AN all-time record of 1,335 Americans relinquished their US citizenship in the first three months of 2015, the Internal Revenue Service (IRS) reported.
In 2014, a record 3,415 American citizens gave up their citizenship.
With the number for the first quarter of this year, renunciations for 2015 are expected to surpass that of last year.
Data released by the IRS provides the names of Americans who renounced their citizenship but did not indicate their reasons for doing so.
Many Americans living abroad complain about the US tax system, which requires the reporting of worldwide income, offshore bank accounts and financial information. Failure to do so comes with substantial civil penalties that can exceed balances in offshore accounts. Imprisonment is another possible consequence of failure to report such data.
The United States is the only country in the Organization for Economic Cooperation and Development that requires citizens to pay taxes wherever they reside. American citizens living abroad can exclude up to $100,800 in earned income and may qualify for tax credits for payments to foreign governments. However, in most cases, double taxation can only be partially offset. Additionally, US tax liabilities can apply to children born to Americans living in foreign countries.
The paperwork Americans living abroad must file can be so complicated that it requires assistance from professional accountants and lawyers that may charge large fees for a simple tax return.
“These are complicated rules, and these are laypeople who don’t really understand the rules,” said international tax lawyer Andrew Mitchel, according to Bloomberg. “It can be tens of thousands of dollars to file tax returns.”
An estimated 6 million Americans live abroad, and with the increase in expatriates, the US government has raised the fee for renunciation from $450 to $2,350. The figure is more than 20 times the average cost in other high-income countries.
“The cost of compliance with the complex tax treatment of non-resident US citizens and the potential penalties I face for incorrect filings for holding non-US Securities forces me to consider whether it would be more advantageous to give up my US citizenship,” Stephanos Orestis, a US citizen residing in Oslo, wrote in a March 23 letter to the Senate Finance Committee. “The thought of doing so is highly distressing for me since I am a born and bred American with a love for my country.”
The US government has been intensifying its scrutiny of Americans living abroad. In 2010, Congress passed the Foreign Account Tax Compliance Act (FATCA), which requires US citizens with more than $50,000 in foreign assets to report them each year. The law also requires foreign financial institutions to inform the IRS of the incomes of its US customers.
Another provision under FATCA mandates that US financial institutions impose a 30 percent withholding tax on payments made to foreign banks that refuse to identify and provide information about its American customers.
Thousands of financial institutions in more than 80 countries have agreed to comply with the law, although it has discouraged some from doing business with anyone possessing ties to the United States. Institutions that inadvertently fail to inform the US government about accounts held by its citizens can face significant penalties.
Although the Obama administration has faced stiff criticism for the law, it has touted the act as the “global standard” in fighting against tax evasion.
(With reports from Bloomberg, Forbes, FOX, RT, The Hill)
(www.asianjournal.com)
(LA Midweek May 13-15, 2015 Sec. A pg.1)
