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American citizenship

Americans denouncing their citizenship is gaining popularity with record numbers in 2011


If you think residing in America is taxing, just talk to one of the many expatriates who is contributing to a shocking statistic recently discovered: across the globe, people are renouncing their US citizenship in record numbers.

At least 1,788 Americans officially threw away their US citizenship in 2011, exceeding the totals from 2007, 2008 and 2009 combined. The Internal Revenue Service has been keeping a tally of US citizens driven to renouncing that title since only 1998, but last year’s number has officially raised the bar when it comes to calling America quits. What’s more, experts say, is that more and more Americans will soon be saying ‘sayonara’ to Uncle Sam if the federal government keeps up its trend of heavily taxing US citizens abroad.

Out of the 34 countries that belong to the Organization for Economic Cooperation and Development, the United States is the only nation that taxes its citizens no matter where they reside on Earth. As long as a person maintains citizen status, they are expected to send the United States government pennies on every dollar earned no matter where they live, under current law. With the US enacting stricter guidelines in recent years that demand wealthy Americans abroad paying the IRS even more, citizens are voluntarily refusing the perks and protection of the United States in numbers unmatched in recent memory.

Americans renouncing U.S. citizenship rose sevenfold since UBS AG whistle-blower Bradley Birkenfeld triggered a crackdown on tax evasion four years ago.

The United States — the only nation in the Organization for Economic Cooperation and Development that taxes citizens wherever they reside — is searching for tax cheats in offshore centers, including Switzerland, as the government tries to curb the budget deficit.

Shunned by Swiss and German banks and facing tougher asset-disclosure rules under the Foreign Account Tax Compliance Act, or FATCA, more of the estimated 6 million Americans living overseas are weighing the cost of holding a U.S. passport.

“It started with the fallout from UBS and non-U.S. banks feeling it’s too risky to deal with Americans abroad,” said Matthew Ledvina, a U.S. tax lawyer at Anaford in Zurich. “It will increase because FATCA will require banks to track down people, some of whom will make voluntary disclosures before renouncing their citizenship.”

Renunciations are higher in Switzerland because American expatriates expect extra scrutiny of their affairs after the UBS case and as the United States probes 11 other Swiss financial firms for aiding offshore tax evasion, said Martin Naville, head of the Swiss-American Chamber of Commerce in Zurich.

During a 10-minute renunciation ceremony in a booth with bullet-proof glass windows, embassy staff ask exiting Americans whether they are acting voluntarily and understand the implications of giving up their passports. They pay a fee of $450 to renounce and may incur an “exit tax” on unrealized capital gains if their assets exceed $2 million or their average annual U.S. tax bill is more than $151,000 during the past five years.

The UBS settlement led to about 33,000 voluntary disclosures to the IRS in the three years through 2011 and repatriation of billions of dollars to the United States. Swiss banks saw their offshore North American assets shrink significantly.

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Discussion

One thought on “Americans denouncing their citizenship is gaining popularity with record numbers in 2011

  1. Reblogged this on Machholz's Blog and commented:
    This is an intresting read!

    Posted by machholz | May 4, 2012, 7:17 pm

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