...And indeed, government statistics
show record numbers of people are renouncing their U.S. citizenship. But
it’s not Trump that has persuaded them to go. It’s taxes.
The IRS publishes the
names of each American who gives up his or her citizenship. The list
comes out every three months, and international tax lawyer Andrew
Mitchel has tallied them
up. In the first quarter of this year, 1,158 people expatriated — more
than 10 times the number in the first quarter of 2008, when Mitchel
began his count. Last year, a record 4,279 people renounced their
citizenship.
Expatriations have grown steadily
since 2008 but began to spike in 2013. That timing undermines the theory
that Trump is responsible. (Back then, he was busy suing talk-show host
and comedian Bill Maher for calling him the spawn of an orangutan.) But
the increase dovetails with the implementation of new federal reporting
requirements and penalties for assets held overseas by U.S. citizens.
The
rules were passed back in 2010 as part of legislation intended to
encourage businesses to hire more employees and jump-start the nation’s
economic recovery. Attached to the law was a provision called the
Foreign Account Tax Compliance Act (FATCA) that was supposed to “detect,
deter and discourage” tax evasion through offshore bank accounts.
The
law requires foreign banks to report whether their clients are
U.S. citizens. The penalty for not complying is stiff: a 30 percent
withholding from the proceeds of the bank's financial transactions in
the United States. That has caused plenty of consternation among foreign
firms, some of which have reportedly closed accounts belonging to
Americans as a result.
The regulations also created new filing requirements for individuals
with assets overseas and increased the fines for missing a form. The
penalty for failing to file is $10,000 per form. The consequences are
even steeper for intentionally not filing a document known as the Report
of Foreign Bank and Financial Accounts, which could result in a fine of
$100,000 or 50 percent of what’s in the bank account — whichever is
greater.
“They’re like, 'Oh my, God, the IRS is going to bankrupt
me,'” Mitchel said of his clients. “People get terrified of this, and
they don’t want to have anything to do with the IRS, and then they want
to renounce.”
Mitchel said that many of his clients have been
paying taxes in the country where they live now and may not have
bothered filing a U.S. return. Most countries in the world expect you to
pay taxes only when you live inside their borders. But two nations
— the United States and Eritrea — require its citizens to pay taxes on
income while living in other countries. And Mitchel said it’s not
just the very wealthy who are chafing under the new regulations. Many of
his clients are moderate-income households and retirees living overseas
who find navigating the morass of requirements more trouble than it is
worth.
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