By Matthew Feeney – Earlier this month it was reported that the number of Americans renouncing their citizenship increased sixfold in the second quarter compared to last year. According to The Wall Street Journal, more Americans renounced their citizenship in the first two quarters of 2013 than the whole of 2012 combined. The increase comes ahead of a July 2014 deadline (which has been moved back six months) imposed by an absurd piece of legislation called the Foreign Account Tax Compliance Act (FATCA), which compels foreign financial institutions to disclose the holdings of their American customers to American authorities as part of the U.S. government’s latest attempt to crack down on Americans who avoid taxes by keeping assets abroad.
Of course, American authorities can’t legally force a foreign entity to do anything. However, they can threaten to impose a30 percent withholding tax on income from American sources on a foreign financial institution if those institutions don’t comply with the U.S. Treasury Department’s demands, thereby turning foreign businesses into an IRS enforcement tool. The recent news of the huge increase in the number of Americans renouncing their citizenship is only the latest reminder of not only the arrogance of the IRS but also of the fact that American tax laws place an unreasonable burden on American who live abroad.
One of the most notable instances of an American renouncing his citizenship is Eduardo Saverin, the Brazilian-born co-founder of Facebook, who has lived in Singapore since 2009. Ahead of Facebook’s IPO Saverin renounced his American citizenship, although Saverin denied that his decision was based on economic incentives. Saverin’s decision upset some legislators on Capitol Hill, and prompted Sen. Chuck Schumer (D-N.Y.) and some of his colleagues to sponsor a bill, which died in committee, called the Ex-PATRIOT Act, which would have punished Americans who chose to make the rational decision to take legal means to move assets and wealth abroad in an attempt to hand over less money to the government. One of the most objectionable parts of Schumer’s Ex-PATRIOT Act is its title. While perhaps a clever backronym, the implication that you must be somehow unpatriotic for living abroad or for choosing to take legal means to lower your tax bill is disrespectful and symptomatic of a worrying attitude towards the relationship between citizens and their government.
What may come as a shock to many Americans is that the U.S. is one of the only countries in the world that taxes its citizens who live abroad. This issue was made painfully aware to me when I moved back to the United States in January 2012 from the U.K.
Paying U.S. tax is and will continue to be a major issue for my family. Among my three siblings, my parents, and myself there are three nationalities represented. All of us are American citizens, some of us are New Zealand citizens, and some of us are British. Only one of these countries requires that each of us submit a tax return every year until we die: the United States.
Perhaps I have an unusual sentimentality attached to my American citizenship because it is something I earned, having become an American citizen in 2009 after a process that is itself a subject worthy of its own article. I am very happy that I am an American and I feel very privileged and lucky to be allowed to live in the U.S. However, this does not mean that I would not reconsider my citizenship if I left the U.S. (at the moment unlikely) and the American authorities decided to hound me every year for the rest of my life.
It’s astonishing that the American government would punish some of the world’s most patrioticpeople by making them choose between their citizenship and the headache that comes with trying to be compliant with awful laws like FATCA. The requirements imposed by FATCA on foreign financial institutions and the punishments that come with non-compliance mean that sometimes foreign banks don’t let Americans open accounts at all.
Instead of seeking to punish Americans who make rational economic decisions, American legislators should perhaps consider how absurd U.S. tax laws are compared with other developed nations. Why not make it so that U.S. taxes are based on residency, not citizenship? While such a move would bring the U.S. in line with other wealthy countries, it would not be conducive to the goal of legislators who passed legislation like FATCA, which is to squeeze every American for whatever money they might owe in order to help finance our overspending government. Reassuringly, even with the growing reach of the IRS there is still something, albeit regrettable, that Americans can do to keep their own money; namely, renounce their citizenship.
The only problem with this article is that it shows that the autor doesn't have a clue. The provisions of FATCA are so draconian that a bank account in the name of a teacher of English as a Second Language – someone maybe making 30,00 per year — is a massive threat to the foreign bank even for a trivial or inadvertent error.
As a result, in many countries, an America citizen cannot open a bank account or buy a house. The guys dumping their citizenship are not 1%-ers who have any number of ways for dodging taxes, they are ordinary people who are being screwed by bureaucrats who are either stupid or uncaring or both..
While some of these people are 'rich' most are not, and did they not leave the US for tax reasons – they were already living outside the US when they made the difficult decision to renounce their US citizenship. It is a travesty that the US government is treating all Americans living overseas (who are on the whole quite patriotic and love the US) as criminals and hunting them down like dogs under threat of draconian tax/FBAR penalties. No other country in the world treats their citizens like this and the US must move to a residence based tax system like the rest of the world (and stop citizenship based taxation). Those giving up their US citizenship do so as a last resort, because of FATCA and it's terrible effects (e.g. not being able to get a bank account in the country you live in, not being able to get a mortgage, not being hired by a non US company because it can result in the accounts of the non US company having to be reported to the IRS…the list of horrors goes on and on). When will the US wake up and see that Citizenship based taxation and FATCA is harming the US and its citizens trying to live a normal life abroad? All of this, and yet US COMPANIES making money overseas are taxed only on their income when they being it back to the states. So Apple and Cisco can keep BILLIONS overseas, but pity the poor US citizen living abroad with an international family that has to comply with FATCA and is just trying to make an honest living in the country he/she chooses to live in.
Something, which unfortunately is not obvious to a large majority of folks, is the fact that calling this country the "United States of America" is becoming a description in name only. If people don't wake up very soon they will come to the realization, at some point (hmmm…maybe not), that the "fundamental transformation" that is taking place will be complete. At this point a more appropriate acronym for U.S.A. would be "Uninformed Socialists of America", later transitioning to the M.S.A., "Marxist States of America". Yep, that is what is being done to us all, the transformation from "America" to a Marxist State. And this always leads to the same thing, eventual government control of almost every aspect of your life and the ensuing loss of most of your freedoms. Will Americans wake up before it's too late? Do you really believe Detroit was an anomaly?
Highly recommend reading Mark Levin's latest The Liberty Amendments and his recourse ideas on this discourse government.
Every Teacher and Student should make this a must read, then pass a test on the book to receive their paycheck and diploma.
Also, it should be optional but strongly recommended for everybody else. I;m still surprised of how many people don't know their rights and allow other people to abuse them just because they think they can't do anything about it.
This is why you shouldnt enforce laws that disadvantage a part of your citizens. It's completely natural that people are doing this
Yep, I honestly dont know what they expected
Of course people do this, because the taxes are unreasonably high! If everyone paid their fair share, including corporations and big companies that always hide expenses or profit in order to pay fewer taxes, believe me we wouldnt have that issue
The IRS is not forcing people to do this. I'm tired of everybody saying the government and authorities are trying to rip them off. in the end, we're all people trying to do our jobs and while the public workers are the most corrupt I'm sure there still is a great deal of people that still do their best to do their job right
Does the government actually realise how desperate people are if they renounce their citizenship for this??
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