درباره این اپیزود
October 11, 2024 - Participants include:
Dr. Karen Alpert - @FixTheTaxTreaty
Dr. Laura Snyder - @TAPInternation
John Richardson - @Expatriationlaw
About SEAT:
The purpose of SEAT has been and continues to be to conduct research (including the SEAT survey), prepare position papers, make submissions by SEAT to various governments, facilitate advocacy by individuals impacted, file amicus briefs and provide a centre for educating interested parties about the U.S. extra-territorial tax regime. (SEAT's work may be found on the SEAT website.)
SEAT believes that the problems caused to Americans abroad by the U.S. extraterritorial tax regime can be ended ONLY by severing citizenship from tax residency. We encourage the United States to join the rest of the world by taxing individuals on the basis of residence and source and NOT based on the citizenship of an individual.
This particular podcast is a response to a Tax Notes article discussing the recent Trump proposal to end the double taxation of Americans abroad. The article is found here:
Of particular interest, and the reason for this podcast, is the following excerpt quoting Professor Avi-Yonah:
"Reuven S. Avi-Yonah of the University of Michigan Law School believes concerns over double taxation are exaggerated, noting that in addition to the income exclusion limit and tax credit, many U.S. citizens live in countries that have a tax treaty with the United States, and those treaties often provide “tiebreakers” to ensure there isn’t double income taxation. “Thus, the double taxation argument is spurious,” Avi-Yonah said in an email. “There are many more cases where Americans living overseas enjoy double non-taxation because of sections 911 or 933 than cases of double taxation.”
We disagree both the general sentiment expressed and the claim that the treaty tie-break provision is available to U.S. citizens living outside the United States.
AI Description:
"In this episode, John Richardson from Toronto, Canada, discusses a major proposed development in U.S. taxation policy with Dr. Laura Snyder in Paris and Dr. Karen Alpert in Australia. President Trump's recent announcement to end the double taxation of American citizens abroad has stirred significant interest and controversy. The discussion centers around an article from Tax Notes and the differing perspectives described in the article about this policy shift.
Dr. Snyder and Dr. Alpert, both members of the organization "Seat Stop Extraterritorial American Taxation Now," delve into the complexities and implications of the U.S. tax system for Americans living overseas. They critique the views of Professor Ruven Avi-Yonah, who argues that concerns over double taxation are exaggerated and often mitigated by the "treaty tie break" provision tax treaties.
The conversation highlights the challenges faced by expatriates, including definitional and timing issues in tax codes, which can lead to double taxation despite the existence of tax treaties. The episode calls for more inclusive dialogue involving experts with firsthand experience of these tax challenges, advocating for a reevaluation of the U.S. citizenship-based taxation system."
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Good morning. This is John Richardson speaking with you from Toronto,
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Canada. Today, Friday, October the 11th, 2024.
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And this has been a really, really interesting week.
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President Trump announced his support for a policy of ending the double taxation
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of American citizens abroad.
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This has generated a lot of interest, in some cases, a lot of controversy,
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all kinds of blog posts, statements from organizations.
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And as we might expect, Tax Notes has jumped in with an article about this as well.
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And that's in part what we'd like to talk to you about today. I'm joined by Dr.
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Laura Snyder in Paris, France, and Dr.
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Karen Alpert in Australia. And
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we are all members of Seat Stop Extraterritorial American Taxation Now.
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Let me begin with Laura. Laura, tell me about
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this article that appeared today well it's
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called trump vows to end double taxation of
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overseas citizens by alexander refot not
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sure how to pronounce his last name it's a pretty short article it makes reference
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to a video released yesterday where trump basically is quoted as saying once
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and for all i'm going to end double taxation on our overseas citizens you've
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been wanting this for years and no one has been listening to you.
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The article then very briefly explains the situation, has some quotes from some
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people who are supportive of Trump's position.
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And then at the end of the article, you've got a quote from Professor Ruben
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Aviona at the University of Michigan Law School, who has been a long,
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well, initially he was actually one of the first people to publish an article
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describing the problems with the current system of how overseas Americans are taxed.
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But he's done a complete 180 on that.
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And his most recent publications, he's quite supportive of the current system.
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And he's quoted in this article. He says that,
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well, he's described as believing that concerns over double taxation are exaggerated
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and makes reference to the income exclusion limit and tax credits,
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and that many citizens live in countries that have a tax treaty with the U.S.,
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and that those treaties often provide tiebreakers to ensure there isn't double income taxation.
