Comment by dathinab

Comment by dathinab 2 days ago

11 replies

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)

mandmandam 2 days ago

> 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...

  • ForHackernews 2 days ago

    > 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.

    • mandmandam 2 days ago

      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.

      • ForHackernews a day ago

        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.

kergonath 2 days ago

> 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?

  • dathinab 2 days ago

    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

    • kergonath 2 days ago

      "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.