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Tie Citizenship to Tax Exiles

ger12

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Feb 25, 2011
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Really, it's time to tie the two as they do in the US of A.

The Sunday Times today leads with a story about JP McManus not having paid income tac or capital gains tax here in twenty years. As Irelands 11th richest man, it is of course up to him where the law allows him to reside and pay his taxes. However the ST points out that he has extensive business and personnel interests here.

JP is one of many tax exiles, including the great Denis O'Brien. Many of whom “trade” on being Irish.

In the U.S. if you live outside the states you may still be liable to pay tax (depending on the combination of taxes paid in the host country and various deductions available). If you don't pay, you lose citizenship. And that’s the big one isn’t it, losing citizenship.

Time for Ireland to adopt and adapt a similar approach as the U.S. to our tax exiles?
 


Gin Soaked

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A tax exemption on the first €500k income would seem prudent.

That might sound generous, but many expats are maintaining a current or former family here and in the place of residence. Throw in travel and high tax locally and you have a different set of circumstances.

After that, a tax of 10% would seem reasonable. Or whatever the yanks charge.
 

stopdoingstuff

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Other than the US and Ethiopia, almost no one taxes based solely on citizenship.
 

Dearghoul

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Other than the US and Ethiopia, almost no one taxes based solely on citizenship.
He's claiming Irish domicile for tax purposes to avoid paying US taxes on 57 million dollars won at backgammon (!).

The U.S. Revenue Dept. isn't having any of it though, saying he's only contributed e100,000 to the Irish Exchequer in the last year.
 

ger12

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Other than the US and Ethiopia, almost no one taxes based solely on citizenship.
I don't see how that would be a rationale for us not doing anything ...
 

Half Nelson

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We used to sell citizenship, so it makes sense to attach a value to it and to tax it.

The last referendum saw a plethora of voters with no practical interest in the Irish State, flying in to use their citizenship to make an ideological point, and then flying out, leaving the natives to live with the consequences.

Is that any way to run a country?

"Where your treasure is, there your heart will be also."
 

Prester Jim

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It makes perfect sense, for much too long the rich have played by their own rules and flagrantly foregone their duties.
The only problem is that for it to be truly effective it would need to be a globally enforced rule, your international man of media manipulation could just purchase a citizenship in a wayward corrupt state and avoid paying tax that way.
Or you could have the Ayn Randesque scenario where the super-rich just build their own state in international waters, when the greatest threat today seems to be supranational entities and terror groups perhaps the UN should morph into a body dedicated to keeping the super-rich and other terrorists in line.
 

Boy M5

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I'm more interested on where exactly McManus' primary residence is.
 

HarshBuzz

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He's claiming Irish domicile for tax purposes to avoid paying US taxes on 57 million dollars won at backgammon (!).

The U.S. Revenue Dept. isn't having any of it though, saying he's only contributed e100,000 to the Irish Exchequer in the last year.
He won 17 million. The guy who he beat paid over 5m in taxes on behalf of JP to the IRS and sent him the remainder.

Apart from that, your contribution is entirely accurate. The IRS won the case too.
 

Dearghoul

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He won 17 million. The guy who he beat paid over 5m in taxes on behalf of JP to the IRS and sent him the remainder.

Apart from that, your contribution is entirely accurate. The IRS won the case too.
Thanks for the correction.

I don't, myself, play backgammon, and obviously had an inflated idea of what the stakes might run to.
 

HarshBuzz

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Thanks for the correction.

I don't, myself, play backgammon, and obviously had an inflated idea of what the stakes might run to.
17 million is pretty damn inflated! They played for 3 days straight and it sounds like JP let the other guy hang himself, constantly increasing the stakes to try to get out of the hole.

Not that I think he's a great guy or anything. It's interesting that another famous racehorse owner, Michael O'Leary, who actually pays his taxes here, gets far more public opprobrium than JP.
 

Harmonica

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The 200k tax levy is a joke. Nobody likes to pay taxes but you live here you have to follow the rules like everyone else.

I am sure it will be hard to find someone with a back word to say about JP McManus in Limerick after he has donated to sports & charities. Of course its a fraction of what his tax liability would be.
 

Dearghoul

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The 200k tax levy is a joke. Nobody likes to pay taxes but you live here you have to follow the rules like everyone else.

I am sure it will be hard to find someone with a back word to say about JP McManus in Limerick after he has donated to sports & charities. Of course its a fraction of what his tax liability would be.
I'm surprised it hasn't been brought out yet.

My answer to that one is 'What about Longford and Louth?. Wheres their J.P.? Don't their charities deserve support, and don't their hospitals and schools need financing?'
 

TheWexfordInn

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Just because this tax scheme works for the US doesn't mean its appropriate for Ireland. I would think that the number of US citizens working outside the US is a tiny in comparison to the US population and those workers would typically be earning a pretty high salary.

In contrast the numbers of Irish people abroad would be much larger in comparison to the workforce in Ireland, the administrative effort of administering such a scheme would be very large for Ireland, the average salary of the average Irish emigrant wouldn't be particularly high and in a high percentage of cases they would be fully tax compliant in their new jurisdiction in any case. The amount of tax raised wouldn't be much in comparison to the administrative cost.