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He said the double taxation argument is spurious. That's the word he uses.
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There are many more cases where Americans living overseas enjoy double non-taxation
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because of sections 9-1-1 or 9-3-3 than cases of double taxation.
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So that's what we've got here.
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What does the word spurious mean?
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Well, I haven't looked it up lately, but I basically think it means not.
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It's wrong, basically. Yeah, roughly irrelevant. Okay, yeah.
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Okay, something like that.
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So in other words, Professor Avion, number one, he supports the principle of
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citizenship taxation, which means by definition that he supports the principle
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of the United States imposing worldwide taxation on people,
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one, who do not live in the United States, and two with respect to income not
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sourced in the United States. So to be clear, that's his position, correct?
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Yep. Okay. All right. Now that's interesting because, I mean,
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that makes it sound an awful lot more graphic, you know, than just somehow he
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supports citizenship taxation.
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Okay. So you're making two points here, right?
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The first is he's saying, I think he's saying,
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well, there really isn't double taxation too much or something like that,
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right and the second thing he's basically
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saying this is not really a problem that's how i'm understanding it
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i see so towards his view he says the problems are
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exaggerated okay so so it's not a problem uh for the united states to be imposing
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its tax code on people who actually live in other countries on income they earn
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in those other countries have i got this right is this what this guy is saying
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yes um but he in another article i don't have it in front of me but In another article,
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he goes even further, and he says if you did change it,
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it would cause a problem in the United States with social cohesion,
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which he's written about in his own articles also.
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Well, I have a lot of opinions on what we're talking about. We'll get to that, I guess.
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Okay. All right. so then he
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makes the argument he says that in any case leaving aside
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all that sort of stuff you know the
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united states has tax treaties with a number of countries and these tax treaties
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have what's called a treaty tie break so that these american citizens are taxed
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as though they don't live in the united states is that right but the tax treaties
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have two two things that avoid double taxation.
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First, they've got the savings clause, which for anyone who's not a U.S.
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Citizen, allows you to say, hey, look, if country A and country B both want
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to claim you as residents, we're going to figure out who you're closer to,
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and we're going to award you as a resident to that country, and you will not
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be treated as a resident of the other country.
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That's the treaty tie-break provision, not the saving clause,
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the treaty tie-break, right?
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That's the 3D tiebreak. Yeah, that's the 3D tiebreak position. So they've got that.
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And they've also got a... Generally, they've got a more general thing...
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Paragraph that says that the purpose of the treaty is to avoid double taxation,
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whatever that means, and that the two countries will adjudicate when there's double taxation.
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But usually the word tiebreaker is about the residence tiebreak provision,
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not the double taxation provision.
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Absolutely. So what I'm going to do here is I want to actually,
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I think I should pull up the U.S.
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Model tax treaty as an example of these things.
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But the point is that the first thing it does is it says when people are tax
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residents of more than one country.
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So, I mean, what in the world does that mean? Well, you know,
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part of the problem with the U.S.
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Citizenship taxation is it means that a U.S. citizen is always a tax resident
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of the United States, even if they leave the United States. I mean,
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so, you know, his claim that somehow double taxation is spurious is absolutely
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ridiculous because U.S.
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Citizens, by definition, if they leave the United States, are subject to double taxation, okay?
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But when you have somebody who's a tax resident of more than one country,
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say the United States and Canada, Canada and U.S.
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Because you're a U.S. citizen, Canada because you live in Canada.
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Basically, treaties have provisions that say, well, in the case of dual tax residency,
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we're going to have some rules that assign residency to one country or the other.
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So you're not a dual tax resident, right?
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Yeah, right. And then there's a savings cost that says, oops, if you're a U.S.
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Citizen, you can't use any of the rest of the treaty unless it's listed here.
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And it never lists that particular tiebreak.
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Right. That's exactly right. So in other words, the treaty says, you know what?
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All this is well and good, but if we're dealing with a U.S. citizen,
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none of the treaty applies unless it specifically is stated to apply, and U.S.
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Citizens are not, in fact, not allowed to use a treaty tie-break provision to
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not be treated as U.S. citizens, right?
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Right. Okay. Yeah, they're always dual-tax residents.
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Yeah, I mean, that's right. So as per the treaties, right, U.S.
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Citizens are always dual-tax residents if they're a tax resident of the other country as well.
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So then the issue is, is there actually double taxation, even if you're a dual tax resident?
