Boris Johnson caves in and pays up ‘outrageous’ US tax bill

By Expat News

Say it ain’t so, Boris? Tax protesters everywhere were hoping that the hopping-mad London Mayor and accidental dual U.K.-U.S. citizen Boris Johnson would stick to his guns and refuse to pay the IRS. The political tax brouhaha started when the New York born brit (who left America at age 5) said he couldn’t be taxable by the IRS as he gave up U.S. citizenship. Then it turned out he hadn’t, as the BBC confirmed, despite his threats to renounce in a column for the Spectator.

Did Boris Johnson, the mayor of London, pay the IRS tax bill?

Then there was outrage over American’s unique but expansive worldwide tax regime. The Mayor politely gave the IRS the finger, saying it was ‘outrageous’ for the IRS to tax people all over the world for an accident of birth. Meantime, FATCA—the Foreign Account Tax Compliance Act—is causing panic around the world. Banks and nations everywhere are ratting out Americans to the IRS. No account anywhere is safe from the IRS’ prying eyes and FBAR penalties.

Up until now, the tousled blond mayor Boris Johnson refused to pay the IRS, which must have felt good. But there was more than idle talk that he could face arrest on his next US. visit! So he paid his “absolutely outrageous” U.S. tax bill, escaping an embarrassing incident when he next visits America. U.S. law says all citizens, including dual citizens, must pay tax on worldwide income. And U.S. rules often trump others.

Boris Johnson has reportedly settled a tax demand issued by the US authorities that he previously described as absolutely outrageous.

The London mayor, who holds British and American passports, revealed in November he had been hit by a capital gains tax bill – despite previously lambasting the US embassy in London over its failure to pay the congestion charge.

According to the Financial Times, he has paid an undisclosed sum, with his spokesman saying “the matter has been dealt with”. Johnson, who was born in New York, has reportedly paid the outstanding bill ahead of a visit to Boston, New York and Washington in March.

The mayor is expected to return to parliament in May in the safe Conservative seat of Uxbridge and South Ruislip and is considered a frontrunner to be the next Conservative leader.

He has said in the past that he is prepared to relinquish his US citizenship but an unpaid tax bill would have been an obstacle.

The bill related to his first home in the UK, which was not subject to capital gains tax in England.

All US citizens, including those with dual citizenship, are obliged to file a tax return and liable to pay US taxes, wherever they are living, even if the income is earned abroad.

Asked in November if he would pay the bill, Johnson said: “No is the answer. I think it’s absolutely outrageous. Why should I?

“I think, you know, I’m not a … I, you know, I haven’t lived in the United States for, you know, well, since I was five years old … I pay the lion’s share of my tax, I pay my taxes to the full in the United Kingdom where I live and work.”

Asked why he continued to carry a US passport, to which he responded: “It’s very difficult to give up.”

U.K. tax law excluded Mr. Johnson’s London house, which he sold in 2009 for a reported £1.2 million. But in the U.S., there’s no such luck. Rather than quietly paying the IRS, in an NPR interview, Mr. Johnson called it ‘outrageous’ to tax U.S. citizens on their global income. Mr. Johnson noted that tax rates in the U.K. are higher than in the U.S. Still, the house sale was tax exempt in the U.K., so Mayor Boris can’t claim a credit for his U.K. taxes to the IRS.

TO be fair, there was a tit for tat tax problem too. The Mayor has lambasted the U.S. Embassy in London for failing to pay London’s congestion tax. The Embassy says it is a tax and diplomats are immune! When President Obama was in the U.K. in 2011, Johnson reportedly asked him for a £5 million cheque for unpaid congestion charges but the U.S. Ambassador intervened before President Obama could answer. By last year, the amount the U.S. Embassy owed more than £7 million.

The prospect of being hauled in by tax inspectors when Mr. Johnson touches down in Boston, New York or Washington in February must have changed his mind. Mr. Johnson has previously said he might renounce his U.S. citizenship. Yet most renunciations involve certifying that you are compliant with the IRS for the last 5 years. Renouncing isn’t easy and wouldn’t solve his tax bill. Apart from proving five years of U.S. tax compliance, you may have to pay an exit tax.

Expats and disgruntled American taxpayers were happy that Mr. Johnson was calling attention to fairness. Many hoped citizenship-based taxation would be scrapped. Mr. Johnson got support from expats miffed with the American tax code and the IRS. After several Canadians filed suit to block FATCA in Canada, a named plaintiff wrote Mayor Boris offering her support.

They all must feel let down that Mr. Johnson has paid the IRS bill and moved on. Lesson: the IRS wants money. The IRS collects, often because the threat of its reach is just too big. Even overseas. Even political figures. Everywhere.