Expat Banking and Finance


London mayor’s US tax stance highlights drawbacks of FACTA regime for expats

by Ray Clancy on December 1, 2014

The refusal by the Mayor of London to pay his American taxes has been hailed as a brave stance that highlights the drawbacks of the recently introduced Foreign Account Tax Compliance Act.

Mayor Boris Johnson has a US passport as well as a British one, as he was born in the United States. As such, he has received a US tax demand on the sale of his UK home.

us expat taxes

The FACTA system taxes expat Americans, no matter where in the world they live

According to Nigel Green, chief executive of international independent financial advisory firm de Vere Group, expats and those with two passports, as in the case of Johnson, need to be aware of the new FACTA rules.

Johnson has talked in the past of giving up his US passport as he has not lived in the country since the age of five. He was born in New York when his father was working in the United States. He has stated that the US can tax what he called ‘accidental Americans’ on their global income.

‘I welcome the Mayor of London joining the growing army of voices on this issue. Boris Johnson’s noble and brave stance against this fatally flawed, imperialistic and economically dangerous law means he is legally in the wrong, yet morally he is right,’ said Green.

‘I wouldn’t advocate that individuals do not comply with FATCA. Instead they should explore all the available options to mitigate its adverse effects. I do hope the Mayor’s apparent FATCA crusade will serve as a call to arms to other high profile personalities to publicly express their opposition to this highly polemical new law,’ he added.

He pointed out that there are many reasons to oppose FATCA. ‘FATCA brands Americans and accidental Americans who choose to live and/or work overseas, as financial pariahs. US expats are now routinely rejected from foreign financial institutions (FFIs), such as banks in their country of residence, because FATCA’s extensive and costly rules mean Americans are now usually perceived as more trouble than they are worth,’ explained Green.

‘Similarly, American firms operating in global markets are now also often hit with a leprosy-like status. Clearly, this can only be detrimental to their global competiveness and could, in turn, hit American jobs and the long term growth of the US economy,’ he pointed out.

‘In addition, questions should be asked, too, about the imperialistic traits of FATCA. Governments and foreign financial institutions have been coerced into complying with FATCA’s costly, lengthy, privacy infringing, sovereignty violating regulations by the US or have to face heavy penalties and be, in effect, frozen out of US markets,’ he added.

He believes that the citizen-based US tax system, which taxes citizens no matter where they live and work in the world is ‘draconian and utterly inappropriate’ for today’s increasingly globalised world.

He added that almost every other national government in the world, with the exception of the tiny African state of Eritrea, adopts a residence-based tax regime.

‘The US should align itself with the other major nations and put an end to the harsh double taxation imposed on US citizens and business owners overseas, who include millions of middle class Americans and not just the super wealthy, as is so often reported in the media,’ Green added.

He also pointed out that the number of Americans renouncing their citizenship, according to the US Treasury Department, rose by 220% in 2013 and many experts say this is a direct result of FATCA’s serious and unintended consequences.

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