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And I think this whole focus on double taxation is difficult because you've
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got two countries with two completely different tax codes that define income differently.
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Where they define income the same, the treaty will generally allow one country
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or the other to tax and will allow credit.
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A foreign tax credit to the other. But the real problem is where they define things differently.
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And one place where they almost always define things differently is tax-deferred retirement accounts.
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Because every country's tax code has its own separate, unique provisions for
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retirement savings, right?
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Right. And you're in Australia. Maybe you can comment on that issue a little
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bit in the Australian context?
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Well, so Australia's got superannuation, which is a separate retirement account
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that your employer is required to contribute money to, required by Australian
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law. You can't get out of it.
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And under Australian rules, those contributions that your employer make are
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not your income. They go into your superannuation fund and your superannuation
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fund actually pays tax on that as it goes in.
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But the u.s says well it's going into
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so so the australian rules work for
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australia then because you're a
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u.s tax resident as well you have to look at this through
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a u.s tax lens which doesn't recognize superannuation
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as being anything other than an account in your name therefore your wealth is
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increased when the contribution has been made therefore you have income okay
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so that that's a That's an example of a definitional issue that would lead to double taxation.
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Karen, we've talked about this over the years. There are also timing differences.
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Would you care to comment in the context of, say, GILTI or the transition tax?
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Right. There are timing problems when, say, one country decides that you're
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going to recognize a gain that hasn't actually been realized, phantom gains.
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Things like the transition tax that was in tax reform act where they.
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Basically made controlled foreign corporations recognize all of their previously
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deferred income all at once, one lump sum.
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And that was a tax event in the US, but it wasn't a tax event where you live.
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So you've got all this huge capital gain in the US, the transition tax gain,
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or a capital gain when you do an exit tax.
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All these things are capital gains that happen because the U.S.
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Tax code creates a gain on a particular kind of transaction that the foreign
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tax code is not going to have a gain because there's no realization event.
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You'll have something similar in Australia if you gift property,
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because gifting property is a disposition event for capital gains.
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Right. And I don't believe there's a provision in the U.S.-Australian Tax Treaty
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that deals with that situation.
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So in other words, this is real, okay? It's not a figment of somebody's imagination.
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And for people who've been hurt by this, the pain has been considerable.
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The carnage has been considerable.
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So, you know, these claims that, you know, somehow double taxation is not an
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issue or would you agree with me if I were to say they're completely wrong?
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Yeah. Okay. So, you know, back to this whole saving clause thing. I'm going to read you.
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This is, you know, there are different saving clauses, all right,
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you know, in different treaties. But here's the one in Canada.
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And here's what this says. Except as provided in paragraph three,
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nothing in the convention shall be construed as preventing a contracting state
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from taxing its residents as determined under Article IV residence.
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So, in other words, you can use the tiebreak provision to not be a U.S.
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Resident. And in the case of the United States, it's citizens.
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And in the case of the United States, it's citizens. So what this specifically says is that U.S.
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Citizens are not able to use a treaty tie break to not be treated,
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to avoid being treated as a U.S. tax resident, correct?
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Correct. So, I mean, this claim about, and I've seen this before in a recent
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article by him, this claim that, you know, somehow treaty tie break provisions are available to U.S.
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Citizens is, you know, is flat out wrong as a categorical statement, at least, right?
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Right. If that's what he meant by tiebreak. And that's what most people mean
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by when they talk about tiebreak. Well, Laura, can you read the paragraph there?
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Because, you know, this is not the only time I've seen this.
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Can you read the paragraph where he talks about the tiebreak provision?
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Yeah, there's two short ones. Okay.
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Aviuna believes concerns over double taxation are exaggerated,
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noting that in addition to the income exclusion limit and tax credit, many U.S.
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Citizens live in countries that have a tax treaty with the United States,
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and those treaties often provide, quote, tiebreakers, end quote,
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to ensure there isn't double income taxation.
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Then he says, quote, thus the double taxation argument is spurious.
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There are many more cases where Americans living overseas enjoy double non-taxation
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because of sections 9-1-1 or 9-3-3 than cases of double taxation, end quote.
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Well, I mean, there's a lot packed into that, okay, you know,
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obviously, so it's hard to know where to begin.
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But very, very clearly, the part of that that says that the treaty tiebreak
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is being used to avoid double taxation is a completely false statement.
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It's always false with respect to U.S. citizens because the treaty tiebreak doesn't apply, right?
