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Considering 'Citizenship Taxation': In Defense of FATCA

42 Pages Posted: 25 May 2017 Last revised: 8 Jun 2017

Young Ran (Christine) Kim

University of Utah, S.J. Quinney College of Law; New York University School of Law

Date Written: May 22, 2017

Abstract

Inspired by Ruth Mason’s recent article, Citizenship Taxation, which reaches a general conclusion against citizenship taxation, this Article also questions citizen taxation under the same normative framework, but with a particular focus on efficiency and administrability, and takes a much less critical stance towards the merits of citizenship taxation. First, neither citizenship taxation nor residence-based taxation can completely account for the differences between residents’ and nonresidents’ ability to pay taxes under the fairness argument. Second, the efficiency argument, that citizenship taxation may distort both Americans’ and non-Americans’ citizenship decisions, is not convincing. The American citizenship renunciation rate is not particularly serious compared to other countries, and it is U.S. immigration law, not U.S. tax law, that should be blamed for obstructing highly skilled and educated immigrants. Third, despite enforcement difficulties abroad under the administrative argument, determining residence by considering all facts and circumstances in residence-based taxation would be worse than the bright-line citizenship criterion in citizenship taxation.

After discussing the competing normative arguments on citizenship taxation, this Article aims to defend the administrability of citizenship taxation in conjunction with new reporting obligations. Individual taxpayers’ obligations to file Foreign Bank Account Reports (FBAR) or report under the Foreign Account Tax Compliance Act (FATCA) are not seriously onerous. The fact that citizenship taxation along with FBAR and FATCA enhances global transparency further supports the case for citizenship taxation.

Keywords: Citizenship Taxation, Residence-based Taxation, Renunciation, FATCA, FBAR

JEL Classification: H24, K34

Suggested Citation

Kim, Young Ran (Christine), Considering 'Citizenship Taxation': In Defense of FATCA (May 22, 2017). 20 Florida Tax Review 335 (2017); University of Utah College of Law Research Paper No. 215. Available at SSRN: https://ssrn.com/abstract=2972248

Young Ran Kim (Contact Author)

University of Utah, S.J. Quinney College of Law ( email )

383 S. University Street
Salt Lake City, UT 84112-0730
United States

New York University School of Law ( email )

22 Washiangton Square North
New York, NY 10011
United States

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