Citizenship, Surveillance and Taxes: A Dystopian Tale

Photo by Andrew Neel on Unsplash.

We’re living in a golden age for dystopian fiction, or so the critics say. Our pages and screens are filled with tyrannical governments, tech slavery, and surveillance run amok — dark imaginings of a society where the arm of injustice is inventive and long-reaching.

The genre has plenty of gripping tales to choose from, but allow me to add one more, told from an angle that might not seem so sexy or threatening at first — taxation. Stick with me.

In this story, you’re an immigrant. Like the increasing number of people in the world who cross borders in pursuit of education, employment, love, family, health, or safety, you leave your country of origin and settle someplace else.

You get a job, and you dutifully pay taxes on your income to your country of residence in exchange for use of common resources like medical care and transportation.

But that’s not enough. As it turns out, you have to pay taxes to your country of origin too, even though you don’t live there. It doesn’t matter if you already pay taxes to your country of residence. It doesn’t matter if none of your income comes from your country of origin. It doesn’t matter how little you make or how long you’ve been away.

Certain exemptions and deductions may reduce what you owe, but if you want to claim them, you must prepare complicated paperwork. If you need help, an accountant costs money.

It doesn’t end there. You’re self-employed in your country of residence, maybe a small business owner or part of the rising population of contractors working in the “gig economy.” And for that, the law says you must also pay self-employment tax to your country of origin.

If you’re lucky, you live in one of the two dozen places with special treaties to prevent this double taxation. But if not, buckle up: For the rest of your self-employed life, you must send 15% of your already taxed earnings to a country where you don’t live in order to fund welfare programs that you aren't allowed to use in full or at all because you don't live there.

And that’s not to mention your country of origin expects a cut on any property, investments, and pension plans you may hold in your country of residence.

You can choose not to file taxes with your country of origin. Plenty of people don’t. But if the government finds out and says you owe more than $50,000 in taxes, penalties and interest, they have the power to revoke your passport — without a hearing or conviction.

And the government likes to huff and puff that they have ways of finding out.

On their insistence, the rest of the world collects your financial data in bulk without guarantee of secure handling or storage and reports it to your country of origin. Some banks require you to fill out special forms to continue as a customer, while others simply bar you completely from their services because dealing with your citizenship isn’t worth the hassle.

As a result, bank accounts are closed, mortgages are canceled, employment opportunities are lost, and retirement planning is a pipe dream. It becomes increasingly difficult for you and the rest of the diaspora to lead a normal life.

How to remedy the situation? You can abandon the roots you’ve put down and move to the country of your citizenship … or abandon your citizenship altogether. Caught between a rock and a hard place, an ever-growing list of your compatriots make the painful decision to renounce.

This trend doesn’t go unnoticed, however, and in response the government raises the fee to renounce by 422%, making it the highest cost of its kind in the world and likely out of reach for a person of modest means.

Regardless, the renunciations continue. One government policy architect callously argues before lawmakers that those ex-citizens are no great loss: There are more people naturalizing who are “willing to pay” taxes anyway.

As a scattered minority, you and your compatriots are largely ignored by politicians in your country of origin. In recent elections, one of the major political parties does vow to fix taxation for expatriates like you. Once in power, however, they pass a reform package that changes the rules for corporations, not for people, and makes it even more difficult for small-to-medium-sized business owners to stay open.

At least, for all your efforts, in the event of war or catastrophe, your country of origin will ferry you to safety … right? Sure, but only after you promise that you’ll reimburse the government for the costs of your own evacuation — and in turn, the government will promise to hold your passport hostage until you make arrangements to pay.

So you’re stuck, double taxed in the worst of cases and paying a precious penny for an accountant to prove that you shouldn’t be double taxed in the best. Your privacy is violated as you’re forced to give up your personal data — no suspicion of wrongdoing necessary. Your financial security is compromised as your citizenship transforms you into an unprofitable pariah.

Your business and romantic partnerships are hobbled, because association with you could bring loved ones and colleagues under the scrutiny of a powerful foreign government. And your plans for children give you pause because your citizenship — and tax burden — will be passed on to them, even if they never once set foot in your country of origin.

