[Editor's note: Simon is still out in the jungle and should be back on Monday. Meanwhile, we wanted to pass along a note he wrote over a year ago warning that governments would go back in time to pass retroactive tax hikes and regulatory changes. He was right. Since this letter last summer-
* The US government passed a retroactive estate tax hike
* The Spanish government passed a retroactive wealth tax
* The state of Illinois passed a 66% income retroactive tax hike
* The US Financial Crimes Enforcement Network issued offshore reporting guidance retroactive to 2010
The list goes on...]
July 13, 2010
It’s no secret that the government– any government– has nearly unlimited authority to do whatever they want, whenever they want. They can bend the rules, spin reality, and use their national constitutions like a roll of cheap, single-ply toilet paper.
Lately, governments have been unafraid to increase the size and scope of their powers, making drastic changes often with near immediate effect.
For example, UK Chancellor George Osborne shocked British investors several weeks ago when he announced that capital gains tax rates would increase for many Brits effective midnight that same evening.
Not to be outdone by Chancellor Osborne, the United States Congress has actually gone back in time and made retroactive changes to tax and reporting regulations. There are some recent instances of this in 2010′s controversial HIRE Act.
Even better, Canada’s Legislature amended the Retail Sales Tax Act earlier this year to be retroactive effective May 1997. The amendment specifically affected certain companies which had to come out of pocket for 12-years worth of tax that they had previously been exempt from. Ouch.
Today marks another example of the government showing us how quickly it is willing and able to make changes. Effective today, the United States Department of State is increasing fees for consular services across the board– things like visas, passports, and notary services.
The state department made this announcement just two weeks ago; the thing that caught my eye and sparked this letter today is their new $450 fee for renunciation of US citizenship.
This is a brand new fee that has never been imposed before. Apparently the number of Americans queuing up at embassies around the world to renounce their citizenship is exploding so rapidly that the State Department had to formalize the process and tack on a fee… this, of course, on top of the 30% exit tax.
With all of these examples, there’s really one single point that I want to drive home today: you can only kick the can down the road for so long…