From: Biniam Tekle (biniamt@dehai.org)
Date: Sat Apr 17 2010 - 19:07:41 EDT
"But expatriation for tax avoidance is not simple. The United States imposes
taxes on your worldwide income. There is only one other country in the world
that does that: the shining city on a hill in the Horn of Africa, Eritrea.
All other countries tax a person only on his or her income generated within
the jurisdiction.
A taxpayer in a high-tax country — other than the United States and Eritrea
— who seeks relief from taxation need only relocate. That fact has a
moderating influence on the taxation of most countries. The United States
does not suffer that restraint.
But that’s not all. If an American seeks to leave the U.S. in an effort to
control the amount of taxes paid, he or she is faced with a number of
obstacles"
http://www.azbiz.com/articles/2010/04/16/opinion/columnists/lionel_waxman/doc4bc889c0ef01d984790726.txt
We
are living in 'interesting times' for those wanting to hold on to wealth MY
OPINION: Global taxation?
By Lionel Waxman, Inside Tucson Business
*Published on Friday, April 16th, 2010*
Historically, America has been a country people came to for relief from
oppression and to seek a better life. In fact, it was THE country. But
something happened within the last year or so. The number of people leaving
the United States is increasing.
This shift has not been obvious statistically because the number of
immigrants far exceeded the number of emigrants. But the people entering the
country are typically poor people looking to make good. The people leaving
are more well-off and looking to stay that way.
Today’s expatriots fear the United States government in general and the
Internal Revenue Service in particular. Poor immigrants become a charge on
the economy, at least at first. Wealthy — or comfortable — emigrants take
away with them capital, both human and monetary. Both of these phenomena are
bad for the country
But expatriation for tax avoidance is not simple. The United States imposes
taxes on your worldwide income. There is only one other country in the world
that does that: the shining city on a hill in the Horn of Africa, Eritrea.
All other countries tax a person only on his or her income generated within
the jurisdiction.
A taxpayer in a high-tax country — other than the United States and Eritrea
— who seeks relief from taxation need only relocate. That fact has a
moderating influence on the taxation of most countries. The United States
does not suffer that restraint.
But that’s not all. If an American seeks to leave the U.S. in an effort to
control the amount of taxes paid, he or she is faced with a number of
obstacles.
First, there is the payment of what amounts to an exit tax. It’s based on an
evaluation the individual is required to make of all assets as if you had
died. In order to avoid incurring additional taxes, the American taxpayer
must formally renounce U.S. citizenship. The requirement to continue to
report and pay taxes for 10 years, as if you had not left, is then
eliminated. After doing all that, John Q. Taxpayer is done with the IRS.
Many readers of this travail may say, “Good riddance. He doesn’t want to pay
his taxes, so to blazes with him.” And if that remains only a trickle of
Americans retiring to more economically hospitable climes, it probably
wouldn’t make any difference.
But there is the probability that as taxation becomes more intrusive and
oppressive, the more obnoxious the IRS becomes, the more capital will flee
the country.
In a previous column, I examined the probability of medical centers opening
along the border in Mexico to avoid the strictures of Obamacare. Right now,
though, they are busy having a war in Mexico. With Obamacare hanging over
the supply of medical services, it could be only a matter of time before the
war is ended and Mexico becomes a tax haven for Americans. Those doctors and
support personnel will be Americans who move near the facility and
increasingly center more of their lives and economic activity in Mexico.
In fact, the more oppressive the American system of taxation becomes, the
more Americans will take their business and capital across the border. Right
now, the number of Americans expatriating themselves is a trickle. If the
top income tax rate hits 91 percent, as some have speculated it eventually
will, that trickle could become not a flood, surely, but a strong current.
Nevertheless, the federal government is not asleep when it comes to raising
revenue. It has charged the IRS with investigating the chances of promoting
“global taxation.” There is hardly a country in the world that isn’t in
financial trouble and in need of additional revenue. I don’t know what
global taxation will look like, but it won’t be attractive.
Probably it will attempt to close the “loopholes” by which people escape
taxation either by using various trusts and similar arrangements, or
jockeying back and forth from one country to another. Global taxation will
probably attempt to end the power of each country to lower its taxes. Each
will probably have to adhere to the same tax rates.
This would be a problem for small countries that use their low or
non-existent taxes as an attraction for rich residents. Mexico, in the
example cited above, would want its taxation of doctors lower than the
American rate to attract them into their economy. If global taxation is
achieved, Mexico will not have that privilege.
The Chinese have an expression they reserve for their adversaries: “May you
live in interesting times.” Clearly these are interesting times and unless
major changes are made in government, they promise to get even more
interesting.
*Contact Lionel Waxman at **territorial@waxmanmedia*<territorial@waxmanmedia>
* or visit his website: **www.newflashpoint.com*<http://www.newflashpoint.com/>
*. *
Copyright © 2010 Inside Tucson Business
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