American Citizens Abroad Dinner in Geneva

by Phil Hodgen on May 25, 2012

Last night (Thursday night) Mary and I were guests at a dinner and extended conversation hosted by American Citizens Abroad, in Geneva.

Perhaps not coincidentally, the dinner was at the restaurant of Le Musee des Suisses dans le Monde and as Anne Hornung-Soukup noted as we were walking in the Swiss tend to honor their citizens abroad rather than, well, ignore and/or pillory them. My words, not hers.

You can see Karl Jauch’s collection of photos (don’t I look fetching?). I am sitting between Jackie Bugnion (on my right) and Marylouise Serrato (on my left).

American Citizens Abroad

For those of you who do not know the people of American Citizens Abroad, let me tell you only one thing: this organization is the adult in the room when it comes to talking about (and understanding) the effect of U.S. tax policy on American citizens overseas, as well as the entirely predictable future effects of these policies on immigration to the United States, expatriations, and investment flows. I count myself as one of the adolescents because I sometime *ahem* rant a bit and I have a potty mouth.

I first came to know the organization about three years ago as the UBS bank hoo-hah was heating up in 2009. My initial contacts were with Dorothy van Schooneveld, Jackie Bugnion, and Anne Hornung-Soukup.

Anne Horning-Soukup told us on the drive back to the hotel that in her 30 years with the organization the activities have shifted from helping proud parents acquire U.S. citizenship for their foreign-born children (long ago) to dealing with the toxic tax landscape how which is increasingly driving people to relinquish U.S. citizenship. Again, my words, not hers.

Everything I know in my day job, the ACA members know because they live it. They are living inside the effects of the various voluntary disclosure programs, the entirely predictable (and unavoidable) exclusion from banking that is befalling U.S. persons living abroad, and just the general paperwork overhead that the citizenship-based tax system imposes.

What it’s like for a normal American abroad to deal with tax returns

For those of you living inside the USA and not quite understanding what Americans abroad live with, consider this simple example. Imagine you live in a high-tax country. Anywhere in Europe, for example. You pay your taxes in your country of residence. You pay a lot of income tax.

The IRS also asks that you file U.S. income tax returns. The USA requires its citizens to file tax returns and pay income tax, no matter where those citizens live.

For you, the American living overseas, tax return preparation is an order of magnitude more complicated than for someone living at home in the USA. There are extra forms to fill out. Extra stuff to report. Big, big penalties if you fluff things up. So you either spend an inordinate amount of your free time doing the tax returns yourself, or you pay a lot of money to an accountant to do the work for you. I don’t know what the people around the table last night spend, but it would be common to see tax bills of $3,000 – $4,000 in my experience. Let’s say you only spend $2,000. Lucky you.

The amount of tax that the IRS typically collects from people living in Europe and other high tax countries is ZERO. The foreign tax credit (PDF) ensures this. So does the foreign earned income exclusion (PDF).

Short story? You pay $2,000 or maybe much more to do a tax return that yields zero revenue for the U.S. government. And you burn up a lot of nights and weekends doing the paperwork.

Then you hear some Senator yammering about people like you and how you should be paying your “fair share” to the U.S. Treasury.

But it’s worse than that. A set of obscure tax rules (I’m looking at you, Mr. PFIC) (PDF) designed to short-circuit semi-clever multinational corporate tax planning tricks just happens to apply to the average American living abroad.

If you save a bit of money and decide to buy foreign mutual funds because this looks like a good investment strategy, you run afoul of Form 8621. Translation for the uninformed: add another $1,000 to your tax return preparation bill, AT LEAST.

Because Google and its worldwide empire (on the one hand) and you, the Average American Abroad (on the other hand) should live by the same set of tax rules and fill in the same paperwork. Right?

In short — excessive burdens on humans. Useless paperwork to be processed by the IRS (oh dear, we need to hire more staff at the IRS). Very low (many times zero) tax collections in the USA from these people.

