While nearly all of us have said - one time or another - we’re mad about something and want to move to another country, few of us have packed up for the trip. But, last year, not only did a record number of Americans flee the good ol’ U.S. of A., they also renounced their citizenship. Just quit!
The exact number - 2,999 - is 217% more than the year before.
It’s likely some left with hurt political feelings. But the Treasury Department blames three other things: increased awareness of an obligation to file U.S. tax returns by U.S. citizens and U.S. “tax residents” living outside this country; the ever-increasing burden of complying with our tax laws and fear generated by the potentially bankrupting penalties for failure to file tax returns when an individual holds substantial non-U.S. assets.
In other words - they reason - file or flee.
This country is one a very few requiring its citizens permanently living abroad to continue filing returns and paying taxes in the nation of citizenship. And the policy is very actively pursued. In 2009, UBS Bank of Switzerland was fined $700 million for providing services to more than 4,000 U.S. account holders on the tax evasion list. Department of Justice and other fed agencies regularly publicize names of banks and other sources who aid in hiding wealth of Americans as well as the names of the “hiders.”
Filing forms are quite complicated and there are lots of ‘em. Next year, the recently enacted Foreign Account Tax Compliant Act will require foreign financial institutions to report accounts and other holdings of American citizens to the I.R.S. Every year.
So, a lot of folks with a lot of assets decided to pack up and leave. For good. And a lot of ‘em paid a large “exit tax” on their way out the door. (more…)