Americans Are Renouncing Citizenship Over FATCA Tax Law, Not Donald Trump
The number of individuals who renounced their US citizenship for Q-3 of Y 2016 was the 2nd-highest in history at 1,380, US Treasury Department reported.
The Foreign Account Tax Compliance Act (FATCA), which enacted in Y 2010, and took years to implement, is “having an impact, perhaps bigger than these expat numbers reveal.”
FATCA is designed to ferret out individuals who have unreported offshore bank accounts and other assets. The controversial law requires financial institutions to share information about Americans’ accounts worth more than $50,000.
There are now 18X as many “renouncers” as in Y 2008, with Americans renouncing citizenship up 560% from their Bush (43) Administration high.
The reasons for renouncing can be family, tax and legal complications. Some renounce because of global tax reporting and FATCA.
America charges $2,350 to hand in your passport, a fee that is more than 20X the average of other high-income countries. The US government has collected over $12.6-M in fees since the Fall of Y 2014, after hiking its fee to renounce citizenship by 422%.
“FATCA has been painstakingly implemented worldwide by President Obama’s Treasury Department. It now spans the globe with an unparalleled network of reporting. America requires foreign banks and governments to hand over secret bank data about depositors. Non-US banks and financial institutions around the world must reveal American account details or risk big penalties,” Forbes explained.
“America’s global income tax compliance and disclosure laws can be a burden, especially for US persons living abroad. Like pariahs, they may be shunned because of their American status by banks abroad. Foreign banks are sufficiently worried about keeping the IRS happy that many do not want American account holders. Americans living and working in foreign countries must generally report and pay tax where they live. But they must also continue to file taxes in the US, where reporting is based on their worldwide income,” Forbes says.
The exit when you make it can be expensive too.
If you have a net worth greater than $2-M, or have average annual net income tax for the 5 previous years of $160,000 or more, you can pay an exit tax.
It is a capital gain tax, calculated as if you sold your property when you left. A long-term resident giving up a Green Card can be required to pay the exit tax too.
Sometimes, planning and valuations can reduce or eliminate the tax, but taxed or not, many are headed for the exits.
FATCA and tax rules are the reason a for a growing number of Americans abroad to renounce their citizenship. In a Y 2015 survey, 86% of respondents felt the law needs to be reworked.
Expect the GOP Congress to attack this predatory Obama Admin rule.