The dinner discussion

This is what the ACA members around the table live with, and this is what we collectively discussed on Thursday night. There’s not much to report. Voluntary Disclosure Programs — resoundingly counterproductive. Expatriations and interest in expatriation on the rise. FATCA — a law that is impossible to apply but creates intolerable burdens on Americans abroad.

Oh. Marylouise Serrato told me that the Bern Embassy is now much quicker at processing expatriation appointments. This is welcome news.

ACA has an active effort to bring awareness of these issues to the elected officials in Washington.

I hope this works, but frankly it is a long shot because the ACA does not have hundreds of thousands of dollars to throw at lobbying and campaign contributions. So some type of low-budget but effective campaign is necessary and the ACA crew is working at this. The first phase is complete, I think. There is some awareness on Capitol Hill that ACA exists.

Thanks

At the end of the evening Mary and I were presented with an enormous (!) bottle of wine and a small brick of Swiss chocolate. Yay. The bottle of wine will be saved for a future special event to be selected — probably a family wedding in August in Chicago. The brick of Swiss chocolate has already been savagely attacked and will probably not survive until the train ride tomorrow to Zurich.

This has been a great trip. I should be back to Switzerland in the autumn. If you would like to connect next time I am here, pop me an email and let me know.

Reader comments (18)

  • Is there anything people who want to support this cause can do to help ACA’s efforts?

  • Keep the warm continental air blowing up to the UK, it reached 25-26C here today!

    If the renunciation rate keeps holding up, the ACA will soon become the Ex-patrioted American Citizens Abroad (EACA).

    What will be the new agenda? Helping former US citizens collect their social security, make disability claims and offer advice for those wanting to enter the US because of Sen Schumer’s legislation?

    Jokes aside, but it’s a real possibility in today’s climate.

    Watch Schumer in his latest speech in Congress -

    http://www.huffingtonpost.com/2012/05/24/chuck-schumer-eduardo-saverin-nazi-comparison-appalling_n_1524021.html

  • @Phil It is great that you got to meet key people at ACA. They are doing a great job with limited resources (mainly whatever they can earn at their annual auction and membership fees) so please everybody join and contribute if you care about the issues– I don’t think they would mind if a “homelander” joined up and contributed, somebody correct me if I am wrong as I don’t have their bylaws in front of me right now.

  • Sankar says May 28, 2012 7:02 pm

    ACA, Americans in canada, immigrants with accounts in their homeland
    all have reasons to have accounts in their home country and may be
    under similar circumstances when it comes to FBAR and foreign accounts.

    So would it not make to have a single voice for all these affected parties
    rather than splitting and taking the issue in different fronts.

  • Anonymous says May 29, 2012 9:32 am

    In addition to taxes there is the problem of banking. If you reside in Switzerland you NEED a Swiss bank account to deposit your pay, and pay your rent and utilities. Due to UBS, FATCA, FBAR and all that most Swiss banks will not touch Americans with a 10-foot pole, even those resident in Switzerland who need an account. A few will very reluctantly open an account but just a non-interest-bearing CHF account, no savings, no stocks, etc. The problem exists for Americans living in other countries also, though generally not as bad as in Switzerland.
    Oh, and Americans abroad find it extremely difficult to open an account in a US bank, because of PATRIOT Act.

  • What is the current status of the referendum in Switzerland regarding treaty changes I read in blogs recently?

    The real action starts in 2013 when banks have to actually do something about it or their customers. Today we’re in legal limbo until 2013. Otherwise it’s up to software companies, accountants, and lawyers (sorry Phil !) to drum business through the fear-factor of the IRS fines and withholding tax on a daily basis via a barrage of daily press releases.

    Once the IRS starts withholding 30% that will invoked a reaction by customers or FFIs.

    We haven’t even talked about legal action against FFIs regarding “pass-thru” payments beginning in 2017 particularly with foreign bank to foreign bank payments which have nothing to do with the US.

    Unless the EU, Japan, or whoever starts to implement their own versions of FATCA worldwide (which I not entirely convinced because they don’t share the same incentives of the US with citizenship-based taxation), FATCA will be shaped by foreign courts as much as the US Congress.