All because of chance. You can’t choose where you’re born or who your parents are, and you just so happened to be born to a country that keeps a tight grip on its citizens and casts a long, domineering shadow across the world.

How’s that for dystopian fiction? It’s a disturbing tale, one that touches on concerns over privacy, fair treatment and freedom of movement that are particularly relevant in this day and age. And there’s more. Ready for the plot twist?

It’s all true. At least if you’re one of the estimated 9 million Americans, like myself, who live outside the borders of the US.

The US is one of only two countries in the world that practices a system of taxation based not on residency, but citizenship. The other is the oppressive dictatorship of Eritrea, which the US itself has criticized for the “extortion, threats of violence, fraud and other illicit means” that the country uses to collect taxes from its diaspora.

And in the last several years, the US has made the situation even worse with the implementation of the Foreign Account Tax Compliance Act. Under FATCA, as it’s called for short, authorities vacuum up the financial data of US citizens and “US persons” (such as Green Card holders) who have non-US bank accounts, all without a warrant. The tactic isn't dissimilar to what the National Security Agency was revealed to be doing — to great outcry — with Americans’ phone and email records.

They accomplish this bulk collection with a threat: If the world’s financial institutions don’t hand over the details of their customers with US citizenship, the US will impose a 30% withholding fee on their US transactions. In response, a mushrooming number of banks have limited what they offer to US citizens or shut them out altogether from even the most basic checking or savings services, because there’s no benefit in setting up special systems for one small slice of their clientele.

FATCA “starts with the unsubstantiated assumption most taxpayers are bad actors,” explains the ombudsman within the US Internal Revenue Service, known as the Taxpayer Advocate, “and implements a draconian enforcement regime applied to everyone.” You’re a US citizen living in Germany, paying taxes in Germany, and using a local German bank account? Under FATCA, you’re guilty of US tax misdeeds until proven innocent.

So if the current system is taxation dystopia for US citizens overseas, what would utopia look like?

In this story, you’re an immigrant. You leave your country of origin and settle someplace else. You open a bank account and use financial services without discrimination based on your citizenship. Your right to privacy remains intact. You pay taxes to your country of residence, and you aren’t under any obligation to pay even more of your money to the government of a country where you don’t live.

Too bad it’s fiction.


  • Shmilfke

    Elise Bean is the most miserable and moronic woman the US has ever produced – and it’s the same country that prduced Hillary Clinton and Rosie Odonell.

    She should never have been entrusted with the power to turn the thermostat, let alone to control every bank in the world.

    The citizenbased taxation system is absolutely outrageous

  • I’m only familiar with banking and paying taxes in Canada and in Japan, but my experience with Japan has not been so bad. Due to a reciprocal tax treaty, once I achieve residency status in Japan (after 6 months) I no longer need to file Canadian taxes each year. I pay tax in Japan, and that’s that. If I had assets in Canada, well, that’s a grey area. So it’s pretty straightforward. More recently, as a resident of Canada I have been doing some freelancing for Japanese clients, and Japan takes a 10% cut, even if I pay tax on the income in Canada. So I don’t like that.

    Interestingly, Canadian banks are sometimes compelled to hand over private banking information about Canadian citizens to the IRS.

  • CB

    This situation is even worse than depicted in the article, because it also affects accidental Americans, who left the US as babies. They have never lived in the US and many of them don’t even speak English, and yet they are subject to all of this and more, e.g. having to apply for a SSN, making the period of unbankability and the process of renunciation even longer and more expensive.

    Anyone who wants to help can sign Today (13 March) is the last day for this petition.

  • Kev

    Imagine that you are a young member of the active population. You don’t possess much yet, but you are full of potential to make a good life for yourself and your loved ones. One day, you need a bank account. But wherever you ask, you are sent back home with nothing.

    You are confused, they tell you it’s about your place of birth on your ID…

    You don’t understand what’s happening; you never had any problem until now. You have lived all your life in Europe. Your parents are Belgians, you are Belgian, you speak French and couldn’t tell much about the US except for all the movies coming from over there.
    At that point your life is stuck, so you investigate and discover a different reality, the dystopian world described above.

