I have been a little disconnected from the news and details concerning Peruvian politics. I know that we are in the middle of a presidential election and, as a Peruvian living abroad since 2001; I decided to begin my quest for information about the candidates and their proposals.
The internet turns out to become the number one source of information, especially for expats like me, therefore, while accessing Peruvian media I had the chance to watch the National TV interview to Mr. Carlos Bruce Montes de Oca, Spokesperson of Candidate Mr. Alejandro Toledo, by Rosa Maria Palacios, journalist and lawyer. http://www.americatv.com.pe/portal/noticias/voto2011/carlos-bruce-pidi-kuczynski-mostrar-renuncia-su-nacionalidad-norteamericana
As a Peruvian next to become a Canadian citizen, I couldn’t feel more affected by the opinions expressed by Mr. Bruce during such interview. I understand his concern due to the sudden increase in popularity of Candidate Mr. Pedro Pablo Kuczynski, but to disqualify his candidacy on grounds of dual citizenship is definitely an excess.
Assuming that the opinions expressed by Mr. Bruce are true, all Peruvians living abroad who adopted the citizenship of the country they are living in, are immediately disqualified to actively participate in further elections as candidates for office on grounds of “morality and ethics” and, therefore refrained to apply valuable experience acquired abroad that could be of major advantage for our country.
Dual citizenship when one does not exclude the other and no statutory prohibition emerges in this sense, should not become an obstacle for that Peruvian national to pursue an active participation in his country’s political life, especially when the Constitution allows him/her to elect and being elected with no other condition that being a national by birth.
However, the purpose of this open letter lies in the second part of this interview and relates to Immigration and Naturalization Law of the United States of America and its immediate effects in taxation on US expatriates, considering first and foremost Mr. Bruce’s appearance in national TV as an expert in the topic.
The central discussion was Mr. Bruce’s request to Mr. Kuczynski to renounce his US citizenship; something the first alleges the second will not do considering the latter will be mandated to pay an exit tax equal to 30% of every penny earned in the USA while being a US citizen.
In June 17, 2008, the United States Congress passed the Bill H.R. 6081, later enacted by President George W. Bush as Heroes Earnings Assistance and Relief Tax Act “HEART” This Act contains a section with the applicable tax regime for certain individuals who relinquish their US citizenship (hereafter referred as expatriates) if that individual (i) has a net worth of US$2 million or more, (ii) has an average net income tax liability of greater than US$139,000 for the five year period prior to expropriation, or (iii) fails to certify that he/she has complied with all US federal tax obligations for the precedent five years.
The Act consists of three key elements:
1. The so-called “mark-to-market”
tax that will apply to the net unrealized gain on the expatriate’s worldwide
assets as if such property were sold (the “deemed sale”) for its fair market
value on the day before of the expatriation date. Any net gain on this deemed
sale in excess of US$600,000 will be taxable. Trustees of non-grantor trusts
must withhold and pay over to the IRS 30% of the portion of any distribution
that would have been taxable to the expatriate had he not expatriated.
2. A tax on certain gifts and bequests over US$12,000 made by the covered expatriate
to any US national except an spouse and/or charities, and,
3. A repeal of the current so-called ten year shadow period for covered expatriates for income tax filling.
In: Withers Worldwide "Exit Tax for US Expatriates to Become Law", London May 2008.
My humble intention is to provide a clear scenario in reply to an opinion
expressed with evident lack of knowledge and expertise, furthermore coming from
a public figure like the Spokesperson of one of the candidates who happens to be
a former president of Peru.
In consequence, the Political Constitution of Peru does not mandate the relinquishment of a citizenship on grounds of incompatibility with the exercise of Office of President of Peru.
The Immigration and Naturalization Act of the United States mandates that the applicant to the US citizenship renounces to his prior citizenship before his pledge of allegiance, however, the Supreme Court of the United States in the case Afroyim v. Rusk (1967) established the concept of dual citizenship and the State Department policy since 1990 has gone beyond the requirements of the Afroyim Decision in allowing freedom to US citizens to take advantage of multiple citizenships. It is appropriate to remind the non-common law readers that this System of Law is informed not only by Statutes but also by equally enforceable Case Law.
Therefore being the “mark-to-market” applicable way to enforce this kind of exit tax for US expatriates rather than the so-called, as per Mr. Bruce’s opinion, 30% tax of all income earned by the expatriate for his/her time being a citizen, is evident to infer that not only the first method is less punitive but that the latter is illegal considering that it will impose double taxation assuming the income was taxed and paid every due year.
Besides the efforts of this Act of regulate and maybe even refrain certain US nationals of renouncing their citizenships, in the past three years following its
enactment the number of wealthy US nationals that became expatriates had dramatically increased. This shows us clearly that this exit tax is still for
some, preferable than to remain in tax system that with Eritrea makes the USA
the only two countries in the world that base their tax system in nationality
rather than residency.
Is my wish that all candidates and their spokespersons respect their constituents’ right to be well informed and refrain to manipulate the data and information in their own benefit. We need to know that whatever they say is adjust to the truth and that those nationalisms which rather than uniting they divide are nowadays outdated.
Maria Elisa Rodriguez
Thank You ^^
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