America


Many US expats tempted to give up citizenship over tax issues: survey

by Ray Clancy on October 27, 2014

A large number of expat Americans are tempted to give up their US passports in response to the Foreign Account Tax Compliance Act, a new survey has found.

In the global poll, independent financial advisory firm deVere Group asked more than 400 of its American expat clients if they would consider voluntarily relinquishing their US citizenship due to the impact of FATCA.

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Some 73% of respondents have at least consdiered renouncing their US citizenship

Some 73% of respondents answered that they had ‘actively considered it’, ‘are thinking about it,’ or ‘have explored the options of it.’

Overall, 16% said they would not consider relinquishing their US citizenship, while 11% were unsure.

This is an increase of five percentage points from November when deVere Group, which has 80,000 mainly expatriate clients globally, conducted a similar survey.

The findings come as Federal Register data shows that the number of Americans renouncing US citizenship increased by 39% in the three months leading up to September, after the new global tax law came into force. There are an estimated 7.6 million Americans living overseas.

Purportedly designed as a tool to counteract tax evasion, the Foreign Account Tax Compliance Act has resulted in additional reporting requirements for all US citizens living overseas. FATCA opponents argue that it will do little, if anything, to tackle the important international matter of tax evasion.

‘It is alarming that nearly three quarters of Americans abroad said that they are going to or have thought about giving up their US citizenship,’ said Nigel Green, founder and chief executive of deVere Group.

‘Nationality, especially for an expat, is an incredibly important part of one’s identity and typically it’s a very emotional issue too. It is our experience that most Americans are extremely saddened at the prospect of giving up their US citizenship to avoid the harsh implications of a new and utterly flawed tax law,’ he pointed out.

‘However, it should come as little surprise that such a high number are prepared to do so, because FATCA’s reporting requirements are excessively onerous, burdensome and expensive. Also many non-US banks and other financial institutions will no longer work with Americans, which can make living outside the US achingly complicated,’ he explained.

With most Americans telling deVere Group that they are loath to give up their passports, Green is urging them to speak to a financial advisor in the first instance.

‘Americans abroad who are being adversely affected by FATCA should explore all the available options to them to mitigate the absurd tax law’s effects with an independent financial advisor with cross border experience before renouncing their citizenship,’ he said.

‘This is especially important as there are certain established federal regulations aimed at discouraging Americans from renouncing their citizenship for tax reasons. There are now many vehicles that US expats can use to significantly reduce the impact of FATCA, including supplementary overseas pension plans,’ he added.

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