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to how this new tax on gifts or inheritances will work. The IRS has deferred the reporting and tax obligations with respect to this tax pending the issuance of guidance. The IRS has also stated that it will provide a reasonable period of time between the issuance of such guidance and the date it prescribes for filing the required reports and paying the tax.

      The new law does not contain any immigration penalty. It is not a ground for denying you a visa or entry into the US. The 1996 Reed Amendment remains in effect but it has never been applied to bar any former US citizen who had expatriated from visiting the US.

      You may still be subject to US Foreign Bank Account Reporting (FBAR) requirements even after you expatriate since these rules may apply to some non-Americans. The FBAR definitions and rules are different from the tax rules.

      One of the unintended consequences of these rules is that some foreigners who might normally consider moving to the US to take long-term employment or start a business are having second thoughts and may decide to move elsewhere instead. A well-advised wealthy foreigner who does move to the US may now be advised to avoid trying to obtain a green card or becoming a US citizen and, if possible, to live in a tax-friendly state with a non-immigrant visa such as those available to a treaty investor or treaty trader.

      Seven US states do not impose any state or local income taxes; they are Alaska, Florida, Nevada, South Dakota, Texas, Washington (the state, not DC), and Wyoming. The other 43 US states and many of their local governments do impose income taxes on top of those imposed by the federal government. The extra income taxes in at least 10 of these states can now exceed 10% and those imposed on residents of New York City can be as high as about 13%. Many states apply these high tax rates to both ordinary income and capital gains. About half of the states do not impose any extra death tax on top of the federal estate tax; the other half do.

      Prior versions of US anti-expatriation legislation have been unsuccessful in raising meaningful amounts of revenue. The revenue estimates for this legislation are probably grossly overstated. Why then does the US Congress waste so much time and effort trying to pass these types of rules? The real aim of the exercise is apparently not to collect taxes from those who expatriate but to discourage you and others from leaving. Like most governments, the US wants to retain its best-paying ‘customers’.

When a US exit tax was first proposed by President Clinton in 1995, the US Treasury Department issued a press release stating that the Clinton Administration aimed at “stopping US multimillionaires from escaping taxes by abandoning their citizenship.”⁴⁵ It added that a few dozen of the 850 people who had relinquished their citizenship the previous year did so to avoid paying tax on the appreciation in value that their assets accumulated while they ‘enjoyed the benefits of US citizenship’.⁴⁶

      Later that year, the staff of Congress’ Joint Committee on Taxation issued a report that ran several hundred pages including eight lengthy appendices. I may be the only person outside of government that read the whole thing. I was fascinated by the following language excerpted from a lengthy letter near the end of Appendix G from Leslie B. Samuels, then Treasury’s Assistant Secretary for Tax Policy, to Kenneth J. Kies, who was then Chief of Staff for Congress’ Joint Committee on Taxation:

       “A substantial revenue loss can occur if only one extremely wealthy taxpayer expatriates each year. Assume for purposes of illustration that: (i) absent the proposal a 70-year-old US citizen would expatriate, (ii) the taxpayer has been paying USD 40 million per year in income taxes, (iii) the taxpayer has assets worth USD 4 billion (USD 3 billion of which is accrued capital gains), and (iv) the taxpayer plans to leave half of his estate to charity. The revenue effect of this taxpayer staying in the United States for one additional year is approximately USD 73 million – USD 40 million in income taxes plus USD 33 million in estate taxes (USD 4 billion estate less USD 2 billion given to charity multiplied by the 55% estate tax rate multiplied by the probability that he will die next year (about 3%)). If the proposal were to cause one additional individual who would otherwise have expatriated (or several individuals who cumulatively generate a similar amount of revenue) to remain in the United States each year, the six-year revenue effect for the total of six individuals affected during the six-year period would be USD 1.5 billion (USD 73 million in year one, USD 146 million in year two, USD 219 million in year three, USD 292 million in year four, USD 365 million in year five, USD 438 million in year six). Note that if the taxpayers in this illustration were to expatriate and pay the tax on expatriation, the revenue effect over six years would be about USD 5 billion (USD 840 million each year for six years).”

      I wonder how many people realized that some revenue estimates used to support the exit tax legislation were predicated on counting not only expected continued income tax revenues but also an accrued sum each year based on the possibility that you will die that year and your estate will have to pay a high death tax if they can keep you from expatriating.

      It is fairly obvious that the rules concerning expatriation are complex and that anyone considering giving up US citizenship or a green card needs professional assistance. Hopefully, this book will assist you in asking the lawyers and accountants supporting you the right questions.

*Dr. Marshall Langer is Professor Emeritus at Thomas Jefferson School of Law and recognized as the most experienced US tax attorney specialized in expatriation and international taxation

**Prof. Denis Kleinfeld is a noted lawyer, author and teacher. He is an Adjunct Professor at Texas A&M Law School’s new LLM Program and known worldwide as an expert in international taxation, financial services, and expatriation

      45Department of the Treasury, Treasury News, ‘Clinton Offers Plan to Curb Offshore Tax Avoidance’, RR-54 (6 February 1995)

      46Ibid.

       4

       The Identity and Brand of Nations

       By Simon Anholt^*

      Chapter Summary

      Nation Brand encapsulates the idea that the reputations of countries and cities are as important as the reputations of corporate entities. These reputations are critical to the country’s or city’s appeal to tourists, investors, and the media, and form a key role in attracting new residents.

      There are, of course, a range of obvious factors usually considered critical in terms of considering where to live, such as infrastructure, political stability, fiscal policy, transport links, government incentives and climate. Other factors however, related to the brand or image of the destination, may play as important a part in decision making. Every individual will be influenced by the reputation of the city or country and its level of prestige.

      The incoming residents also play a part in the development of the reputation of the country. High-profile immigrants and investors bring and share their own brand or reputation, which in turn is altered by the destination – meaning that the identity of a new country is as important as the more tangible factors in choosing a new location to live or invest.

      However, each individual’s image of a destination is, by its very nature, subjective. Reputation is key, but reputations are frequently distorted, usually outdated, and always over-simplified. It is therefore incumbent upon government and administrations to take seriously the value, development and management of the identity of the country, city or region. This does not call for clever marketing campaigns, but rather, solid communication of the ideas, products and policies which define the place.

      The Anholt-GfK Roper Nation Brands Index^SM measures the image and reputation of 50 nations, across six key areas: exports,

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