Thread: Tough tax rules see expats ditch US passports

By Katy Barnato | CNBC – Wed, Sep 10, 2014 8:22 PM AEST




Expatriate Americans are renouncing U.S. citizenship in record volumes because of increasingly onerous tax-filing requirements-and the number doing so is likely to continue rising.

Around 6.32 million Americans (excluding military) live abroad-about as many as who inhabit the state of Tennessee. The majority of expats are based in Europe, but growing numbers live in the Asian financial hubs of Tokyo, Singapore and Hong Kong.
These émigrés have been swept up in a government crackdown on tax evasion, following well-publicized investigations into Swiss banks like UBS (Swiss Exchange: UBSN-CH) and Credit Suisse that are alleged to have helped Americans conceal money abroad.

The result is that increasing numbers of expats are opting to relinquish their passports.

In the first six months of 2014, 1,577 Americans expatriated their citizenship, according to data from the IRS- the U.S. tax authority.
Last year as whole, 2,999 Americans officially cut their ties to the U.S.-over three times more than in 2012 and far above a previous record of 1,781 in 2011.
"We probably get two or three calls a day from people saying they want to relinquish citizenship. That would have much rarer six or seven years ago, maybe once every couple of months," Scott Michel, the president of tax law specialist Caplin & Drysdale, told CNBC.

Michel was one of several lawyers and financial advisers across the U.S., Europe and Asia who told CNBC that more Americans were requesting advice on expatriating.
"What is really driving Americans to expatriate is not that they do not want to pay taxes. What is driving them crazy is that now filling out tax returns is much more complicated-it requires tremendous work in terms of tax-record keeping and then it can cost thousands of dollars to get a competent person to fill it (the tax return) out," David Kuenzi, the founder of Thum Financial Advisors, told CNBC.

A particular bugbear is the Foreign Account Tax Compliance Act (FACTA), which came into force at the end of June this year with the intention of combating tax evasion. It requires all Americans to provide the IRS with detailed information on their foreign financial accounts and offshore assets, and also requires that foreign financial institutions divulge any accounts held by Americans, as well as any entities in which Americans have financial interest.

This latter point has proved controversial, with some countries claiming it violates local laws, and expats saying that certain banks are now unwilling to service them due to the increased administrative burden and the risk of misfiling to the IRS and being hit by penalties.

Individuals can also be hit by steep penalties for misfiling, even by accident. Fines start at $10,000 and criminal charges can apply if the IRS decides information was withheld "willfully".
"My filing requirements and possible penalties are very much different (to U.S. residents)," Jim Rogers, a renowned U.S. investor who lives in Singapore, told CNBC. "It is treating Americans who live abroad differently-you would think it is some kind of discrimination."
Rogers, who was born in Baltimore, said that relinquishing citizenship "crosses the minds of everybody lives abroad".
"I know three or four Americans who are basically being forced to give up citizenship. If you make simple mistakes it could cost you-it could be a criminal offense, or at least a very financially onerous one," he told CNBC.

The U.S. is the only country in the world which levies taxes on the basis of citizenship rather than residency-meaning people can be liable to the IRS without ever having lived in the country, if they hold a U.S. passport or green card.
CNBC spoke to one such citizen-who asked to remain anonymous due to the "very long arm" of the IRS-who was born and raised in London but holds a U.S. passport through his American father.
A trainee obstetrician, he mulled cutting his U.S. ties after his sister was threatened with a hefty fine for accidentally misfiling.
"Giving up citizenship would be incredibly difficult to undertake from an emotional standpoint," he told CNBC. "However, financially you have to be ever so careful...It is something I have to consider in the future."

Renouncing U.S. citizenship is neither easy nor cheap however. Citizens must undergo at least two intensive interviews with consular officers and renunciation is subject to final approval by lawmakers in Washington.
Would-be expatriates must also pay both a fee and an "exit tax", although the latter only applies to those who meet a minimum income or net worth threshold, or have failed to comply with federal tax obligations.

This month, the fee for renunciation will rise five-fold to $2,350. Justifying the increase, the Department of State noted that demand for expatriation had increased "dramatically" since a fee of $450 was set in 2010.
U.K. expats may also soon feel the long arm of the taxman. Last month, the British government launched a consultation on whether non-residents should cease to benefit from the £10,000 ($16,100) tax-free allowance which all Britons are currently guaranteed. The move was criticized by the U.K. media, with the Daily Telegraph newspaper headlining with "Expats face £400 million tax raid".
-By CNBC's Katy Barnato

https://au.finance.yahoo.com/news/to...102239667.html

Much ado about nothing. A relatively tiny number of self-described tax cheats.

