record number of yanks said im out

13th February 2014

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Some 2,999 Americans gave up their US passports in 2013, compared with 932 in 2012, and 1,781 in 2011. (See graph, below.)

As long ago as 2010, the number of renunciations was starting to climb, even though few, at that point, had even heard of the Foreign Account Tax Compliance Act, which was quietly signed into law that year, and now is often credited with prompting Americans to head for the exits.

As reported, the trend among Americans to renounce their citizenships so alarmed Solomon Yue, a China-born, naturalised American who represents his home state of Oregon on the Republican Party's National Committee (RNC), that he sponsored a resolution – adopted following a vote last month by the committee at its winter meeting in Washington – calling for FATCA to be repealed.

"I first became aware of the issue that overseas American citizens are forced to choose between their citizenship and livelihood due to FATCA in the international media," he told International Adviser, the day after the vote was taken.

"This hit a raw nerve with me, because my US passport is my freedom."

Yue, who is also vice chairman and chief executive of Republicans Overseas, said he could not help seeing the need some American expats are facing "to choose between their love for their country by not renouncing their citizenship, and the welfare of their families by providing for them" while living abroad, caused by FATCA, as a "modern-day Sophie's Choice".

Echoing Yue's concerns, in January, was Nina Olson, the US national taxpayer advocate (a Congressionally-appointed watchdog). In her 2013 annual report on the IRS, Olsen noted that various programmes aimed at ensuring overseas Americans were paying their fair share of tax, such as voluntary disclosure schemes in use since 2009, had “burdened ‘benign actors’ who inadvertently violated the rules".

Such disclosure programmes had been “punitive, charging average penalties of more than double the unpaid tax and interest associated with the unreported accounts”, Olson added, in her wide-ranging report on the IRS's performance.

As for FATCA, which is due to take effect on 1 July this year, she said it "has the potential to be burdensome, overly broad, and detrimental to taxpayer rights".

'Stand-up argument'

Daniel Freedman is founder and managing director of the London & Capital wealth management office, which specialises in looking after Americans abroad. He said he witnessed the mass frustration of expatriate Americans first-hand last November, when he was part of a panel of experts at a “town hall” event in London that had been organised to provide a forum for learning about how best to handle one's wealth while living outside the US.

“It descended into a stand-up argument, with everyone shouting their disgust at the fact that they couldn’t do something as simple as open a bank account in the country in which they were living, because the banks are all closing down their units that look after Americans,” Freedman said.

Relatively small percent of total

Some experts point out that 2,999 renunciations is a relatively small percentage of the 6 million to 7 million Americans estimated to live overseas.Others say the number would be higher if renouncing were not complicated and time consuming.

David Treitel, an American tax specialist based in London, says he sees the personal toll that the increasingly complicated tax burden expatriate Americans are facing.

"Most weeks I meet a new [expatriate] American client who appears traumatised, betrayed, significantly distressed, in shock or fearful of the IRS and the US tax system," Treitel, managing director of American Tax Returns Ltd, said.

"While different US government departments provide competing figures about the numbers renouncing, there is little doubt that Americans around the globe are giving up their passports in ever greater numbers.

"Sure, they have to have filed five tax returns with the IRS before renouncing, and will need to deal with some steely questions from Homeland Security before they are able to leave, but remaining American carries for many the nuisance, pain and cost of filing complex US tax returns for the rest of their lives outside the United States."