The U.S. tax war on Expats

The United States Internal Revenue Service is pursuing a damaging war on its citizens living abroad by demanding tax returns from American citizens worldwide irrespective of where they are resident, leading growing numbers of expat Americans to formally renounce their citizenship. Almost 4,000 Americans did exactly this in 2014, the latest being the mayor of London, Boris Johnson, a dual British and American national.

According to Brett Arends in the Wall Street Journal’s Marketwatch, U.S. financial laws that make it nearly impossible for expats to keep two passports (not that the U.S. has ever encouraged dual citizenship!). According to Arends, the federal government is “ramping up a wide set of bizarre and impossible regulations on all Americans living abroad — and threatening them with the financial equivalent of the death penalty if they don’t comply…they can be arrested, thrown in jail and bankrupted by Uncle Sam for failing to disclose a $15,000 checking account on which (they) have paid all the taxes owed”. In addition, such expats are liable to double taxation, required to spend thousands of dollars a year on professional advice simply to survive, are effectively barred from investing in either U.S. or non-U.S. based mutual funds and stripped of a number of constitutional rights.

At the same time, the Obama administration is allowing millions of illegal, or so-called ‘undocumented’ immigrants, mostly from Mexico, to acquire legal status and to get work permits and benefits normally associated with holders of green cards.

Currency Wars 2015

The year 2015 has introduced the phenomena of currency wars, devaluation, negative interest rates and central government stimulus policies aimed at fighting deflation and creating competitive advantages of one country over the the next through fiscal engineering.

Randall W. Forsyth wrote in Barrons that "not since the 1930s have central banks of countries around the globe so actively, and desperately, tried to stimulate their domestic economies. Confronted by a lack of domestic demand, which has been constrained by a massive debt load taken on during the boom times, they instead have sought to grab a bigger slice of the global economic pie". However, if the world economy is not growing at a sufficiently rate, in other words if the global pie is not expanding, this is a zero-sum game without any winners, except, as analysts at Morgan Stanley argue, that the early movers in currency wars are the biggest beneficiaries at the expense of the late movers.

This beggar thy neighbour policies implemented by central banks of Canada, Switzerland, Denmark, the Euro Zone, Australia, Russia, India, Singapore and Sweden may provide short -term advantages, but it is logical that if all countries engage in this behaviour simultaneously, there can ultimately be no winner. The U.S. implemented the first large-scale stimulus programme with its quantitative-easing and near 0% interest rates. Japan followed next and now it is the turn of the EU. The world's largest economy, China, might be the next huge player to devalue its currency, a truly frightening prospect. The United States is threatening to punish other states with import tariffs if it can be proven that an exporting country is deliberately weakening their currency to make its exports cheaper and the prospects for global trade war is increasing by the day.

Ironically, currency devaluation and the return to the Drachma might be Greece's only salvation and a way to rebalance its economy and boost exports and in this case, it might even be the prudent step to take. As for the rest of participants and prospective currency warriors, this can only end badly.

Is Germany fed-up with Greek intransigence?

The new Greek governing Party, Syriza,  is rapidly moving

into a minefield and down a road of no return. Just when you think could not possibly get worse for Greece, the country propels itself head on to the edge of economic default and total financial ruin, brought onto itself following decades of uncontrolled spending and a ruinous approach to financial governance. Greece is now is making additional strategic blunders by turning against their allies in the European Union and NATO, invoking German war crimes of 70 years ago and demanding 'war' reparations, planning for wholesale debt-write-offs, and threatening the NATO alliance with overtures to Russia.

It will come as little surprise if Germany throw in the towel and let Greece exit from the EU, and in fact, this scenario has probably already been build into German planning. Germany does not need Greece, but the same cannot be said for Greece.

Residency through Investment - some easy options

Among the most popular 'Club Med' countries where one can obtain residency and a EU passport are Cypress. Malta, Greece, Spain and Portugal. You can get Cypriot permanent residence by transferring about €300,000 to a Cyprus Bank on a fixed deposit for three years.

Malta has a Global Residence Program which allows expats the opportunity to buy or rent property in Malta and direct their foreign income to Malta in exchange for residence permit. The minimum investment in property is between €220,000 and €275,000 depending on the region and the minimum tax payable is €15,000 per family, while renters must pay at least €800 monthly.

In Spain, the simplest way is to invest €500,000 in a property and in return, obtain a temporary

 residence which has to be renewed each year. After five years the applicant receives permanent residency and citizenship after another five further years. The Spanish temporary residence permit allows for limited travel throughout Schengen zone for 90 days within a 180 day period, but does not give the recipient the right to work in Spain.

Portugal offers expats the opportunity to become residents through the Golden Residence Permit and it
is available to non-EU investors. Applicants can buy real estate of at least €500,000 or alternatively, make a capital investment of at least €1 million in a Portuguese company or establish a Portuguese company that employs more than ten people. Successful applicants get visa-free access to the Schengen Area, receive permanent residence after five years and Portuguese citizenship one year later.

As part of its efforts to raise income Greece is offering non-EU investors permanent residency similar to the Golden Visa of Spain and Portugal, by way of an investment of €250,000 in a Greek property for five years or if they own a ten-year time-sharing contract. Residence permits may be renewed for a further five years upon expiry if the resident maintains the status quo, but it does not allow employment