The Wall Street Journal Quotes Mark Matthews: Why Does Uncle Sam Hate American Expats?

Caplin & Drysdale's Mark E. Matthews  was quoted in The Wall Street Journal regarding complex reporting requirements for Americans living abroad. For the complete article, please visit The Wall Street Journal's website (subscription required).

Excerpt taken from the article.

The U.S. is the only developed country in the world that requires citizens who live abroad to file tax returns. This is so complicated that it is virtually impossible to do without an accountant, and that can cost more than $1,000 a year, even for very simple tax returns.

But that's only the beginning. There are additional reporting requirements for Americans who live abroad. The FBAR (Foreign Bank Account Report) requires holders of foreign financial accounts to report detailed information about all such accounts each year. It can take many days to obtain and compile the information and then prepare the form.

The Foreign Account Tax Compliance Act of 2010 made matters worse. FATCA compliance costs for foreign banks are so high that many banks have closed the accounts of Americans living abroad. Joining the ranks of the "unbanked" is becoming the straw that breaks the camel's back. The Economist has reported that approximately 3,000 expats gave up their U.S. citizenship or green cards in 2013; prior to FATCA it was only a few hundred a year. A recent survey by the deVere Group suggests that a large majority may have done so because of the law.

Why this regulatory paper chase? The U.S. government wants to collect taxes from the undeclared income of Americans living abroad. But the average American living abroad in developed countries pays more in taxes to the country of residence than he or she would pay in the U.S. Since the U.S. gives tax credits for taxes expatriates pay abroad, overseas Americans typically do not owe any taxes to the U.S. government. Mark Matthews, a former deputy commissioner of the IRS, noted in the Economist that compared with other forms of tax evasion, the amount of additional tax revenue generated by FATCA is very small.