The IRS is LOSING Money via Expat-Taxation?

A: Where the cost of taxation likely exceeds tax collected–as in its extra-territorial Citizenship Based Taxation. Q: How could the IRS lose money through taxation? It could be shown that US extra-territorial taxation of US citizens and US persons actually loses money at the IRS. America needs a method to see if it is actually losing money by its taxation of its expatriates (Citizenship Based Taxation (CBT) or Personhood-Based Taxation). The U.S., in contrast to the rest of the world, determines who is taxed by virtue of citizenship and personhood rather than by virtue of the location of residence. There is little justification for America’s extra-territorial CBT taxation other than the fact that it indeed does have extraterritorial taxation. For example, citizen rights are not supposed to be dependent upon payment of taxes. Neither is it shown that non-residents of US receive any benefit from their taxes,—in fact the opposite has been shown. What remains to be shown is that the IRS actually does not have a net loss by taxing non-resident citizens and US persons. US taxation of its non-residence is implemented via an archaic 1860’s taxation law which was first imposed to punish those who left US in order to evade the civil war draft. The civil war ended, but the punishment of taxation for having leaving it remained (and was actually expanded!). The tax which was meant for deserters has been transferred to expatriates and emigrants from America. This was cemented via dual-taxation treaties with most of the world. US extra-territorial taxation of its citizens is basically implemented by taxing-up its citizens to the higher rate of the country where its citizens live or the US. This is done in each taxation category which is important according to the US model: taxation of active income (salaries) and passive income (interest and dividends). There is also an extensive array of IRS forms and filing requirements which are simply used to keep track of its citizens activities who are living in other legal jurisdictions. However, in the CBT method, the IRS takes in loads of completed forms which have no value or little value. the IRS gains no revenue from 82% of the non-resident US citizens (those who live in high-tax jurisdictions). In the remaining returns, most of the income tax is (fairly) relieved by credits for income tax paid to foreign governments. The IRS can only (unfairly) tax US citizens who live in areas where there is little income tax yet high corporate tax or high sales taxes. There are many methods available to analyze how much revenue the IRS can gain from extra-territorial taxation. American Citizens Abroad (ACA) has estimated this to be only about $6 billion per year– enough to run the US government for about7 hours. The cost for the IRS to implement the extraterritorial taxation is far greater than the implementation of the taxation of residents. While each homeland US citizen files a 1040 form, every non-resident must also file a form to get credit for taxes he’s paid to the country where he lives, a form to exclude income which is not taxable from US, and form to prove that he shouldn’t pay for not having purchased the Obamacare that he couldn’t use anyways. There are also endless mounds of papers for reporting an individual’s business activities which NEVER generate IRS revenue. There are at least 50 forms which are required to be considered for filing by a US person not resident in US. The IRS doesn’t care about how much time citizens waste to fill out these forms, but the IRS should have considered how much time it wastes processing all of these forms. 82% of all these forms yield no taxation–however they require processing of up to 3 times. more tax forms! And the other 18% yield only a smaller amount of revenue. However, processing each tax form at the IRS requires oodles of salaried IRS workers and rented and owned office space. The amount of work in the IRS could actually cost more than the amount of money collected via taxation. The unfair revenue that is gained from US extra-territorial taxation comes from any differences in tax philosophies between countries. For example, countries such as the United Arab Emirates fund their government primarily from high corporate taxation. For this, they are able to eliminate individual taxation. Therefore, a US citizen living and receiving government services from UAE could then be taxed by USA. This can’t be called fair but it IS called IRS tax revenue. For a US citizen living in a country with no tax treaty with US, the potential to use tax credits and income exclusions can be taken away. If a citizen lives in such a country, that citizen can be exposed to dual taxation from both where he lives and US. There are also additional loads of complicated tax forms and reporting, which are time-consuming and complex. Here, the potential exists to make errors which are answered with penalties by the IRS. These penalties would have been made possible had not the forms been made for extra-territorial taxation and had they not been un-understandable. It’s quite likely that the cost of extra-territorial taxation is higher than the revenue taken in by the IRS. It is quite certain that the cost of extra-territorial taxation is higher than the fair revenue taken in. With proper access to the base data, these factors could be analyzed. Today, this analysis is impossible with the current administration’s love of the compliance industry and love of the government workforce—both of which overpower any concerns for citizens of the country. If the leadership of the Executive Branch was more interested to support US citizens than in supporting the compliance industry and the IRS workforce, a proper analysis of the amount of money lost by extra-territorial taxation could be made. Meanwhile, the US has assigned the IRS to go blindly forwards with its unconstitutional and kidnapping-of-American-inducing FATCA system of locating more US persons in Mexico and Canada and Sweden and Yemen and Ukraine and China. We are waiting for the day when the Government Accounting Office GAO is allowed to show that taxation of non-resident US citizens and US persons is a big loser even to the government itself. Until that day, the US will have to live with the IRS draining the assets of US citizens.