October 24, 2020

The Editor Speaks: A taxing editorial

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Big brother is certainly looking down on you, especially if you were born in the USA. As “The Economist” once wrote, “The national anthem calls America ‘the land of the free’. Great reformers from Abraham Lincoln to Martin Luther King have urged America to live up to its ideal of “freedom”. When a group of French Americanophiles wanted to flatter the United States, they sent the Statue of Liberty.” I wonder what these reformers would think now?

In the same article it mentions how the American legal system has seemingly lost any sense of proportion. It cites the case of Christopher Ratte, a professor of archaeology, who tried to buy his seven-year-old son a bottle of lemonade at a baseball game. He was handed a bottle of Mike’s Hard Lemonade, an alcoholic drink, by mistake. Officials noticed the boy sipping the drink and immediately whisked him off to hospital. He was fine. But the family was condemned to legal hell: the police at first put the seven-year-old into a foster home and a judge ruled that he could go home only if his father moved out. It took several days of legal wrangling to reunite the family.

If this seems to be just a one off case think again. At Tuesday (31) night’s tax seminar it was reported that anyone who lives in the Cayman Islands who are US citizens, green card holders or even just have spent more than 183 days in any calendar year in the United States, are all required to file tax returns in the US, as they may be liable to pay tax there. According to US tax expert Shawn P Wolf, filing tax returns did not automatically make the individual liable to actually pay tax as certain exemptions or exclusions applied, particularly for those people who truly lived and worked outside the US. The only way to apply for such exemption is to file a return in the first place. Even Cayman residents who have spent over 183 days in the US for medical purposes, such as for cancer treatment, are also required to file tax returns.

The USA is only one of three countries in the world that taxes its citizens when they live and work abroad.

“If the IRS gets to you first they have the ability to deny you the Section 9-11 exclusion,” attorney Shawn P. Wolf said at the same seminar. Section 9-11 exclusion applies to people living and working outside the US and permitted to earn US$95,100 this year before becoming liable to pay tax, but Wolf confirmed that this figure was not fixed and changed annually.

So wherever you live, and you are in any way an American, you are not as free as you think you are.

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