Fine. Let them go get citizenship elsewhere, and pay taxes there.

Originally Posted by Davis Knowlton

Much ado about nothing. A relatively tiny number of self-described tax cheats.

Fine. Let them go get citizenship elsewhere, and pay taxes there.

I hear it's easy to get a Liberian or Sierra Leone passport.

Originally Posted by Davis Knowlton

Much ado about nothing. A relatively tiny number of self-described tax cheats.

Fine. Let them go get citizenship elsewhere, and pay taxes there.

There are a large number of people who were born there, left as a baby and kept the passport. They are now finding out the should have been making returns. The embassy for years happily kept giving out passports without a "Oh, by the way...."

For the really unlucky ones, the fact that they paid tax in their country of residence makes no difference as there may not be a double taxation agreement in place.

...and as said, if you DO want to give the passport back - good luck as you will be taxed on every single asset you currently own.

Much ado about nothing? Not really. There will be a lot of people out there who will be badly hurt.

^Real stretch. X gets a US ppt. as a baby, then goes abroad and doesn't return and knows nothing about tax liability?

X would have had a 5 year ppt. So, by the time X is 21, he would have had to renew his ppt at least twice. Where has X been living. On what visa status?

If X has never returned, but has been earning money abroad, it's free from US tax liability up to something like 80K, which X probably didn't exceed given X is too dumb to understand tax liability.

Embassies have no responsibility to provide tax advice.

Far fetched scenario in my opinion.

People are trying to avoid paying taxes. Period. If they get caught, yes, there will be pain.....in the US and almost all other countries, many of which tax at a much higher ratel than the US.

The only thing that bothers me is that American Corporations, Apple being a prime example are still holding billions of Dollars off-shore to avoid taxes.

Why not do the same to corporations, especially since they are fictional creations of the State and have no natural rights?

I've never had any problem with the IRS.

Originally Posted by BobR

The only thing that bothers me is that American Corporations, Apple being a prime example are still holding billions of Dollars off-shore to avoid taxes.

Why not do the same to corporations, especially since they are fictional creations of the State and have no natural rights?

I've never had any problem with the IRS.

If they have no natural rights, why are they allowed to lobby and influence politicians?

Originally Posted by Mr Earl

Also in adherence to the constitution there is no legal statute compelling anyone to file a tax return. The USA tax system is an amazing game of bluff and terror.

If you refuse to comply the cant touch you, if you comply they terrorize you.

Just in case anyone would think about taking Earl as a serious or responsible person,……….. don’t.

Originally Posted by Mr Earl

The only way to get caught avoiding taxes is to file a tax return.

Well done.

Now please go and read the OP carefully. Foreign banks are now required to report to IRS accounts of US citizens. In addition (not in OP) foreign insurance companies are now required to report new policies to the IRS.....

^ I eave the US as a child and move to Oz.
For whatever reason I choose not to become a AU citizen and stay a permanent Resident in which case all this is moot as I would use that basis to open accounts. And last time I opened an account with an Oz drivers licence I don't recall being asked if I was a US citizen...

IRS would not know I existed.

And if they did, chances of them actually prosecuting me for tax evasion unless I went there? None.

They could mess with you at passport renewal time, but are they?
In that event you have enough local ID to pass for a local anyway. A resident in Ox who already has banks and drivers lic would never in their life have to prove citizenship.

Originally Posted by Necron99

Originally Posted by BobR

The only thing that bothers me is that American Corporations, Apple being a prime example are still holding billions of Dollars off-shore to avoid taxes.

Why not do the same to corporations, especially since they are fictional creations of the State and have no natural rights?

I've never had any problem with the IRS.

If they have no natural rights, why are they allowed to lobby and influence politicians?

Because the politicians like the money, obviously.

Originally Posted by Mr Earl

But the 5th amendment to the US constitution says; " you cannot be forced to bear witness against yourself". So the very concept of filing a tax return is unconstitutional in its very nature. Also in adherence to the constitution there is no legal statute compelling anyone to file a tax return. The USA tax system is an amazing game of bluff and terror. If you refuse to comply the cant touch you, if you comply they terrorize you.

Excellent points

Amazing how the US hunts down their expats to pay for more bombs to drop on far-away brown people.

Glad I'm not from there.

Originally Posted by harrybarracuda

Originally Posted by Davis Knowlton

Much ado about nothing. A relatively tiny number of self-described tax cheats.

Fine. Let them go get citizenship elsewhere, and pay taxes there.

I hear it's easy to get a Liberian or Sierra Leone passport.

..or even a Filipino passport.

