A recent poll conducted by The Heritage Foundation found that in 2013 alone, a record 3,000 Americans living overseas voluntarily gave up their citizenship or green cards. The percentage increase of expats from 2012 was an overwhelming 221 percent, an increase never seen before in the United States. There has been much speculation as to what caused the concerning increase but the most discussed cause is the passage of the Foreign Account Tax Compliance Act (FATCA).
Passed in 2010, the act took effect on July 1st of this year and it nominally aims to crack down on the use of offshore banks and fight against tax evasion. By forcing foreign banks and other financial institutions to exchange data, the act is incentivizing many Americans to abandon their US citizenship to avoid FATCA’s complexity and overreach.
The previously mentioned Heritage survey revealed that 70 percent of Americans working and living abroad have considered giving up their U.S. citizenship because of FATCA.
Among those who have recently relinquished their US citizenship are some surprising and extremely well known faces.
Perhaps the most famous of the expats is singer Tina Turner. The US embassy in Bern Switzerland confirmed that the famous American singer signed a “Statement of Voluntary Relinquishment of U.S. Citizenship” in October 2013. Ms. Turner has been living in Switzerland since 1995 with her husband Erwin Bach, a German record executive. A Forbes article notes, “While it doubtless wasn’t tax motivated, our tax system doesn’t exactly help.” And “Concerning taxes, it is worth noting that Swiss rates are high.”
What makes FATCA so burdensome is how it inserts the U.S. Government into the financial matters of people who have as little as $10,000 in an account. Combine that with America’s already nonsensical “double taxation” system where citizens living abroad can owe domestic income taxes (even if they did not spend a day in the U.S.), and you have a big reason to cut bait, and almost no reason to retain citizenship any longer.
Social media pioneer, Eduardo Saverin received slightly more criticism from the media for his relinquishment of his US citizenship. The Washington Post explains that the Facebook co-founder renounced his U.S. citizenship to become a resident of Singapore. His spokesman countered, “We are unequivocal in our position that taxes were not a factor in his decision.” However, unlike Ms. Turner’s new home in Switzerland, Singapore’s taxes will favor Mr. Saverin.
Socialite, songwriter and former high-profile Democratic Party fund-raiser, Denise Rich also handed in her U.S. passport. Reuters explained in 2012 Rich renounced her citizenship in for an Austrian Citizenship “and, with it, much of her US tax bill.” But FATCA isn’t just causing the rich and famous to relocate their allegiance to tax-friendlier countries, the act is also having a rather large impact on over 7 million Americans who are living overseas.