The Permanent Tourist By Vernon K. Jacobs, CPA  & J. Richard Duke, J.D., LLM

There is a group of people who call themselves "P.T.ers" because they are advocates of the ideas of a writer who calls himself W.G. Hill. As the story goes (or as we understand it), Hill read an article by Charles Schultze, an international newsletter writer, who advocated the concept of becoming a "permanent tourist" or "perpetual traveler" and not having any permanent residence. Hill expounded on this idea with a series of books that lead many people to believe they could somehow become free of heavy taxes by joining the PT movement.

While that theory might have some validity with respect to those who are citizens of countries that tax on the basis of residence, it isn't valid for U.S. persons who are taxed on the basis of their citizenship. The U.S. citizen is subject to U.S. taxes on his world wide income regardless of where he or she lives. There is a modest exception for up to $92,400 a year (for 2006) of income earned outside the U.S. if the U.S. person also lives and works outside the U.S. for at least 330 days in any 12 consecutive months.

Otherwise, in order for a U.S. person to be able to legally benefit from this idea, he must first acquire citizenship in a country that taxes on the basis of residence (such as Canada) and then lose their U.S. citizenship and cease to be a resident of the U.S. And, losing U.S. citizenship doesn't always result in total freedom from the U.S. tax laws and the IRS. If you are a non-resident alien who is working in the U.S., you will still owe U.S. income taxes. 

Even for those who are not U.S. citizens, it is first necessary to accumulate some substantial assets because most countries will tax any resident (temporary or permanent) for the income earned from work performed in their country. To avoid that, it's necessary to be able to live on your investments or to find a way to make a living in a tax free country while providing services to someone in another country, without becoming subject to the "income source" rules of the country where the services are being performed. All in all, it's not really as simple as it's made out to be.

And apart from the tax issues, if someone is not a citizen of any country, then they can't have a passport -- in which case they will have great difficulty in finding any place to reside and a much greater problem being able to travel from country to country. Legal passports are only issued to the citizens of a country -- although there are countries that do not tax their citizens on income earned or realized in other countries.
 

About the authors: Vernon Jacobs is a CPA who provides tax accounting and consulting services for clients with international interests.   J. Richard Duke, JD, LLM is an attorney who specializes in international tax law and is an Adjunct Professor of international tax law. Sponsored by Offshore Press, Inc.., Copyright,  2006, All rights reserved. Offshore Press, Inc., Box 8194, Prairie Village, KS 66208. Phone  (913) 362-9667. Email to Offshore Press  Vernon K. Jacobs, Webauthor.