Originally Posted by Tarquin Chucklefucc

Originally Posted by Mr Earl

But the 5th amendment to the US constitution says; " you cannot be forced to bear witness against yourself". So the very concept of filing a tax return is unconstitutional in its very nature. Also in adherence to the constitution there is no legal statute compelling anyone to file a tax return. The USA tax system is an amazing game of bluff and terror. If you refuse to comply the cant touch you, if you comply they terrorize you.

Excellent points

Amazing how the US hunts down their expats to pay for more bombs to drop on far-away brown people.

Glad I'm not from there.

They are not excellent, they are puerile.
You can use the same argument to say a kited cheque or other falsified document is against the constitution.
No one holds a gun to your head and "forces" you to fill in a tax return. You submit it voluntarily. If you happen to lie on it, more fool you.

Originally Posted by Necron99

No one holds a gun to your head and "forces" you to fill in a tax return. You submit it voluntarily. If you happen to lie on it, more fool you.

And if you don't fill in a tax return what are the consequenses?

Originally Posted by Necron99

Originally Posted by Tarquin Chucklefucc

Originally Posted by Mr Earl

But the 5th amendment to the US constitution says; " you cannot be forced to bear witness against yourself". So the very concept of filing a tax return is unconstitutional in its very nature. Also in adherence to the constitution there is no legal statute compelling anyone to file a tax return. The USA tax system is an amazing game of bluff and terror. If you refuse to comply the cant touch you, if you comply they terrorize you.

Excellent points

Amazing how the US hunts down their expats to pay for more bombs to drop on far-away brown people.

Glad I'm not from there.

You can use the same argument to say a kited cheque or other falsified document is against the constitution.

Very different matters I reckon.

Look at the chart below. When you pay taxes in the US you are ultimately contributing (to a huge extent) to supporting the horror the US military exports.

Not saying people would want that - but that's what the money goes on.

Originally Posted by Necron99

Originally Posted by BobR

The only thing that bothers me is that American Corporations, Apple being a prime example are still holding billions of Dollars off-shore to avoid taxes.

Why not do the same to corporations, especially since they are fictional creations of the State and have no natural rights?

I've never had any problem with the IRS.

If they have no natural rights, why are they allowed to lobby and influence politicians?

Good question, why do we even have or allow a lobbying industry? It's a multi-billion Dollar industry that peddles influence and access to those in power and it operates in the open readily available to anyone or any corporation with enough cash to hire them

Originally Posted by BobR

Good question, why do we even have or allow a lobbying industry? It's a multi-billion Dollar industry that peddles influence and access to those in power and it operates in the open readily available to anyone or any corporation with enough cash to hire them

There is a thing called the Constitution of the United States.
Following multiple cases adjudicated before the courts, which included lengthy legal arguments, it has been decided that lobbying is part of the guarantee of free speech protected by the U.S. Constitution.

You make the assumption that lobbying is dominated by the corporate world. Some of the powerful groups are farmers, labour unions (especially teachers, police and firemen), non profit "interest groups" such as environmental groups, ethnic associations (remember the Irish affiliated groups who lobbied on behalf of Sinn Fein?), and consumer groups. It's not just the dreaded lobbyists of the evil Koch brothers (and yes they can be termed evil) or the petro industry or big pharma.

The lobbyists make for some curious bedfellows. There are community groups and small business associations who lobby against defense base closures which could save the U.S. tax payer billions of $$$, there are the farmer groups who supported the screwed up school lunch programs that have children fed processed high fat, high sodium meals, there are the law groups who protect their vested interests in respect to personal injury and product litigation, to human rights groups who lobby on behalf of immigration reform etc.

Everyone is in favour of a crackdown, as long as It doesn't impact them. Unfortunately, no one of any political stripe is willing to clip the wings of lobbyists, not even the Ron Paul Institute for Peace and Prosperity.

Agreed.

Originally Posted by Davis Knowlton

Much ado about nothing.

I'm sure there are (a few) people who are so dead set against paying taxes that they would go to the extreme of renouncing citizenship to save (a few) bucks.

The first thing you have to do is find a country with a "friendlier" taxation platform, so, where is this economical country, how much do they charge for your new citizenship and how much will it cost to maintain the equivalent standard of living in this new found Shangri-La?

Perhaps all the rich need to do is find a good accountant and a tax lawyer to use all those tax loopholes, salting their money away in all those tax shelters, we hear so much about. This should be a more feasible, and cheaper, methodology than renouncing citizenship.

I find it hard to connect the dots... can a person having so much money be so enamored with their money that they would actually go through the trouble of renouncing citizenship to save money? Something they have a great deal of.

Or, in other terms, Is the US personal wealth taxation so out of the norm that renouncing citizenship is a cost effective exercise? Or, in truth, is there a more deep seated reason behind the renunciation?