American expatriates are giving up their citizenships at a shocking 6 times more than in the same period last year.
In the first half of this year alone, 1,810 individuals have handed in their passports to United States embassies all over the world.
The US tax laws aimed at offshore citizens are tightening and they now must provide detailed information of all owned assets in addition to any offshore bank accounts.
The US government is the only member of the OECD that taxes their expat citizens and are trying to plug the nation’s deficit by catching attempts at tax evasion.
The Foreign Account Tax Compliance Act was issued by the United States government in 2010 that required all citizens to report their foreign assets to the Internal Revenue Service.
The government is now using FATCA to pressure foreign banks to disclose account information of all their American clients to the US government.
Many countries have already signed in agreement and have begun to reject US clients. As of June 7 of this year countries such as Germany, Switzerland, United Kingdom, Ireland and Mexico have agreed to handover all necessary information to the IRS as of next year.
The deadline for foreign banks to comply is July 1, 2014 after already have being delayed by over a year.
Over 5 million US expats are becoming aware of the new rules and are consequently choosing to renounce their nationality after weighing their options.
Expats must fill out a more complex foreign tax form to hand in to the IRS. In this form all foreign assets must be listed including bank accounts and any stakes in foreign businesses. If they do not comply, they can be fined up to $50,000.
In addition to the threat of a monstrous fine, offshore US citizens are likely to bear additional accounting costs of up to $2,000.
Another burden they must bear is the likelihood of being rejected as clients from foreign banks. This makes it close to impossible for US citizens to take out a mortgage in their country or residence and often difficult to obtain insurance policies.
It has been reported by the US treasury department that FATCA will generate $8.7 billion in foreign tax revenue over a 10 year time frame but this is only a small fraction of estimated money lost from tax evasion.
The US government may be generating money for the economy but this is being done at the cost of losing many of their citizens in addition to speculation from their national residents.