    With all negative emotions crossing your mind, you still don’t get it.
    After all, you are not really American. You haven’t lived, studied or worked in the US. You only know a few words of English and your French accent is just ridiculous.

    That’s when you discover that in this dystopian world, you got yourself a special place.
    You are not an American overseas, like the other 9 millions. You never had any relationship or communication with the US administration. You don’t have any US paper except your birth certificate.

    Your parents happened to enjoy themselves in the US and so, there you were born…

    You came back to Belgium while still a baby. Obviously, you don’t agree with your life being destroyed by a foreign authority in your own country. After all, borders are supposed to do just that. You grew up, studied and became an active member of Belgium’s culture. With that in mind, you contact your country’s authorities to get help. Full of hope, you imagine the upcoming conversations with smiling and compassionate compatriots who will do everything to help you.

    How naive you were…

    All your conversations start with the other person stating your problems are not possible. US citizen-based taxation and its consequences, is a concept that does not fit in the mind of a normal person outside of the US. And so, you have to do your best to convince them of that reality that you just learnt yourself.

    After you manage to alter the perspective of the person in front of you, comes the first slap in your face: they will tell you that the problem is not theirs to fix, and thus you are on your own. At that point the dystopian world merges with the kafkaesque. The next thought is that of a lost soul with no nation.

    Then comes the second blow, from an underpaid official, a minister or an ambassador, they all tell you this simple truth: that because it’s the US, they won’t do anything. Still dizzy from before, you remember imagining the smiling compassionate compatriot, and here you are, that very instant with them smiling at you, except it’s not of compassion but of inconvenience and their eyes tell you that the sooner you leave, the better their life will be.

    And so you go back home…

    The time passes. You discover you are not alone in that situation. You meet groups of people suffering to a lesser or greater extent of the US citizenship based taxation. Just speaking about it and sharing your feelings among them makes you feel better and here and there, there are people trying to change the situation. Thanks for that.

    But you are changed forever. You have realised that your country does not protect its citizens. You look at its flag and you see a symbol of hypocrisy. You look at the US flag and you see a symbol of pain.

    In this dystopian world, there is no place for you. Nor in the US, nor in your homeland.
    Your country is just a US dog, and you are worth less than a flea on its back.

  • GC

    Everything in the article applies to those with green cards, aka “resident aliens” too. They are deemed US citizens for taxation purposes, except:
    – no right to vote,
    – no automatic right to re-enter the country if you leave, even temporarily (and if you are absent for more than a year, you will be denied re-entry);
    – subject to outright deportation for increasingly minor offenses. Even after deportation, you remain liable for US taxes.

    “Simple solution: hand in your green card!” I hear you say. Not so simple if you have lived in the US for an arbitrary 8 years, after which you become subject to the same Expatriation Tax regime that applies to citizens (exit taxes & potential “covered expat” status that subjects any US citizen or resident future heirs to an additional 40% outright tax on anything they inherit from you – that is in addition to whatever exit tax you paid PLUS it would include thew 40% tax on any increase in your wealth after you gave up the green card). Egregious for citizens, but doubly so for those who have never been citizens. The imposition of the 8 year rule was retroactively imposed on those who had already been “US persons” for more than 8 years at the time.

    US personhood has become akin to wearing a yellow star internationally, especially when dealing with any financial institution.

  • Samer Tallauze

    American citizens living abroad. The Wall Street Journal reported in July 2014 that “FATCA worsens the already profoundly unjust tax treatment of millions of middle-class Americans living abroad…FATCA rules were intended to correct a tax loophole. Applied to Americans living abroad, they are absurd.”The Guardian reports that Americans living abroad feel financially terrorized by FATCA requirements. In 2013, Robert Stack stated the IRS position that “FATCA withholding applies to the U.S. investments of FFIs whether or not they have U.S. account holders, so turning away known U.S. account holders will not enable an FFI to avoid FATCA.”

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