Citizenship renunciation and offshore account requirements
In the last few years, U.S. authorities have stepped up their efforts on multiple levels to crack down on a perceived problem with the use of offshore accounts to evade U.S. taxes.
One of these levels has been to offer incentives for taxpayers with undisclosed foreign accounts to participate in voluntary disclosure programs. These programs have offered partial amnesty to taxpayers with previously undisclosed accounts who meet certain conditions.
Another level is the new requirements for offshore account reporting under the Foreign Account Tax Compliance Act (FATCA). After Congress passed FATCA in 2010, a complicated process began for ruling out new reporting rules. That process is still ongoing.
U.S. authorities probably did not intend that stepped-up offshore account enforcement would lead to an increase in the number of U.S taxpayers giving up their citizenship or green card. But that appears to be what is happening in Texas and elsewhere.
It is certainly understandable that someone would not want to pay taxes in more than one country. But that said, it is of course a big step to give up U.S. citizenship. After all, U.S. citizenship has long stood as a coveted status that millions of people around the world have aspired to.
But government data shows an undeniable spike in the number of U.S. taxpayers who have essentially opted out of the new offshore account regime. So far this year, the total number of people who ave given up either their American citizenship or their green cards exceeds 1,800. By comparison, just five years ago, before Congress passed FATCA, the number of citizenships renunciations was only around 300.
To be sure, giving up citizenship isn’t necessarily a quick fix for taxpayers. It does not remove the possibility of tax evasion charges for previous years. But the increased numbers of renunciations certainly says something about increased offshore compliance demands.
Source: KFOX14, “Thousands giving up U.S. citizenship to avoid taxes,” Ruben Veloz, September 5, 2013