Kluth: Golden Passports, Citizenship and Identity in a Time of War

On the intersection of citizenship and identities, never as simple as presented. But citizenship decisions, like all decisions, have consequences:

As a dual citizen who hangs out with polyglots carrying several passports each, I can attest that identity is a complicated thing. It’ll never be captured adequately by lists of checkboxes — from age and sex to race, religion, profession or indeed citizenship. Just glance across Europe right now.

In one corner, Ukrainians are fighting heroically to preserve their distinct national identity against Russia, whose despot denies they have one. Some of the defenders speak Ukrainian as a mother tongue, others Russian or something else. The older ones used to be citizens of another entity, the Soviet Union. But now their allegiance is to Ukraine.

Right next door is the European Union. It’s a confederation that recognizes overlapping and thus ambiguous layers of identity and citizenship, including both a European and a national tier. Moreover, many of its members have in the past been quite relaxed about granting citizenship to outsiders, provided those have money. In return for big investments, these foreigners got “golden passports.”

The EU never liked these schemes, seeing them as mechanisms to dodge taxes or conduct other monkey business. That’s why it has leaned on countries like Bulgaria, Cyprus or Malta to quit the practice. Since the attack on Ukraine, the EU started cracking down harder. It fears that golden EU passports given to Russian oligarchs or Kremlin-cronies — granting them all the rights of other Europeans — could subvert the sanctions passed against them.

Ukraine and the EU are bookends around a variegated subject. People gain multiple citizenships for all sorts of reasons. Some Brits, in the run-up to Brexit, remembered an Irish grandmother to get themselves an EU passport. Many descendants of German Jews or other victims of the Nazis have exercised their right to become German citizens. Immigrants get naturalized in many countries every day.

Other bi-nationals, like me, simply fall between jus solis— Latin for “right of the soil” — and jus sanguinis — the “right of the blood,” creepy as that term sounds nowadays. That means we automatically got one citizenship through our place of birth, and another through our parentage.

Sometimes these twists of fate are boons that give people more options in life. Other times, they are banes, as for so-called “accidental Americans” — those who were born in the U.S. but lost contact with the country as babies or children, and often don’t even speak English. And yet, owing to the peculiar American tax system — which is based on citizenship rather than residence — they face a nightmare of compliance paperwork and are often barred from financial services in their home country.

Even in extreme cases, however, citizenship is rarely as problematic as the lack of it. Millions of people around the world — Palestinians, Rohingya, Kurds and others — are stateless. Their sense of identity is just as strong. But without the right papers, they often live in limbo.

Historically, the idea of citizenship has morphed enough to make the concept seem almost arbitrary. It originated in city states (poleis in Greek, the root of “politics”) such as ancient Athens or Thebes, where it described the rights and duties of rich, non-slave men. But during the Middle Ages, the notion all but disappeared. Identity and standing were instead based on a person’s feudal class — such as peasantry, clergy or aristocracy.

When the idea of citizenship returned in the modern era — especially with the American and French revolutions — it was again based on a covenant between an individual and a state. The former got rights (to vote, for example) but also responsibilities (to pay taxes, say).

Even so, citizenship rarely fits neatly with more slippery notions about identity. If you had an interesting life in the 20th century, you could have held papers issued variously by Austria-Hungary, Yugoslavia and Bosnia Herzegovina — and identified all along as Serb, Croat or something else. Latinx Americans, Turkish Germans, Algerian French — ever more identities in the modern world are hyphenated and thus complex.

That’s even true for people with only one citizenship — especially if they’re “army brats” or children of expats. Raised in countries other than the one named on their passport, such “third-culture kids” tend to float between contexts, sometimes feeling unmoored but also showing unusual flexibility and tolerance. Many feel most at home with other cosmopolitans of any nation rather than their own compatriots.

For some people who feel unambiguously rooted in their countries, such fluid identities can be provocations. Populism has been blamed in part on a backlash by so-called “somewheres” against the allegedly footloose “anywheres.”

The multinationals in turn chafe at the taunts of their compatriots who don’t consider them “real” Americans, Germans, Japanese or whatever. They consider these labels attempts at exclusion, and power grabs.

The reality is that identity and allegiance are highly individual and subjective. Take Eileen Gu. She’s an American-born freestyle skier with a Chinese mother, who competed for the U.S. before winning two gold medals and a silver in this year’s Olympics for China, a country that doesn’t even recognize dual citizenship. Is that fair or foul? Neither, I’d say. It’s simply up to her.

Part of freedom is choosing our communities, allegiances and loyalties. And part of tolerance is respecting the choices of others. In the modern world, those decisions are sometimes confusing, other times urgent and clear. Just ask the brave Ukrainians fighting for their country right now.

