3000 Americans renounced citizenship over Tax Laws

Feb 19, 2014 18:50 IST

3000 Americans have renounced their citizenship in 2013 owing to become tired of dealing with intrusive US tax laws and complicated tax filings.

The numbers of Americans renouncing citizenship for 2013 represented an increase of three times over  the average for the previous five years.

imageIn 2008, a total of 231 Americans renounced their citizenship. In 2009 the figure rose to 742 while in 2010 the figure touched 1534. In 2011, the number reached to a high 1781 and in 2012 the figure went down to 933.

Unlike other countries, the US continues to tax citizens on all income, regardless of where it is earned or where they reside. For expats, filing taxes in two countries often means wrestling with a huge mountain of paperwork.

Some of the rush may be caused by Americans hoping to avoid the new disclosure requirements. The new disclosure requirements approved by Congress in 2010, is aimed at recouping some of the hundreds of billions of dollars the government loses each year in unpaid taxes.

The first wave of renunciations in 2010 coincided with a part of the law that requires individuals to report foreign assets worth as little as 50000 USD. That was in addition to a separate provision that forces Americans to disclose foreign bank holdings larger than 10000 USD.

imageThe renunciations dipped in 2012. However, with another part of the law becoming effective the trend of renouncing citizenship is expected to increase. The new provision requires financial institutions to report all foreign accounts held by Americans.

The law has prompted some banks to kick out their American clients rather than comply. Penalties can be high if banks make a mistake reporting US-held accounts, even if they are basic checking and savings accounts.

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