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More than 5.5 million Americans living abroad are tempted to renounce their U.S. citizenship.
That was the finding of a new survey by deVere Group, a financial advisory firm, which revealed that 73 percent of Americans abroad said they have considered or are considering giving up their U.S. passport.
According to Forbes, that 73 percent represents a staggering 5.5 million Americans. “If all those considering renouncing followed through, it would be the biggest spike ever in renunciations,” Forbes said.
Federal Register data shows that renunciations soared by 39 percent this year, following the implementation of FATCA, the Foreign Account Tax Compliance Act. While 560 Americans relinquished their citizenship in the third quarter of 2013, 776 Americans handed over their passports last quarter. In the past five years, more than 9,000 Americans living abroad have given up their nationality.
The U.S. taxes its citizens based on their worldwide income, no matter where they live. FATCA, which can help the U.S. identify tax evaders, is driving the increase in renunciations, according to CNBC.
FATCA, which came into effect on July 1, requires foreign banks, investment funds and insurers to hand over information to the U.S. Internal Revenue Service (IRS) about accounts with more than $50,000 held by Americans. The controversial tax law is intended to detect tax evasion by U.S. citizens via assets and accounts held offshore.
FATCA also requires U.S. financial institutions to withhold a 30 percent tax on payments made to foreign banks that don’t identify and provide information on U.S. account holders, Bloomberg said. Some banks have turned away U.S. expatriates as a result of the new regs.
Nigel Green, founder and chief executive of deVere Group, told CNBC:
It is our experience that most Americans are extremely saddened at the prospect of giving up their U.S. citizenship to avoid the harsh implications of a new and utterly flawed tax law. 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.
So far this year, 2,353 have renounced their U.S. citizenship, Bloomberg said.
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