Top Philippine Diplomat Perfecto Yasay Ousted Over U.S. Citizenship Controversy

Posted: 3:02 am ET
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We have a second post on the Philippines, today.  On March 8, the country’s Commission of Appointments (CA) rejected the nomination of Perfecto Yasay Jr. as Secretary of Foreign Affairs. According to CNN, the committee unanimously decided to reject Yasay’s nomination “for lying under oath and that he failed to declare his U.S. citizenship in 1986.”

We’ve listed the FAM citations for renunciation of U.S.citizenship and loss of nationality in the links below. This should be an interesting case study.

Related items:

7 FAM 1280 | LOSS OF NATIONALITY AND TAKING UP A POSITION IN A FOREIGN GOVERNMENT

7 FAM 1260  | RENUNCIATION OF U.S. CITIZENSHIP ABROAD

7 FAM 1220  | DEVELOPING A LOSS-OF-NATIONALITY CASE

7 FAM 1200 APPENDIX B  | U.S. SUPREME COURT DECISIONS ON LOSS OF NATIONALITY

Renunciation of U.S. Citizenship May Not Necessarily Keep the Tax Man Away

Posted: 4:08 am EDT
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Via MainSt:

Last year, 4,279 U.S. citizens ended their long-term U.S. residency, according to the Treasury Department. That’s up 25.3% from the 3,415 individuals who shed their U.S. citizenship in 2014 and just adds to the 10,693 total who dropped their citizenship between 2013 and 2015.
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Passed in 2010 as a means of cracking down on tax dodgers, FATCA implemented rigid reporting rules for overseas banks and investment firms that hold the assets of U.S. citizens. It also imposes similarly strict rules on U.S. citizens who hold money in foreign accounts. Because the more underhanded elements of U.S. business made a habit of using accounts in Switzerland, the Cayman Islands and elsewhere to shield taxable income from the U.S. government, FATCA uses huge penalties to drop the hammer on those who won’t comply.

Read more below:

Renunciation of U.S. citizenship may not necessarily keep the Internal Revenue Service away. Last month, the Justice Department announced that a former U.S. citizen pleaded guilty to tax fraud related  to his Swiss financial account.  The DOJ announcement does not mention the Foreign Account Tax Compliance Act (FATCA) but it says that in 2012, the individual who has resided in Switzerland since 2007, went to the U.S. Embassy in Bratislava, Slovakia, to renounce his U.S. citizenship and informed the U.S. Department of State that he had acquired the nationality of St. Kitts and Nevis by virtue of naturalization. Below is part of the DOJ announcement:

Former U.S. Citizen Pleads Guilty to Tax Fraud Related to Swiss Financial Account

Used Hong Kong Entity and Foreign Accounts in Switzerland, Monaco and Singapore to Conceal Funds

A former U.S. citizen residing in Switzerland pleaded guilty today to one count of filing a false income tax return, announced Acting Assistant Attorney General Caroline D. Ciraolo of the Justice Department’s Tax Division and U.S. Attorney Dana J. Boente of the Eastern District of Virginia.

“U.S. taxpayers have been given ample opportunity to come forward, disclose their secret foreign accounts, and come into compliance,” said Acting Assistant Attorney General Ciraolo.  “Those individuals and entities who rolled the dice in the hope of remaining anonymous are facing the consequences.  The Tax Division remains committed to investigating and prosecuting individual taxpayers with undeclared foreign financial accounts, as well as the financial institutions, bankers, financial advisors and other professionals who facilitate the concealment of income and assets offshore.  And as today’s guilty plea clearly indicates, the department’s reach is well beyond Switzerland.”

According to court documents, in 2006, Albert Cambata, 61, established Dragonflyer Ltd., a Hong Kong corporate entity, with the assistance of a Swiss banker and a Swiss attorney.  Days later, he opened a financial account at Swiss Bank 1 in the name of Dragonflyer.  Although he was not listed on the opening documents as a director or an authorized signatory, Cambata was identified on another bank document as the beneficial owner of the Dragonflyer account.  That same year, Cambata received $12 million from Hummingbird Holdings Ltd., a Belizean company.  The $12 million originated from a Panamanian aviation management company called Cambata Aviation S.A. and was deposited to the Dragonflyer bank account at Swiss Bank 1 in November 2006.

“IRS Criminal Investigation will continue to pursue those who do not pay the taxes they owe to the United States,” said Special Agent in Charge Thomas Jankowski of the Internal Revenue Service-Criminal Investigation, Washington, D.C. Field Office.  “Today’s plea is a reminder that we are committed to following the money trail across the globe and will not be deterred by the use of sophisticated international financial transactions that hide the real ownership of income taxable by the United States.”

On his 2007 and 2008 federal income tax returns, Cambata failed to report interest income earned on his Swiss financial account in the amounts of $77,298 and $206,408, respectively.  In April 2008, Cambata caused the Swiss attorney to request that Swiss Bank 1 send five million Euros from the Swiss financial account to an account Cambata controlled at the Monaco branch of Swiss Bank 3.  In June 2008, Cambata closed his financial account with Swiss Bank 1 in the name of Dragonflyer and moved the funds to an account he controlled at the Singapore branch of Swiss Bank 2.

In 2012, Cambata, who has lived in Switzerland since 2007, went to the U.S. Embassy in Bratislava, Slovakia, to renounce his U.S. citizenship and informed the U.S. Department of State that he had acquired the nationality of St. Kitts and Nevis by virtue of naturalization.

