A growing number of Americans are renouncing their U.S.
citizenship and handing in their passports at faster rates in an effort to
avoid rising high tax rates and complicated tax
law, according to a newly-published government report.
The Internal Revenue Service released its Quarterly
Publication of Individuals who have chosen to Expatriate in the Federal
Register. The findings reveal that during the fourth quarter of 2012 - ending
on December 31 - 45 Americans renounced their U.S. citizenship. This number
increased to 679 during the first quarter of the year, ending on March 31, and
jumped by 1,130 during the second quarter alone.
The spike in the number of people renouncing their
citizenship has largely been attributed to the upcoming implementation of
the Foreign Account Tax Compliance Act (FATCA), which will require foreign
financial institutions to disclose more account information on assets and
investments held by U.S.
taxpayers. The new tax law is expected to provide for more transparency, build
an international network of institutions combating tax evasion, and lower the
prevalence of tax law violations. New penalties recently announced by the
government revealed that Swiss banks that want to avoid criminal lawsuits may
be required to pay as much as 50 percent in penalties for hiding foreign
accounts held by Americans. This move is expected to greatly diminish the
viability of Swiss tax havens.
As these penalties and further pressure on foreign
institutions continues, some Americans who can no longer gain favorable tax
treatment by hiding assets overseas have opted to renounce their citizenship to
legally avoid American income tax. However, some analysts agree that the FATCA
is not the sole driver of the spike in renounced citizenships recently. An
increase in capital gains and income tax rates in 2013 may also be a
component in the high number of renunciations, the San Francisco Gate reports.
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