For the past few weeks there has been increasing speculation about the contents of a rumoured Residence Based Taxation proposal from Congressman George Holding’s office. Democrats Abroad reported that they had seen the proposal. Then Republicans Overseas were also on board. And, over on the American Expatriates Facebook Group, Keith Redmond reported on a meeting held at the offices of Americans for Tax Reform to discuss the proposal. It has been great to see such broad-based support for this much-needed reform. Continue reading “Residence Based Taxation Proposal”
The Transition Tax could be the final straw for business owners among the American diaspora.
It’s easy. Just cut and paste from one of these two letter writing campaigns:
- The original letter, initiated in Israel by Monte Silver (http://www.americansabroadfortaxfairness.org/) which has been endorsed by Republicans Overseas
- Or the version promoted by Democrats Abroad.
The letter asks the IRS to exempt nonresident individuals from the application of the transition tax and GILTI. It’s great to see bipartisan support for this effort! Continue reading “Fighting the Transition Tax”
In January, John Richardson and I recorded a conversation about the “Transition” tax that was part of US tax reform. John’s post introducing the videos is here: U.S. Tax Reform and the “nonresident” corporation owner: Does the Sec. 965 transition tax apply?
The transition tax is the provision in the tax reform bill that concerned us so much when it was introduced that we posted a Call to Action! In short, when applied to an Australian-resident US taxpayer, the transition tax asserts the right of the US to reach inside an Australian corporation and tax previously earned active business income just because a majority of the company is owned by “US Shareholders”. This is a major departure from prior law, and calendar-year taxpayers were given not much more than a week from the date the law was signed to the end of the tax year in which this new tax would be applied – certainly not enough time to understand the new law, let alone plan to avoid the inherent double taxation. Furthermore, in all of the hearings on the bill, not one Representative or Senator mentioned anything about the applicability of this provision to corporations owned by tax-residents of other countries, for whom the idea of “repatriating” profits to the U.S. is not only absurd, but also a drain on the economy of the country they call home.
While the 2014 FATCA information transfer to the IRS was widely reported, since then we have had no idea how much data has been flowing from the ATO to the IRS. To get a better idea of the scope of the data exchange, Carl sent an FOI request to the ATO for a summary of the data sent to the IRS under FATCA for all three reporting years that have now been completed (2014, 2015, and 2016). The ATO complied with this request in a timely manner, sending us a pdf file of a printout of an excel worksheet that spans several pages both vertically and horizontally. 
FATCA requires Australian financial institutions (very broadly defined) to report account holder details as well as account balance, dividends, interest and other income paid, and gross proceeds from sale or redemption to the ATO for transmittal to the IRS. It is evident from the graphs below that the amount of data going to the IRS has exploded since the initial data transfer of 2014 data (transferred 30 Sept 2015).
Following Karen’s recent Call to Action! post, we are starting to receive positive feedback on our Open Letter – Extra-territorial Reach of US Tax Reform Legislation from our elected representatives here in Australia. This campaign is well aligned with the core purpose of our group being advocating for the Australian Government to renegotiate the under-pinning legacy tax treaties and intergovernmental agreements to provide a fair go for all Australians.
The Open Letter seeks to draw the Australian Government’s attention to an emerging harmful consequence of US extra-territorial taxation as part of US tax reform but it also serves as an opportunity for you to open a dialogue with your elected representatives about the pressing need for Australia to address the many deficiencies in the current Tax Treaty that disadvantage Australians with US ties.
We’ll share some of the positive feedback we received, but first, we want to again remind all of our members to please write your MP / Senators about this issue. Presently, our follow-up survey suggests that only seven MPs have been contacted to-date, suggesting that only a small fraction of our membership have taken action. Most Senators from NSW, QLD, SA and VIC have received at least one letter, making a total of 44 Senators who have been contacted. We have yet to hear from anyone in ACT, NT, TAS or WA who has contacted their representatives. Without your active involvement, affecting positive change will be difficult.
We are all disappointed that the Tax Cuts and Jobs Act (HR 1) currently before Congress does not contain relief for non-resident citizens. But it could even make things worse! The current legislative versions of the bill (both House and Senate) are poorly drafted and could be interpreted to harm individual shareholders of “controlled foreign corporations,” including small businesses owned by non-US resident Americans (even though this is clearly not the intent of Congress).
It is time to contact our Australian elected representatives to make them aware of the potential extraterritorial reach of this harmful provision. The Steering Committee of Fix the Tax Treaty! has sent an open letter to Prime Minister Malcolm Turnbull, Treasurer Scott Morrison, and Foreign Minister Julie Bishop outlining why Australia should be interested in this issue and what Australia can do to mitigate the potential harm.
One of the terrific things about living in a parliamentary democracy like Australia is that there are safeguards in place to facilitate transparency of the Australian Government and public services. One powerful tool is the Freedom of Information Act, or FOI, which provides individuals or organisations with the right of access to documents held by many government agencies. By law, most public authorities have to respond to an FOI request within 30 days. Their response will either contain the information requested, or give a valid legal reason why it must be kept confidential. Note that the government agencies may levy charges for locating and making the information available, based on prescribed rates.
Here at Fix the Tax Treaty!, we’ve often wondered whether the Australian Government adequately considered the impacts on Individuals (vs businesses) when negotiating and entering into the Australia – US tax treaty agreements and the FATCA Intergovernmental Agreement (IGA).
We decided to find out!
Our friends over at the Isaac Brock Society submitted a human rights complaint to the United Nations in 2014. They send an annual update to the UN, and this time they are offering a chance for more affected individuals to add their signatures to the complaint. If you are interested, you’ll need to email the address given in the blog post to get a password to the pdf of the complaint (which can be downloaded from the link here).
It’s been almost three months since Carl posted our revised Strategy Roadmap. In that time, the Steering Committee (Karen Alpert, Carl Greenstreet, and Caroline Day) have been working behind the scenes on creating a package of materials to support organised action. I’ve written a “Talking Points” paper and am working on a more detailed Issues paper. We also plan to boil this down into one or more single-page briefs that can be used to help inform members of Parliament, policy-makers and other key decision-makers and influencers. We have a series of questions that we would like to ask the appropriate government agencies under Freedom of Information and Carl is preparing FOI requests. The bottom line is that we need to have both well-documented evidence and a clear objective before we start any campaign to inform policy-makers.
As we have said before, many hands make light work. There are several areas where we could use some help. Please read through this list and consider what you might be able to help with:
- Steering Committee (see section 2 of the Strategy Roadmap) – we are still looking for two more members to fill the vacant positions (see page 9 of the document)
- Developing and organising our evidence base – We are creating a wiki to organise and index information from this website and others. Even if you don’t feel up to adding original content to the wiki, consider becoming a wiki editor to help populate the wiki with links to other resources.
- Branding – Do you have graphic design skills? If you would like to design a logo for us, let us know via our contact form.
Clearly articulating our group’s vision, objectives and action plans is essential if we are to be effective in achieving our aims. Many of you will recall that the Steering Committee members (Karen Alpert, Caroline Day and myself) have long been working on a Strategy Roadmap document, as previous discussed in a number of blog posts:
A good advocacy plan will help our group decide where to spend time and effort to achieve our goals and assist us to be as effective as possible with our limited resources. The plan will be a key reference document that is periodically updated as we progress towards achieving our goals.
I’m pleased to announce that we have completed a final draft of our Strategy Roadmap. You can view it here.