U.S. District Judge Claude Hilton of the Eastern District of Virginia set sentencing for April 15.  Cambata faces a statutory maximum sentence of three years in prison and a fine of up to $250,000.  As part of his plea agreement, Cambata agreed to pay $84,849 in restitution to the Internal Revenue Service (IRS).

Additional information about the Tax Division and its enforcement efforts may be found on the division’s website.

FATCA was enacted in 2010 by Congress to target non-compliance by U.S. taxpayers using foreign accounts. FATCA requires foreign financial institutions (FFIs) to report to the IRS information about financial accounts held by U.S. taxpayers, or by foreign entities in which U.S. taxpayers hold a substantial ownership interest. For access to the regulations and administrative guidance related to FATCA and to learn about taxpayer obligations visit the Internal Revenue Service FATCA Page.

Click here for the list of countries where the United States has an agreement under FATCA.

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Renunciation of U.S. Citizenship About to Get More Expensive: From $450 to $2,350

— Domani Spero
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Updated 8:36 am PST, Aug 28, 2014:  The Federal Register has now published  this interim final rule online. This interim final rule becomes effective September 6, 2014. Written comments must be received on or before October 21, 2014. A note on “interim final rule” from the Federal Register: “When an agency finds that it has good cause to issue a final rule without first publishing a proposed rule, it often characterizes the rule as an “interim final rule,” or “interim rule.” This type of rule becomes effective immediately upon publication. In most cases, the agency stipulates that it will alter the interim rule if warranted by public comments. If the agency decides not to make changes to the interim rule, it generally will publish a brief final rule in the Federal Register confirming that decision.” See more here (pdf).

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Yesterday, we got the following via the Burn Bag:

“CA [Consular Affairs] will publish a proposed rule on Thursday in the Federal Register raising the fee for renunciation of citizenship from $450 to $2,350. This will not be popular. Fee based on annual fee study and lack of common sense.”

Today, the Federal register posted online the pre-publication interim final rule for the changes in the Schedule of Fees for consular services (see full interim rule embedded below).  The percentage  increase in the renunciation fee is 422%. With an estimated 2,378 annual renunciation of citizenship cases, this increase would net the USG an estimated $4,518,200.  Using the projected FY 2014 workload, Consular Afffairs’ estimated change in annual fees collected for affected consular services is $64,003,862. Below is an extract from the interim final rule which will be published on August 28:

The interim final rule makes changes to the Schedule of Fees for Consular Services of the Department of State’s Bureau of Consular Affairs. The Department sets and collects its fees based on the concept of full cost recovery. The Department completed its most recent review of current consular fees and will implement several changes to the Schedule of Fees based on the new fees calculated by the Cost of Service Model (CoSM).
[…]
The CoSM demonstrated that documenting a U.S. citizen’s renunciation of citizenship is extremely costly, requiring American consular officers overseas to spend substantial amounts of time to accept, process, and adjudicate cases. For example, consular officers must confirm that the potential renunciant fully understands the consequences of renunciation, including losing the right to reside in the United States without documentation as an alien. Other steps include verifying that the renunciant is a U.S. citizen, conducting a minimum of two intensive interviews with the potential renunciant, and reviewing at least three consular systems before administering the oath of renunciation. The final approval of the loss of nationality must be done by law within the Directorate of Overseas Citizens Services in Washington, D.C., after which the case is returned to the consular officer overseas for final delivery of the Certificate of Loss of Nationality to the renunciant. These steps further add to the time and labor that must be involved in the process. Accordingly, the Department is increasing the fee for processing such requests from $450 to $2,350. As noted in the interim final rule dated June 28, 2010 (77 FR 36522), the fee of $450 was set substantially below the cost to the U.S. government of providing this service (less than one quarter of the cost). Since that time, demand for the service has increased dramatically, consuming far more consular officer time and resources, as reflected in the 2012 Overseas Time Survey and increased workload data. Because the Department believes there is no public benefit or other reason for setting this fee below cost, the Department is increasing this fee to reflect the full cost of providing the service. Therefore the increased fee reflects both the increased cost of the provision of service as well as the determination to now charge the full cost.

Screen Shot 2014-08-27 at 10.45.00 AM

The Department intends to implement this interim final rule, and initiate collection of the fees set forth herein, effective 15 days after publication of this rule in the Federal Register.
[…]
Administrative Procedure Act |  The Department is publishing this rule as an interim final rule, with a 60-day provision for post promulgation comments and with an effective date less than 30 days from the date of publication, based on the “good cause” exceptions set forth at 5 U.S.C. 553(b)(3)(B) and 553(d)(3). Delaying implementation of this rule would be contrary to the public interest because the fees in this rule fund consular services that are critical to national security, including screening visa applicants.

Anybody know where we can find a copy of CA’s Cost of Service Model (CoSM) study?

Apparently, dual citizens in Canada trying to shed their U.S. citizenship have created a  backlog at the U.S. consulate in Toronto that stretches into the third week of January 2015.

In any case, Americans who will be upset by this change in renunciation of citizenship fee can  contact Congress to complain about this. Their elected representatives, presumably will be super-helpful to the soon-to-be non-voters.

We should note that interim final rule also lowers the consular time fee of $231 to $135 per hour, per employee:

The Department previously charged a consular time fee of $231 per hour, per employee. This fee is charged when indicated on the Schedule of Fees or when services are performed away from the office or outside regular business hours. The CoSM estimated that the hourly consular time charge is now lower. Accordingly, the Department is lowering this fee to $135 per hour.

See the full interim final rule below. The document posted below is a pre-publication copy. It is scheduled to be published in the Federal Register on 08/28/2014 and available online at http://federalregister.gov/a/2014-20516, and on FDsys.gov

 

 

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