Citizen-Based Taxation: Thank War For ItOnly two nations in the world have citizenship-based taxation: the United States and Eritrea in northeastern Africa.
Citizenship-based taxation means that the payment of taxes is determined by citizenship rather than residency or the source of income. In other words, the foreign income earned by an American abroad is taxed by the Internal Revenue Service even though it is also assessed by the nation in which he lives. An American businessman living in Hong Kong is legally required to render unto two Caesars even if he receives 'benefits' from only one. This amounts to a stiff financial and paperwork penalty on Americans who dare to depart their native soil.
Eritrea imposes a 2% tax on citizens who live abroad. It has come under intense criticism not only for the “diaspora tax” but also for its aggressive pursuit of collection. The Toronto Star (July 24, 2012) reported, “In 2011, governments in both the United Kingdom and Germany demanded that Eritrea stop collecting diasporic taxes on the grounds that the practice might contravene the Vienna Convention on Diplomatic Relations. Though pressure to outlaw the tax is mounting elsewhere around the world, the Canadian government has yet to act.” Increasingly, the tax is being called a human rights issue.
America imposes higher penalties and is more vicious in its collections. Nevertheless, the American Goliath has largely escaped criticism. Without approving any other form of taxation, a particularly bright light should be shone on the citizenship-based version.
For one thing, it is rooted in war. Specifically, citizenship-based taxation dates back to the American Civil War (1861-1865).
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