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“Renouncing citizenship is an option chosen by increasing numbers of Americans. A record 1,780 gave up their U.S. passports last year compared with 235 in 2008,” Bloomberg reports.
And if you think that’s bad, wait until the much-dreaded Foreign Account Tax Compliance Act (FATCA) takes effect January 1, 2013. Some analysts predict FATCA will boost the number of renounced U.S. citizenships exponentially, especially among Americans living abroad.
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“Under the FATCA legislation, the U.S. will require all of its citizens to report their worldwide assets and earnings to the Internal Revenue Service (IRS), regardless of where they live, how long they have lived there, or whether any money is owed,” Georgina Lavers reports.
“Similarly, foreign financial institutions will also be required to disclose such information of any American clients that they may have,” she adds.
Nigel Green, chief executive of the deVere Group, a financial consulting firm, backs up this claim:
Over the last six months, we have received a 22 per cent increase in the number of enquiries from American expatriates around the world who tell us that they are considering the drastic step of switching their homeland citizenship to that of their adopted countries.
The majority of these US expats are being prompted to consider this due to the complexity of the reporting process to the IRS, plus the threats of heavy penalties, including for previous, inadvertent non-compliance.
This sense of anxiety is compounded by the fact that a growing number of Americans are being left stranded by their foreign financial institutions as all banks and wealth management firms will also have to declare the assets of their American clients – and this process is perceived as too costly and burdensome, meaning many are refusing to deal with US citizens.
But wait! There’s more: According to Green, foreign firms have recently started to turn down American applicants for jobs where signatory authority is required.
Why? Because those accounts would be subject to the new tax legislation.
“The fact that a growing number of the six million US citizens who happen to live overseas are being refused bank accounts outside America, or that they are being turned away from jobs as that will mean opening up firms’ accounts to U.S. bureaucrats, or because it could very well discourage foreign companies from doing business with American ones, is clear evidence that this legislation has serious, unintended negative consequences,” Green told TheBlaze in an email.
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