Yahoo Finance Americans Are Still Giving Up Their Citizenship at Record Rates
Wave bye-bye to Aaron Adkins and William Acheson. Say so long to Elena Zona and Sheila Zyngier. Those names are the start and end of a long list of former Americans who turned in their passports during the second quarter of the year.
All told, those four people and 500 Americans renounced their citizenship last quarter, compared to 461 during the same period in 2015. The increase, which comes after 1,158 Americans turned in their passports during the first quarter, means the U.S. is on track to set another record for what the U.S. Treasury Department calls “Individuals who have chosen to expatriate.”
To put this in context, fewer than 300 people chose to cease being Americans in all of 2006, meaning renunciation rates have arisen about 15-fold in a decade.
So why are so many folks saying so long to Uncle Sam? The Treasury Department, which is obliged to publish quarterly lists, doesn’t offer any explanations.
But the best guess is probably not Republican presidential candidate Donald Trump (yet), but the the U.S. tax system.
According to Max Reed, a cross-border tax lawyer based in Vancouver, Canada, he sees an average of two Americans per week come into his office looking to renounce their citizenship.
“There's a lot of them who are tired of the hassle and headache and expense of complying with US tax rules,” says Reed. “Most of them are U.S. citizens who've lived abroad for a long-time.”
He added that, under new regulations known as FACTA, the Treasury Department has grown much more aggressive in pressing foreign banks to disclose assets owned by American citizens.
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Unlike nearly every other country in the world, the U.S. taxes individuals on the basis of their citizenship--not their place of residence--meaning many long-time expats can face onerous reporting and payment obligations. While tax payments to a foreign country can offset U.S. tax obligations, Americans often owe additional money based on capital gains related to a their home or other assets.
Penalties for non-payment are stiff: they can be $10,000 per bank account and, if the U.S. believes the non-payment was deliberate, it will be the greater of $100,000 or half the value of the account.
For those who choose to throw in the towel and renounce, even that process is not cheap or easy. Those who want to cut ties must pay back taxes for five years, plus an exit tax in some cases, and then make an appointment at a U.S. consulate to formally give up citizenship.
“It's a catch-22--you have to get right with the U.S. before you can get out,” said Reed.
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