Extraterritorial Taxation #13: Other Countries Have a Duty to Act

Abstract

This is the thirteenth in a series of sixteen papers about the U.S extraterritorial tax system.

The leaders of some countries are finally understanding that FATCA has devasting effects. Unfortunately, to date few, if any, leaders of other countries have looked beyond FATCA to understand the problems posed to their countries not just by FATCA, but by the U.S. extraterritorial tax system as a whole. If they did look, they would understand that “mere” taxation is only a small part of what the U.S. extraterritorial tax system is about. The system’s problems are considerably larger and more consequential: it violates both the sovereignty of other countries and the human rights of their populations. Because of this, the leaders of other countries have a duty to act.

The hegemonic power of the United States does not excuse the leaders of other countries from this duty; on the contrary, given the formidable obstacles that persons holding U.S. citizenship face in seeking on their own to have the system changed, it is even more important that they are supported by the countries where they live (and where many are also citizens).

While there are many actions that other countries can take, one with the most potential for impact is the re-negotiation of tax treaties with the United States to eliminate the saving clause; this would enable everyone to be a tax resident of just one country – the country where they live and work.

This paper concludes with first-hand testimony from residents (many dual citizens) of 33 countries.

Keywords: Extraterritorial Taxation, Discrimination, Human Rights, Sovereignty, Tax Treaties, Hegemony, FATCA

JEL Classification: H13, D63, E51, E62, F22, F53, F54, G28, H24, H26, H30, J61, J68, K33, K34, K37