    Once we have injured parties in the legal system the real fun begins.

    The real danger of FATCA is making it problematic dealing in US dollars thus speeding up the process of the US losing sole reserve currency status.

    With sole reserve currency status comes responsibilty and costs, is the US really in a position to continue to bear these costs in future or is it better for it to share the costs with the EU and China going forward?

  • I totally agree with Sankar. It would be nice to have a single voice to represent all the people who have the same problem – American Citizen Abroad as well as immigrants.
    Americans of Indian Descent have met with IRS over OVDI to no avail.
    These affect so many people that the response should be united to stop this legalized robbery. I can’t believe the US is doing that…

  • Helpimmigrants says May 31, 2012 3:33 pm

    +1 to Sankar and Chris comments. Many US immigrants are also in the same boat and need representation. There are too many struggling and not sleeping well or at all right now. There are no words to describe how sad this is.

  • barbara says Jun 3, 2012 6:43 am

    US citizen married for 42 years to UK person. The US government seems to me to be persecuting honest taxpayers. Have filed returns for all of my life. If there is a protest group I would join it.

  • Just Me says Jun 3, 2012 1:11 pm

    @Chris…

    What can one do to support ACA?

    Well, for a start, Join ACA. Sign up, and pay some membership dues!

    Two: get active with your email and twitter and Facebook accounts to help spread awareness of excellent blogs like this.

    Three: Come over to Issac Brock Society.com and participate in the efforts to get more visibility in the media. http://bit.ly/LoKaui or just join in the many discussion threads.

    Four: Target Democrats abroad and Americans Abroad for Obama to see if they can influence the administration about the errors of their ways…
    http://bit.ly/LcWiry

    Five: Look for stories you see posted on the internet even remotely associated with Taxes, job creation, trade deficits and FATCA and use it as an opportunity to put the evils of Citizenship taxation into the consciousness of journalist and readers. Here is an example today. Read Roger Conklin’s Comments…Alias RogelioC http://bit.ly/L616yR

    If you read around the internet, after while you will bump into Roger’s name time and again in comment sections, just doing his sole part to educate and inform. He knows his stuff, and is dedicated to the cause. He is over 80 and has been spreading the message for 30 years now, and still going at it. Take some inspiration from that, and help him with his lonely cause. The IRS has screwed up big time, has created an incredible negative marketing machine with the past 3 year jihad (angry minnow expats and immigrants) and put wind behind his sails. It is is thrilling for him to see his effort enjoined by late comers to the battle like you and I.

    Another name to watch for is Julian Hudson, like on this Forbes story… http://onforb.es/KOEh6l Look for the “called out” comments.

    You might be surprised, but these comments are important to journalist. Kinda like a tip for service. It is their badge of value. It helps them know that they are connecting with their readers who are interested enough to comment good or bad. If there are no comments, then maybe the story isn’t interesting enough to explore further in another followup, so they move on. If they get 100s of comments, they have a home run, 1,000s and they are up for a People’s Choice Award! :)

    I will note however, that in stories with less comments, the chance of your commentary helping to shape journalist narrative in future stories is higher. I have seen this happen with journalist I have targeted.

    Also, don’t be afraid to find their email address and email them directly. Just a word of advice. Even if you are critical of the story, start out with a compliment or appreciation for their efforts. Honey works better than vitriol. Stay measured and don’t rant. (Save that for blogs of like minded readers, if you want to vent to feel better) Rants brand you, and turn off almost all journalist immediately. Sound reasonable and serious with your comments and will have a better chance of reception.

    Don’t be discouraged by the lack of response. You are sorta spamming them. It might be lost in their email haze, but I have been pleasantly surprised at the responses I do get back from time to time (low percentages) However, it is enough to keep me at it. Example, the James Fallows 3 piece FATCA Chronicles (Here is the link to the first http://bit.ly/uzB7nk ) was a direct response to my unsolicited email to him, and then dialog that started.