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Right. Yeah. So, I mean, you know, I think this is a problem.
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And we see this, I think, you know, coming out of the, you know,
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the academic world in general.
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The Wall Street Journal ran an article about the Trump announcement.
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It was quoting Professor Kirsch, you know, where he goes back to his talking
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about, well, citizenship taxation is somehow OK because, you know,
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American citizens abroad are somehow part of the American community or something.
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Oh, wait, I made a mistake earlier. I attributed that to Aviona,
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but that's right. It was Kirsch who said that.
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That's right. that particular part of
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it was curse yeah that particular part but but talking
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about the treaty tie break okay yeah
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that's that's i think all abiona i think that i think that this is this sufficiently
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invites obscuring the issue to an extent where i think and i think that a letter
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to the editor ought to be written to tax notes about this what do you think
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well we can get it together.
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I'd like to make a couple comments, John.
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Aviona is held out as an expert on these issues, both by tax notes and by himself.
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The information, what you and Karen have just discussed, there's nothing new.
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The two of you have discussed that on countless podcasts. It's been written
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about in countless articles.
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Aviona seems impervious to this information. It's as if It doesn't exist or
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he doesn't know about it.
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But then how can you be an expert and how can people refer to you and quote
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you as an expert if you are unwilling to take into account what exists out there
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that is contradictory to what you're saying?
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That that's you're not
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an expert in that case and i'd also like to note that the three of us have written
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numerous articles on the problems that overseas americans face with respect
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to taxation many of them have been published in tax notes but we are not consulted
00:16:02.088 --> 00:16:05.528
no one asks us about this type of thing it's as if we don't exist.
00:16:06.765 --> 00:16:10.905
And going back to Aviona, he, it's as if,
00:16:11.605 --> 00:16:14.725
again, he either doesn't know about or doesn't care,
00:16:15.045 --> 00:16:20.605
both are problems, about the many, many, many people who are constantly complaining
00:16:20.605 --> 00:16:26.365
that they do have what you can throw under a very wide, and I agree,
00:16:26.525 --> 00:16:28.465
not a very good term, double taxation.
00:16:28.485 --> 00:16:32.245
But people are always looking for ways to, you know, speak quickly.
00:16:32.825 --> 00:16:36.485
And they're renouncing their citizenship. and he's
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just just doesn't give a damn about them
00:16:39.365 --> 00:16:42.265
it's as if they either are wrong or not
00:16:42.265 --> 00:16:46.505
really experiencing the problems they say they're experiencing or he doesn't
00:16:46.505 --> 00:16:52.165
care he's never lived well he's he clearly doesn't live outside the united states
00:16:52.165 --> 00:16:56.725
now i would question whether he's lived outside the united states for an extended
00:16:56.725 --> 00:16:59.725
period of time to the point where it he has,
00:17:00.285 --> 00:17:03.365
add the opportunity to experience these problems himself.
00:17:04.005 --> 00:17:07.825
And yet he's constantly turned to as an expert on these issues.
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It's clear he knows nothing.
00:17:10.425 --> 00:17:13.725
Well, tell me what you really think about him.
00:17:14.505 --> 00:17:18.065
You know, yeah, I mean, this is a very, very clear problem.
00:17:18.265 --> 00:17:22.665
Somehow, every time I read something that he writes, it was Will Rogers who
00:17:22.665 --> 00:17:25.545
said, it's not what he doesn't know that's the problem.
00:17:25.665 --> 00:17:28.765
It's what he knows that isn't true. Was that a Will Rogers quote?
00:17:29.725 --> 00:17:34.085
Could be. Yeah, but anyway, whoever, you know, wherever the quote came from,
00:17:34.205 --> 00:17:35.965
I mean, this is a big part of the problem.
00:17:36.225 --> 00:17:40.785
And, you know, first of all, I mean, I wouldn't exaggerate.
00:17:40.905 --> 00:17:44.285
I mean, you know, Tax Notes has published our articles, et cetera.
00:17:44.425 --> 00:17:50.405
But I do think that the presumptive deference to him is, you know,
00:17:50.505 --> 00:17:53.005
ridiculous and kind of a bad idea on this.
00:17:53.225 --> 00:17:56.385
I think it's exactly where you say, well, he hasn't lived out of the country.
00:17:56.525 --> 00:18:00.645
That is likely true. But I think, you know, an even bigger problem is that he
00:18:00.645 --> 00:18:02.885
lives, you know, sort of in the academic community.
