If you think residing in America is taxing, just talk to one of the many expatriates who is contributing to a shocking statistic recently discovered: across the globe, people are renouncing their US citizenship in record numbers.
At least 1,788 Americans officially threw away their US citizenship in 2011, exceeding the totals from 2007, 2008 and 2009 combined. The Internal Revenue Service has been keeping a tally of US citizens driven to renouncing that title since only 1998, but last year’s number has officially raised the bar when it comes to calling America quits. What’s more, experts say, is that more and more Americans will soon be saying ‘sayonara’ to Uncle Sam if the federal government keeps up its trend of heavily taxing US citizens abroad.
Out of the 34 countries that belong to the Organization for Economic Cooperation and Development, the United States is the only nation that taxes its citizens no matter where they reside on Earth. As long as a person maintains citizen status, they are expected to send the United States government pennies on every dollar earned no matter where they live, under current law. With the US enacting stricter guidelines in recent years that demand wealthy Americans abroad paying the IRS even more, citizens are voluntarily refusing the perks and protection of the United States in numbers unmatched in recent memory.
“The complexity of international tax law, combined with the administrative burden placed on these taxpayers, creates an environment where taxpayers who are trying their best to comply simply cannot,” explains the IRS in a report published in 2011. “For some, this means paying more US tax than is legally required, while others may be subject to steep civil and criminal penalties. For some US taxpayers abroad, the tax requirements are so confusing and the compliance burden so great that they give up their US citizenship.”
Following up on the trend, Reuters reveals that in recent years more and more millionaires and billionaires have voluntarily removed themselves from the American Empire in order to hold onto their earnings.
“Every dollar you save, you lose to the US tax man,” tax lawyer Matthew Ledvina explains to Bloomberg News. “That’s one reason why people give up citizenship.”
The US attorney, who now works for Anaford AG in Zurich, adds that more and more non-US banks are being pressured by the government to give away their clients’ cash. As a result, fewer banks are willing work with US citizens, even if they have millions or billions to install in their institutions.