    This story in Reuters was a direct response to me emailing the Journalist thanking her for another story she did on FATCA, while pointing out she had missed the narrative about what was really happening. That again, opened a dialog that resulted in a story, so you can have influence. http://reut.rs/uwDMt9

    The main thing, is DO SOMETHING! Don’t shrug your shoulders and think your email or comment won’t have any impact. You never know when you can turn a journalist or Opinion Maker. Pete the Planner is an example of a concerted effort to turn a guy’s opinion around, and was successful just because a few of us tried to diplomatically educate him about a subject he knew nothing about…

    http://bit.ly/IjCKDz

    Finally, there was one other… Al Lewis from Market Watch. He did a terrible piece on Saverin,and so we responded, educated him, and he did a turn around piece. http://bit.ly/ILmUVh

    Now, admittedly these are small victories that will not change the course of history, but you eat the elephant one bite at a time, and I for one, am not yet done digesting. :)

    Cheers… Sorry for the lengthy Post, Phil..

  • Just Me says Jun 3, 2012 2:45 pm

    IsaacBrockSociety.com

  • Just Me says Jun 3, 2012 3:17 pm

    Phil and Jack Townsend do the best they can helping answer questions. Jack especially has been getting a lot of immigrant questions lately and providing advice at http://federaltaxcrimes.blogspot.com/

    There was also post written just for you by a contributor on Isaac Brock…

    “Thoughts on Immigrants caught in IRS jihad, – This post is for you.” http://bit.ly/Naedp6

    and when you look at what the IRS is doing to Expats and Immigrants on the offshore issue, but ignoring this onshore issue, it is especially upsetting…

    http://www.wthr.com/video?clipId=7054149&autostart=true

  • ACA is an amazing organization which deserves every overseas American’s moral, and especially, financial support. They’re doing a fantastic job for all of us.
    Mick

  • Phil,
    Are Jesse Eggert and Manual Corwin “hired help” or “decisionmakers”?

  • I want to react to Phil’s statement that the amount of tax that the IRS typically collects from people living in Europe and other high tax countries is ZERO. I don’t agree with it. There are so many differences in what is taxed in the foreign country and what in USA that most people end up paying additional taxes in USA in spite of the agreements aimed to avoid double taxation. A prime example is contributions to foreign employee pension plans. Another example: currently the USD is so low compared to Swiss Franc that it drives people with moderate income in Switzerland to high tax bracket in USA. The result: the foreign tax credit is not sufficient to offset the US tax.

  • @Sova,

    You are right. There are many differences between tax systems. The most obvious one is capital gains taxation. Many countries do not tax capital gains, while the United States does.

    So maybe :-) my statement that people in high-tax countries pay zero tax to the USA is *ahem* not always accurate.

    And your comment points to one of the structural problems of citizenship-based taxation. When remedies (like the foreign tax credit) are put in place to prevent hardship and injustice caused by citizenship-based taxation, they don’t always work perfectly. And, like casinos, if there is a problem with a tax rule, it always favors the house.

  • TaxFormWeary says Jun 6, 2012 11:50 pm

    US citizen here, married to a Canadian for 12years, living in Canada. I’m done with looking for places to put the little I have. Since the US does not recognize tax free savings accounts here (that in Ca are taxed when funds are taken out), they have categorized them with “trusts”, thus needing hours of paperwork and rabbit trails to follow with threats of thousands of dollars in fines for mistakes. This paperwork (information on cost from my accountant) would cost about $500 to fill out. So if I manage to save 1k, whats the use? It took me a over a full day of trying to fill it out myself + I ended up sending the paperwork to a chartered accountant anyhow.
    Needless to say, I’ve closed all the accounts that I can because I cannot afford the paperwork. Added to that, not all forms are to be filed with a 1040. They go to different addresses at different times. It is confusing. If Americans living in the US faced this, needless to say investing would grind to a halt. Is this your plan Congress?

  • yes – donate to them! go on their website http://www.aca.ch, donate anything you can do it via paypal!