Source: Golden Passports, Citizenship and Identity in a Time of War

Analysis | U.S. Expats Can’t Renounce Their Citizenship Fast Enough

The most in-depth article and analysis of the data regarding Americans renouncing their citizenship:

The swearing in of new citizens often makes news in the U.S., especially if it happens in unusual circumstances such as one party’s national convention. Much less reported are the many citizenship renunciations by Americans, and the travails leading up to these life decisions. Almost all those giving up their U.S. nationality are expats. And for each renouncer going through the ordeal, there are countless others thinking about it. Why?

One recent press release in particular has caused quite a stir. It suggested that, after “a steep decline” in recent years, renunciations in the first half of this year soared to 5,816, more than twice as many as gave up their passport in all of 2019. The implication, as reported breathlessly in the American media, was that expats, already fed up with President Donald Trump, finally despaired over his mishandling of Covid-19 and quit. Other factors were cited as merely secondary.

But these renunciation numbers are notoriously flawed. They’re based on a list of names of renouncers published every quarter by the Internal Revenue Service — experts call this a form of “doxxing.” That list lags in time and jumbles data. In reality, most embassies and consulates stopped making renunciation appointments this spring, owing to the pandemic. And the dip in prior years, according to experts, was due to backlogs and underreporting.

By the best estimates (see chart), renunciations have been rising since 2010, when the Obama administration passed the notorious Foreign Account Tax Compliance Act (FATCA), inflicting misery on U.S. expats everywhere. In 2014, the government raised the renunciation fee from $450 to $2,350. Undeterred, expats kept at it. The American bureaucracy then indirectly slowed the pace with red tape in the first three Trump years. But we’re back on trend in 2020.

Now, it may be true that most expats aren’t crazy about Trump. Americans abroad tend to be cosmopolitan professionals, often married to foreigners or following international career paths. Watching their home country in their host nation’s news, or talking about it at local dinner parties, has stopped being fun. The images occasionally evoke a banana republic succumbing to pestilence while arming for civil war.

But that’s clearly not the reason why so many expats have been trying to drop their nationality for the past decade. Instead, as I described last year, it’s the nightmare of American tax and financial reporting, in which any accounts or assets deemed in Washington, D.C. to be “foreign” are automatically suspect, requiring extra disclosures that can be ruinous in time, expense and peace of mind.

The U.S. is almost unique in the world in taxing based on citizenship rather than residency. It’s also uniquely parochial in being unable or unwilling to distinguish between, say, a rich American living stateside and stashing money offshore and, for example, a middle-class American married to a German and teaching elementary school in Berlin. The hell starts with that conflation.

Before 2010 America’s citizen-based taxation didn’t necessarily disrupt the lives of expats like this school teacher. That’s because few expats even knew about the horrendously complex reporting rules or bothered with them. But FATCA required them to make new and redundant disclosures or face the prospect of tens of thousands of dollars in fines or even prison. It also required their foreign banks, brokers and insurers to report on them to the IRS, or face draconian sanctions.

Unsurprisingly, many foreign banks and brokers therefore stopped taking “U.S. persons” or green-card holders as customers. So American expats have increasingly been locked out of retail finance in their host countries.

Worse, the European Union then started passing laws with bureaucratically sublime names such as MiFID II and PRIIPs that imposed new rules on everything from mutual funds to life insurance. This scared the U.S. banks and brokers of American expats living in Europe, so they also started kicking out their customers with foreign addresses. Many Americans overseas are financially marooned.

In their desperation, several have been taking their struggle to the courts. Fabien Lehagre, a French citizen who is also an “accidental American” because he was born in California, wants to invoke the EU’s data-privacy laws to have FATCA declared illegal in Europe. A U.S.-British dual citizen calling herself “Jenny” is trying to crowdfund a legal odyssey to do something similar in the U.K. Another challenge is underway in Canada. Occasionally, there are even small victories.

But on the whole, Americans abroad feel ostracized by their own country. Like their fellow citizens back home, they’re caught up in the tribal clash between Republicans and Democrats. But when it comes to acknowledging the hardship of expats, the Democrats have mostly refused to listen. The GOP has since 2016 called for the abolition of FATCA and citizenship-based taxation in its platform. But the few Republicans who’ve tried to effect change have so far failed.

If the estimated 9 million Americans living abroad were recognized as a political geography, they would rank ahead of 40 states by population. Their ill treatment by the U.S. tax and compliance regime would be headline news, and probably solved in a bipartisan tweak of common sense. But they’re not a bloc. Like much about American democracy, this discrimination seems unfair. And yet, these millions of voices must be heard.