There's also the little detail that the US emigrants are allowed vote in elections, presumably Irish emigrants would be given the vote if this scheme was introduced which wouldn't be good news for the establishment parties in Ireland.
 

stopdoingstuff

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He's claiming Irish domicile for tax purposes to avoid paying US taxes on 57 million dollars won at backgammon (!).

The U.S. Revenue Dept. isn't having any of it though, saying he's only contributed e100,000 to the Irish Exchequer in the last year.
He is not claiming Irish domicile- he paid the domicile levy, which means he actually is Irish domiciled. He only has to pay tax in Ireland to the extent that it arises from Irish taxable sources, because he is not Irish resident. He is, however, Swiss resident, but the difference is that whereas the Ireland-US Double Tax Treaty does apply to gambling winnings, the Swiss-US Treaty does not, which means he had to engage in a highly dubious strategy of claiming he was resident "of" for treaty purposes (not to be confused with being Irish resident according to domestic law). Now I have no idea what the IRS said, but based on my own reading of the treaty MacManus was definitely a resident of Ireland for Treaty purposes:

Article 4

For the purposes of this Convention, the term "resident of a Contracting State " means:
any person who, under the laws of that State, is liable to tax therein by reason of his domicile, residence, place of management, place of incorporation, or any other criterion of a similar nature.
JP was liable to tax in Ireland by reason of his domicile- this cannot be disputed as he paid the domicile levy.

Since gambling "income" is not mentioned in the other articles of the treaty, it is catered for under the other income article- Article 21:

Other Income
Items of income beneficially owned by a resident of a Contracting State (Ireland, by virtue of the prior definition), wherever arising, not dealt with in the foregoing Articles of this Convention shall be taxable only in that State.
So as far as I am concerned he had a watertight case under law, and the decision was flawed.

http://www.revenue.ie/en/practitioner/law/double/usa-1997.html

I think it highlights the ongoing erosion of the distinction between law and politics, where what matters is not what the words of the law actually say but what a panel of "experts" imagine that they should say.
 

Dearghoul

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Just because this tax scheme works for the US doesn't mean its appropriate for Ireland. I would think that the number of US citizens working outside the US is a tiny in comparison to the US population and those workers would typically be earning a pretty high salary.

In contrast the numbers of Irish people abroad would be much larger in comparison to the workforce in Ireland, the administrative effort of administering such a scheme would be very large for Ireland, the average salary of the average Irish emigrant wouldn't be particularly high and in a high percentage of cases they would be fully tax compliant in their new jurisdiction in any case. The amount of tax raised wouldn't be much in comparison to the administrative cost.

There's also the little detail that the US emigrants are allowed vote in elections, presumably Irish emigrants would be given the vote if this scheme was introduced which wouldn't be good news for the establishment parties in Ireland.
Most, if not all other European states allow some measure of voting in their legislative elections for their citizens who are abroad, although none that I'm aware of tax their expatriates.

I think its a mistake to link taxation to the franchise in this way.
 
Last edited:

Dearghoul

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He is not claiming Irish domicile- he paid the domicile levy, which means he actually is Irish domiciled. He only has to pay tax in Ireland to the extent that it arises from Irish taxable sources, because he is not Irish resident. He is, however, Swiss resident, but the difference is that whereas the Ireland-US Double Tax Treaty does apply to gambling winnings, the Swiss-US Treaty does not, which means he had to engage in a highly dubious strategy of claiming he was resident "of" for treaty purposes (not to be confused with being Irish resident according to domestic law). Now I have no idea what the IRS said, but based on my own reading of the treaty MacManus was definitely a resident of Ireland for Treaty purposes:

Article 4



JP was liable to tax in Ireland by reason of his domicile- this cannot be disputed as he paid the domicile levy.

Since gambling "income" is not mentioned in the other articles of the treaty, it is catered for under the other income article- Article 21:



So as far as I am concerned he had a watertight case under law, and the decision was flawed.

Double Taxation Treaty between Ireland and USA (1997)
Thanks, that's interesting.

Do the states define domiciled exactly as we do?
 

irishpatriot

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Joined
Jun 12, 2014
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392
Really, it's time to tie the two as they do in the US of A.

The Sunday Times today leads with a story about JP McManus not having paid income tac or capital gains tax here in twenty years. As Irelands 11th richest man, it is of course up to him where the law allows him to reside and pay his taxes. However the ST points out that he has extensive business and personnel interests here.

JP is one of many tax exiles, including the great Denis O'Brien. Many of whom “trade” on being Irish.

In the U.S. if you live outside the states you may still be liable to pay tax (depending on the combination of taxes paid in the host country and various deductions available). If you don't pay, you lose citizenship. And that’s the big one isn’t it, losing citizenship.

Time for Ireland to adopt and adapt a similar approach as the U.S. to our tax exiles?
Simply close all tax loopholes, tax breaks and tax reliefs of any kind and we would have enough to build houses for all the homeless and still have enough left over to build the best health service in the world. But will we ever get a government that has the balls to do it?
 

stopdoingstuff

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Feb 26, 2011
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Thanks, that's interesting.

Do the states define domiciled exactly as we do?
They are very similar. The US system recognizes domiciles or origin and choice,just like here. And if JP was trying to assert his Swiss domicile in either an Irish or US court , he would have to demonstrate that he abandoned his Irish domicile and obtained Swiss domicile, which would require physical presence in the country, and the intent to remain there indefinitely.
 

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