The World Should Respond To The US FATCA Driven Attack On The Tax Base Of Other Countries

How The World Should Respond To The US FATCA Driven Attack On The Tax Base Of Other Countries

This purpose of this post is to continue the general theme of focusing on the difference between what a law says and what the law means in application and effect. Yesterday’s post (The Pandora Papers, FATCA, CRS And How They Have Combined To Create Tax Haven USA) focused on the role that the 2010 US FACTCA law played in in facilitating the rise of Tax Haven USA. (To be clear, I am not saying that FATCA was the sole cause.) That said, the unwillingness of the USA to sign the CRS (“Common Reporting Standard”) has also played a role in the growth of the US as a tax haven.

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The Pandora Papers, FATCA, CRS And How They Have Combined To Create Tax Haven USA

JOHN RICHARDSON

Introduction

While millions of people are obsessed with taxation there are apparently people who may (but who knows) wish to simply opt out of the discussion.

I am becoming less and less interested in the intricacies of taxation. At its core the principles of tax are really pretty simple. Tax laws exist for two purposes: (1) To redistribute assets from one person to another person (with the government taking an administrative cut along the way) and (2) to punish (sin taxes) or reward (buying a fuel efficient car) certain kinds of behaviour. Certain cultures are more tax obsessed than others. When it comes to obsession over taxation the USA is certainly a world leader. In fact, what started out as US “citizenship-based taxation” more than one hundred years ago, has created a culture of “Taxation-based citizenship” (Yes, they are different concepts).

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A Landscape PAINting Of The Effects Of U.S. Citizenship-Taxation On U.S. Citizens Living Outside The U.S.

A Landscape PAINting Of The Effects Of U.S. Citizenship-Taxation On U.S. Citizens Living Outside The U.S.

Introduction:

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Tax Issue Or Human Rights Issue? Maehr Reminds Us To Consider The Broader Implications Of Tax

Tax Issue Or Human Rights Issue? Maehr Reminds Us To Consider The Broader Implications Of Tax

Tax Connections is a tremendous resource that focuses on tax issues. It’s important to remember that behind every tax issue there is a real person. That real person is often dealing with an issue that extends far beyond the concerns of that individual. The recent 10th Circuit decision in Maehr is a prime example. The Maehr decision was discussed in a comprehensive post at Tax Connections. That particular post focussed on only the narrow tax aspect – specifically the passport revocation section found in the Internal Revenue Code.

This post is for the purpose of illuminating the impact that (what appears to be) a tax decision can have on fundament rights in general. To put it simply: the 10th Circuit decision in Maeher stands for the legal proposition that Americans are NOT free to leave the United States without the permission of the US Government.

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Digging The Foundation To Build The House Of U.S. Residency Taxation

Digging The Foundation To Build The House Of U.S. Residency Taxation

Prologue

This is the fifth of a series of posts focussing on the need to end US citizenship-based taxation (practised only by the USA) and move to a form of pure residence-based taxation (practised by the rest of the world). The first post was titled “Toward A Definition Of Residence-based Taxation For Americans Abroad“. The second post was titled “Toward A Movement For Residence-based Taxation For Americans Abroad“. The third post was “Toward An Explanation For Why Some Americans Abroad Are Complacent About Citizenship Taxation“. The fourth post explains why some Americans Abroad actually OPPOSE changes to citizenship-based taxation. This fifth post in the series is to begin a discussion of what would be the basic changes (to the existing Internal Revenue Code) that would move the United States toward the world standard of pure residency-based taxation.

It’s about “pure residency-based taxation” and not citizenship-based taxation with a “carve out”

I have previously advocated that the United States should move to to a system of pure residence-based taxation. A system of pure residency-based taxation, means that:

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A Simple Regulatory Fix For FATCA Problems Of Dual Citizens From Birth

JOHN RICHARDSON - Dual Citizenship From Birth

Prologue

It is clear that the US extraterritorial tax regime, which imposes taxation on the non-US source income of US citizens living outside the United States, is an outrageous violation of the sovereignty of other nations. It is also an extreme injustice inflicted on US citizens living outside the United States. The US has successfully exported the extraterritorial tax regime to the world through a combination of (1) The US Internal Revenue Code (2) the FATCA IGAs (hunting down US citizens) and (3) the saving clause in US tax treaties (Country X agrees that the US can impose tax on any individual who has been identified as a US citizen and is tax resident of Country X). To understand the interplay between (1), (2) and (3) above see the following article I wrote for the American Expat Finance News Journal.

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Business Entity Definitions Discriminate Against Canadian Controlled Private Corporations – Treasury 26 CFR § 301.7701-2

Business Entity Definitions Discriminate Against Canadian Controlled Private Corporations

Synopsis:

The 2017 965 Transition Tax confiscated the pensions of a large numbers of Canadian residents. The ongoing GILTI rules have made it very difficult for small business corporations to be used for their intended purposes in Canada.

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United States Tax Treaties Should Reflect The 21st Century And Not The World Of 100 Years Ago

JOHN RICHARDSON

Prologue

The rules of taxation should follow changes in society. The ordering of society should NOT be hampered by the rules of taxation!

As the world has become more digital, companies can carry on business from any location. Individuals have become more mobile. Multiple citizenships, factual residences and legal tax residencies are not unusual. It has become clear that the rules of international tax as reflected in tax treaties (as they apply to both corporations and individuals) are in need of reform.

The purpose of this post is to identify two specific areas where US tax treaties are rooted in the world as it was one hundred years ago and NOT as it is today.

First: The “Permanent Establishment” clause found in US and OECD tax treaties

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Why “All Roads Lead To Renunciation” For Americans Abroad

Why "All Roads Lead To Renunciation" For Americans Abroad

The United States imposes a separate and more punitive tax regime on US citizens who live outside the United States than on those who live inside the United States. For those who live permanently outside the United States, the effects are such that they are forced to renounce their US citizenship in order to survive.

To be clear Americans abroad are subject to US taxation. They do pay US taxes.

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Toward A Definition Of Residence-Based Taxation For Americans Abroad

Toward A Definition Of Residence-Based Taxation For Americans Abroad

Introduction

The discussion of tax reform for Americans abroad is increasing in intensity. Whether through amendments to the Internal Revenue Code or a “Regulatory Fix To Citizenship-based Taxation“, Americans abroad are in desperate need of change. The US tax system as it impacts Americans abroad is forcing renunciations of US citizenship.

The language in the discussion for change reflects a desire (on the part of individuals and organizations) to move from the US system of “citizenship-based taxation” to a system of “residence-based taxation”. Various individuals and groups describe the goal using the language of “residence-based taxation” AKA RBT. It would be a mistake to assume that RBT means the same thing to different people. The purpose of this post is to describe definitions of RBT and and how those definitions may be defined for different individuals or groups.

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