On 2 November 2020 the Washington Examiner published an article by Michael Rubin entitled “The State Department can and should stop Eritrea’s illegal ‘diaspora tax” in the US.”
This article yet again exposes the hypocrisy of so many in the United States with respect to the country’s taxation of its own diaspora, as well as their ignorance on the subject.
SEAT takes issue with several of the assumptions underlying the article:
- Criticism of Eritrea’s taxation of persons who “now call themselves Americans” without any mention that the United States asserts the right to tax residents of other countries who are also citizens of those countries. The United States taxes people who now call themselves French, Australian, Canadian, British ….
- Condemnation of the broad liberties Eritrea takes in defining who is a citizen and thus is subject to its diaspora tax, “imposing citizenship and its obligations on [persons] who have never set foot in Eritrea and have neither the intention nor the desire to do so,” without any mention that the United States does exactly the same thing to millions of persons living outside the United States.
- Abhorrence of Eritrea’s use of extortion, harassment, and threats against Eritrean emigrants without any mention that the United States uses threats against non-US banks in order to coerce them into harassing Americans living in other countries and threatening them with the closure of their financial accounts. True, US harassment of its diaspora is financial, but in the modern world the ability to access financial services and to save for the future is essential. The constant threat of draconian penalties for even inadvertent errors is ever present, as was recently evidenced when thousands of Americans overseas received penalty notices for $10,000 (and more) for failing to file an informational form that even their professional tax advisers did not know was supposed to be filed. The stress and in many cases trauma that the American diaspora experiences as a result of US taxation and banking policies is very real. The fact that it does not involve direct threats of physical violence does not make the situation more acceptable or excusable as compared to Eritrea. Further, the threat of state violence in the form of criminal penalties such as imprisonment is always present. While this risk for American diaspora is remote, the IRS website and many tax practitioners give the opposite impression, seeking to scare persons living overseas into full US tax compliance with threats of heavy fines and imprisonment.
Yes, the article acknowledges that that United States taxes its own diaspora, and even goes so far as to call such taxation “bad policy.” But in referring to US policies as “double taxation,” and by asserting that any analogy to Eritrea is “simply inaccurate” because “the US negotiates double taxation treaties with various governments,” the author – like many others have also done – exposes his lack of understanding of just what the policies are and what their real effects are on American diaspora. Due to the poorly understood “saving clause“, most tax treaty provisions are unavailable to US citizens. Thus, tax treaties do little to alleviate their burdens: They are required to live subject to two incompatible tax systems, that of the country where they live and that of the United States. Rubin either is unaware of the full import of this, or he does not think it is important enough to merit his protest.
At least, not as much as Eritrea’s policies merit protest.