Today's comment is by Mark Nestmann, Wealth Preservation & Tax Consultant for The Sovereign Society and President of The Nestmann Group.

Dear A-Letter Reader,

Your right to leave your country and emigrate to another one is one of the most fundamental requirements of freedom.

Both the International Covenant on Civil and Political Rights (Art. 12) and the Universal Declaration of Human Rights (Art. 13(2)) confirm that emigration is a basic human right.  But thanks to repressive tax policies followed by a growing number of nations, this right is increasingly threatened.

The U.S. has long been the most egregious violator of the right of emigration. For more than 80 years, Congress has dictated that U.S. citizens are responsible for paying U.S. taxes, no matter where they live. 

That's fundamentally unfair because it's likely that a U.S. citizen living abroad will be paying tax on his or her income in another country. And while many of these taxes can be credited against U.S. tax, not all of them can, leading to double taxation. Not to mention the additional cost of complying with two different sets of tax rules. 

Indeed, the only way that a U.S. citizen can legally escape the responsibility for paying taxes is to take the radical step of giving up U.S. citizenship. Even then, if this act is "tax-motivated" as determined by a 2004 law, the former U.S. citizen is responsible for paying U.S. tax on certain income for an additional 10 years and must submit to an invasive reporting regime during this period.

But the governments of the world have long looked hungrily at the ability of the U.S. to tax its citizens, no matter where they live. And now, one country with millions of expatriate citizens-the U.K.-is following the U.S. lead.

Under guidelines published by the U.K.'s Revenue & Customs Authority, former U.K. residents (in most cases holding a U.K. passport), are treated as non-resident for tax purposes if they spend no more than 90 days annually in the UK. However, the so-called "90-day rule" has never been part of any statute. Instead, the U.K. Revenue publishes the 90-day rule in its "IR20" expatriate tax guide. But then, without bothering to change the guidelines, the U.K. Revenue has begun a sneak attack in the courts against individuals it believed were "abusing" the rule.

In 2005, the U.K.'s court of appeal for tax assessments, the "Special Commissioners," agreed that the 90-day rule could be ignored in certain circumstances. It declared that a Mr. Shepherd, a professional pilot, was U.K. tax-resident despite spending only 80 days in the U.K., because he hadn't made a "distinct break" with the United Kingdom.

Just three weeks ago, another case before the Special Commissioners proved that the 2005 decision was no fluke. The court completely ignored the published rules by claiming a businessman who spent only 50 days in the U.K. each year was a tax-resident! 

Here, the Special Commissioners took even greater liberties with the published rules.  IR20 stipulates that days of arrival and departure can normally be ignored in calculating the number of days a person spends in the United Kingdom. Taxpayers have relied on this guidance for years, but the Special Commissioners stated that since they were not legally bound to follow the published guidelines, they could substitute their own test.  They recalculated the number of days "spent" in the U.K. by a Mr. Gaines-Cooper, from 50 to 94. The result of this sleight-of-hand: Mr. Gaines-Cooper was now U.K. tax resident!

One can't say, however, that the handwriting wasn't on the wall. For years, Treasury Chancellor Gordon Brown has advocated much stricter taxation of both British expats and (especially) "non-domiciled" U.K. residents, who are taxed only on their domestic U.K. income, rather than their worldwide income. Brown is now in line to succeed Tony Blair as Prime Minister. If he does so, I won't be surprised if he proposes changing the U.K. laws to make them functionally identical to those in the United States...and tax U.K. citizens no matter where they live.

Unfortunate as this development may be, the solution to this expansion of U.K. tax jurisdiction is the same as it is in the U.S.: to give up U.K. citizenship. As radical as this idea may seem at first glance, it's perfectly legal to give up U.K. citizenship as long as you have a satisfactory passport from another country.  (See http://www.ind.homeoffice.gov.uk/applying/nationality/formsandguidance/guidern1
for details.) 

Nor is it that difficult to do. Since the U.K. is an EU member, a U.K. citizen has the right to reside in any EU country, and can apply for citizenship in that country after living there for an extended period (5-10 years, depending on the country). 

You don't own the bodies of your countrymen, Mr. Brown. If they choose, they can vote with their feet to escape your clutches. And if you tighten the screws much further, I anticipate more and more of the U.K.'s wealthiest and most successful people will do exactly that and give up their U.K. passports for good.

MARK NESTMANN, Wealth Preservation &
Tax Consultant on behalf of The Sovereign Society
www.nestmann.com
assetpro@nestmann.com

EDITOR'S NOTE: Interested in living the expat lifestyle? The Sovereign Society research team just published a report explaining exactly how you can give up your citizenship and move on to greener pastures. (And save thousands of dollars in taxes in the process.) Check your email later tonight for more information on this hot-off-the-presses report. Can't wait? Click below for more information.

LINK: http://www.isecureonline.com/reports/190STUEP/E190GC04