Is there a growing number of Americans living overseas that want to give up their U.S. citizenship because of the rigors of the Foreign Account Tax Compliance Act (FATCA)?
A financial advisory firm, the deVere Group, a vocal opponent of FATCA, says the number of American expats that want to end their citizenship is increasing according to a recent poll of U.S. expats. In past polls, the deVere Group has shown a consistently high rate of U.S. expats are so fed up with FATCA that they are ready to take what I consider is an extreme action.
Americans living and working overseas are subject to the rules and regulations of FATCA, which went into effect on July 1. The law requires all non-U.S. financial institutions to report the financial information of American clients with offshore accounts larger than $50,000 directly to the IRS, or face a costly 30 percent penalty tax.
In the latest poll, nearly three-quarters of the 416 American expatriates surveyed last month, or 73 percent, “are tempted to give up their U.S. passports in response to the introduction of FATCA,” say deVere Group officials. This represents an increase of five percentage points from about a year ago when deVere Group officials surveyed Americans abroad about the impact of FATCA. The firm serves 80,000 “mainly expatriate clients globally,” officials say. Approximately 7.6 million Americans are living overseas.
The firm also notes that recent U.S. Federal Register data reveals that the number of American expatriates renouncing their U.S. citizenship has risen by 39 percent “in the three months to September after the new global tax law came into force,” deVere Group officials say.
The actual question in the poll was: “Would you consider voluntarily relinquishing your U.S. citizenship due to the impact of FATCA?” The responses in favor of ending U.S. citizenship consisted of “actively considered it,” “are thinking about it,” or “have explored the options of it,” officials at the firm say.
Almost 30 percent of U.S. expats are resisting changing their status with 16 per cent saying they are not considering relinquishing their U.S. citizenship while 11 per cent do not know.
FATCA opponent Nigel Green, founder and chief executive of deVere Group, says “most Americans are extremely saddened at the prospect of giving up their U.S. citizenship to avoid the harsh implications of a new and utterly flawed tax law,” in a prepared statement.
Yet FATCA’s reporting requirements are “excessively onerous, burdensome and expensive,” Green adds. “Also many non-U.S. banks and other financial institutions will no longer work with Americans which can make living outside the U.S. achingly complicated.” Green urges U.S. expatriates explore investment vehicles intended to help “significantly reduce the impact of FATCA, including supplementary overseas pension plans.”
However, the FATCA foray by U.S regulators shows little sign of slowing down event though reporting and enforcement across the globe are proving to be an ongoing challenge for the U.S.
A recent FTF News Premier Q&A with Micah Willbrand, the director, global AML product marketing at NICE Actimize, touched on the issue of several countries and regions that have not yet file to get their Global Intermediary Identification Number (GIIN) as part of the intergovernmental agreement (IGA) process. “That is a bit of a concern [as to] how to deal with those financial institutions globally,” Willbrand says.
“The other thing that we’re also seeing is there’s going to be more of this formal globalization of FATCA,” Willbrand says. “It’s called the Automatic Exchange of Information [AEI] that the G20 is pushing. That’s going to be modeled after FATCA but it will be more of a global nature. You’ll have England, Germany, France and Middle East sharing information back and forth. That’s coming over the next two or three years, so we’ll probably be saying AEI instead of FATCA.”
Of course, this is exactly what FATCA opponents feared the most – a global taxation system that would not allow anyone to hide regardless of nationality. It’s also true the Internal Revenue Service (IRS) is the envy of many world governments as far as its enforcement of revenue-gathering. By pushing FATCA as it has been, the IRS and other U.S government branches have been creating a blueprint for others to follow.
If FATCA goes global, it would happen after many battles over sovereignty, privacy issues and the reach of IGAs because there would be no place to hide. Every country would have to apply a FATCA-type law to its citizens abroad. Thus expats from anywhere would have to pay taxes to their country of origin or to their new, adopted homeland.
Still, there might be a silver lining in such a crazy scenario because people would no longer need to switch their passports to a country simply to benefit from more favorable tax policies.
Essentially, they wouldn’t be forced to put a price-tag on their citizenship.
Need a Reprint?
“”Every country would have to apply a FATCA-type law to its citizens abroad. Thus expats from anywhere would have to pay taxes to their country of origin or to their new, adopted homeland.””
What? It is perfectly normal for people to pay taxes where they live and work. The only people who need to hide and be hunted down are Americans because with one exception (Eritrea) no other country taxes people who have left! The idea that people are avoiding taxes in their country of residence due to the lack of FATCA type law is absurd.
Other countries don’t need FATCA and their citizens don’t feel the need to hide from the tax authorities of a country where they don’t live. There is nothing for other countries to gain in hunting down citizens for taxes, because they are not due any. The exception, USA!
“Thus expats from anywhere would have to pay taxes to their country of origin or to their new, adopted homeland.”
There seems to be a theory prevalent among Americans that an American can just turn up and work in a country and not pay taxes to that country while also evading taxes to the USA. If an American turns up to live and work in, say, Germany, he will pay taxes to Germany. If more Americans understood the principle of paying taxes to the country where you live and work and receive governmental services, FATCA would not be causing a living nightmare for around 8 million US persons around the globe because the USA ALSO wants taxes from them and treats them as tax evaders for living overseas. The USA needs to join the rest of the world in residence based taxation. The rest of the world has NOTHING TO GAIN by finding where their expats have their money, because they don’t tax non residents,