00:18:03.725 --> 00:18:09.005
I mean, if he were actually doing tax work, you know, at some major law firm
00:18:09.005 --> 00:18:12.245
or something, I mean, he realized that these statements he's making are, you know.
00:18:13.715 --> 00:18:18.095
Maybe. I mean, maybe it certainly put them in a better position to understand it.
00:18:18.875 --> 00:18:23.115
Yeah, sure. But it's interesting to me that, again,
00:18:23.655 --> 00:18:27.235
you know, the problem is not defined in the sense that, again,
00:18:27.375 --> 00:18:30.735
if you really talk about what's going on here, this is the United States trying
00:18:30.735 --> 00:18:34.415
to impose this tax code on people who don't live in the United States on income
00:18:34.415 --> 00:18:36.155
that's unrelated to the United States.
00:18:36.435 --> 00:18:40.315
I mean, that's what we're talking about here, right? We're not talking about
00:18:40.315 --> 00:18:43.515
some abstract concept here, right?
00:18:43.715 --> 00:18:48.875
But anyway so this has been great thanks for this conversation uh karen any
00:18:48.875 --> 00:18:54.395
closing thoughts on this are you supportive of laura's view of uh the state
00:18:54.395 --> 00:18:56.735
of the state of commentary on this issue,
00:18:57.395 --> 00:19:00.475
i i think yeah they need
00:19:00.475 --> 00:19:04.315
to be talking to people who've actually experienced it
00:19:04.315 --> 00:19:10.135
and and they're not because the people in the ivory tower haven't all of the
00:19:10.135 --> 00:19:16.095
people quoted in this article live in the united states yeah well that that
00:19:16.095 --> 00:19:20.135
is interesting that's what you expect it wasn't ruth mason professor ruth mason
00:19:20.135 --> 00:19:24.255
was when she was quoted wasn't she appeared supportive.
00:19:26.295 --> 00:19:29.035
She's supportive of changes she's been critical of
00:19:29.035 --> 00:19:32.795
the current system and she's been supportive of changes she wrote an article
00:19:32.795 --> 00:19:37.375
i can't remember the title i've been a few years now since she wrote that article
00:19:37.375 --> 00:19:42.975
but again she hasn't written in this area for quite some time there are many
00:19:42.975 --> 00:19:48.815
people who are constantly writing about that this including the three of us that are just ignored,
00:19:49.375 --> 00:19:53.835
well actually the three of us yes but i i think laura you're deserving of a
00:19:53.835 --> 00:19:57.575
very special shot here okay for the work you've done for the last few years
00:19:57.575 --> 00:20:01.775
i mean it's by far the best stuff written on this by far there isn't even a
00:20:01.775 --> 00:20:05.475
close second so you know i think that needs to be acknowledged I mean,
00:20:05.555 --> 00:20:07.955
maybe the problem is, Laura, your work is too good.
00:20:08.055 --> 00:20:09.135
I mean, why would you want to
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consult somebody who knows anything about it when it's easier to consult?
00:20:12.895 --> 00:20:16.115
I don't have professor. I don't have professor next to my name.
00:20:16.335 --> 00:20:21.255
Well, I'm going to add it. This is like a wizard, right out of the Wizard of Oz, okay? A line.
00:20:22.595 --> 00:20:27.855
Laura, I designate you from this point on. You are Professor Laura Snyder.
00:20:29.715 --> 00:20:32.795
There you go. Now you're a professor. All right.
00:20:34.115 --> 00:20:38.855
Well that's how Wizard of Oz why not well.
00:20:41.487 --> 00:20:44.767
So on that note professor snyder thank
00:20:44.767 --> 00:20:48.867
you so much for participating in this today karen well
00:20:48.867 --> 00:20:52.307
actually no you really are professor albert no no
00:20:52.307 --> 00:20:58.307
i'm not i was not did not get that high well i'm going to designate you also
00:20:58.307 --> 00:21:05.027
you're you're albert so professors any final comments otherwise thanks very
00:21:05.027 --> 00:21:10.167
much for the commentary and i think that and i think that tax notes needs to
00:21:10.167 --> 00:21:11.707
hear from us on this issue.
00:21:12.167 --> 00:21:14.387
Karen? Thanks, John.
00:21:15.287 --> 00:21:17.747
Yeah, thanks, both of you. Thanks. Okay.