“More Americans than ever are cutting their official ties with the United States,” said Green, a known critic of FATCA. “For the third consecutive year, a record number of people have handed back their US passports or green cards.
“This year the number is up by more than 20%.”
Financial pariahs
The Foreign Account Tax Compliance Act (FATCA) became law in March 2010. It targets tax non-compliance by US taxpayers with foreign accounts or offshore assets.
But it has had the unintended consequence of turning millions of law-abiding Americans based outside the US into “financial pariahs”, Green said.
“Foreign financial institutions now routinely refuse to handle American clients – even if they have been clients for years – as it is too much trouble and too costly to comply with FATCA’s onerous rules.
“Most Americans abroad are proud of their citizenship and indeed many find it an integral part of their identity when living overseas. Therefore, giving up citizenship is a distressing idea and something they wouldn’t do unless they felt there was no alternative.
“As such, and because of the other financial implications of doing so, such as exit taxes, I would urge anyone who is considering giving up their US passports for financial reasons [but who doesn’t want to], to seek specialist advice.”
Hefty penalties
“The US authorities are taking this project very seriously and Americans must ensure that they are FATCA-compliant. The penalties are hefty.
“However, there are several well-established, bona fide, compliant ways that US expats can mitigate the often unbearable burden of FATCA. These include an additional overseas pension contract that’s specifically designed for US taxpayers with assets in their country of residence,” Green said.
