Record numbers of US taxpayers are fleeing their home country as the countdown to Foreign Account Tax Compliance Act (FATCA) continues.
US Treasury department statistics show just over 1,000 US citizens handed in their passports or green cards in the first three months of 2014.
The figure is almost 50% higher than the same period last year and only 129 fewer than the record 1,130 who left the US in the third quarter of 2013.
The US Treasury has also revealed a record 2,999 US taxpayers decided to renounce their citizenship and move overseas last year.
The clock is ticking on FATCA, a new tax law requiring all US taxpayers to declare any offshore bank accounts or investments of more than $50,000.
FATCA lobbyists
Campaigners lobbying against FATCA claim the increase in the number of emigrants is due to the law.
However, although the US Treasury publishes a quarterly report disclosing the number of taxpayers giving up their residency status, no explanation of why they are leaving is listed.
Anti-FATCA campaigners also fail to take into account that as the US population grows, so will the percentage of people leaving.
According to the US government, a new migrant enters the USA every 15 seconds and the population stands at around 318 million.
Clearly, 3,000 people leaving a year is a minute fraction of the population, and a big increase on the 189 who gave up citizenship in 2012.
The US is one of only two states that taxes the worldwide income of citizens – the other is the African nation of Eritrea.
Warning for taxpayers
Around 6 million US expats live overseas, and FATCA means they must declare any bank accounts or investments of more than $50,000 in a tax year.
Despite the controversy over FATCA, the law does not change the fact that US taxpayers should report their offshore holdings. They have been required to do so for some years as part of filing their tax returns.
The big change heralded by FATCA is taxpayers can no longer omit declaring the income from these bank accounts and assets because foreign financial intuitions holding the cash must tell Internal Revenue Service (IRS) about any such accounts from July 1, 2014 under the new law.
FATCA then allows the IRS to cross-check reports from reporting financial institutions with tax returns to make sure the correct amount of tax is paid.
The aim is to stop tax cheats failing to give the IRS a full picture of their financial affairs in order to evade tax.
Once again, Lisa Smith, writes a wildly misleading article about FATCA. Yes, record numbers are renouncing US citizenship, but record numbers are not packing up and moving out of the USA. The people who are renouncing ALREADY LIVE OUTSIDE THE USA, most for decades, some for life, but they are now being forced to go through with the FORMALITY of ending their US citizenship.
The reason of course is FATCA in combination with USA’s unique to the world citizenship based taxation laws which are making tax cheats out of people who live and earn permanently OUTSIDE the USA, most of whom are citizens of the countries they actually live in.
Who wants US citizenship when it confers automatic taxpayer status regardless if you never earn a dime of US sourced income and don’t live in USA? It is a shame that people are being forced to give up their birth right, but that is what FATCA in combination with CBT are doing to people living outside USA who happen to have been born in USA (even if they left as babies!).
I don’t see any problem with the policy either… If I’m a US Resident/Citizen living in the US, I choose to do so or don’t choose. If I choose to live, I must abide by rules that have existed for a long time (if not forever). Now, FATCA allows government to ensure (audit) if I’m a law-abiding citizen.
Same goes for someone living outside the country. Now, they are bigger cheats in my opinion. They want to hold on to the benefits of US Citizen without paying their dues and presumably leading comfortable lifestyles outside the country. May be getting their social security from US to pay for their foreign bills, and getting free/cheap healthcare from their host country, and in addition making money on the side. That’s double evasion – not paying your dues, and possibly getting benefits from US taxpayers. Again, all the government is saying is we are going to audit the international bank accounts.
As a US citizen and long-time resident overseas, my opinion is that you and a lot of folks like you don’t understand the dynamics of this law. The vast majority of people affected are anything but ‘fatcats’ and they owe no income tax to the US to cheat on. What is going on is situations like this: the foreign spouse of a US citizen has a bank account. If it is or becomes a joint account and the IRS judges that it has been reported improperly or that improper payments are being made to it, then they can unilaterally confiscate the account balance in amounts like 25% per year. Now, consider the foreign spouse. Suppose that they earned the bulk of the money in that account. They have no voice with the IRS: they are not “in the computer”, they are not a US person and have no taxpayer id. So their natural inclination is not to hold the account as joint with their US spouse. This in turn means that if the foreign spouse dies, the US spouse has to try to make claim to the account in the foreign country. This is just an example — the same kind of thing is playing out on the business side. If a joint venture in a foreign country has a US part-owner, that venture can be subject the backup withholding. The natural inclination of the business partners is to get rid of the US ownership stake. The net effect of these policies is to divest Americans. There is no question of income tax here — the FATCA law goes after ASSETS and not INCOME. There are so many misunderstandings about the unintended consequences of this law. I will say this: if any American living in the US thinks this law is a good idea, then I encourage them to sit down and write their Congressional representatives to ask that the law be applied to them and their American bank accounts. If Grandma forgets to fill out form 9338blah then let the IRS take 25% of her life savings for every year of violation. If this were the reality — that the law applied to US citizens living the US — the law would have been DOA and every senator and congressman who voted for it would be out of office. As it is, the citizens affected are too few in number to have an effective voice. It’s an absolutely TERRIBLE law that whose consequences are understood by almost no one who advocates it.
“Benefits”? What benefits?
And what the US government is doing is not “auditing bank accounts”. It is making bank accounts of US citizens too expensive for the banks. It’s much cheaper for the banks to just kick US citizens out than to deal with the arcane, complicated reporting to the IRS. Try to live somewhere these days with no bank account…
What I cannot figure for the life of me is WHY go through all this administrative hassle? Why hang this sword over so many people for what? A few bucks?? It would simplify things so much just to institute residence based taxation and God be done with all this hassle. think of the money that would be saved all across the board. This entire FATCA scheme is just not worth the trouble and effort. Not worth the complications it creates for so many millions of people and financial institutions. Are we missing something??
Foreign Attack To Control All
Martin Luther King said it is our moral obligation to follow just laws, but it is also our moral obligation not to follow UNJUST laws. Citizen based taxation is an UNJUST law. It is immoral , unethical and there is no argument that supports it any meaningful way.
no country has any right to tax beyond it borders plain and simple. You would think the good ol USA , being the only country on the planet (sorry Eritrea does not really even count) to do this , would realize how wrong and counterproductive it is but too bad
the DC crowd just can’t ween itself of any kind of nipple it sucks from.
This Lisa Smith has her head permanently stuck in her a-hole.
Do you think she intentionally deceives or is she just a moron?
Moron.