One of the offshore account stories we’ve been following in this blog is decision by many Americans living abroad to give up their American citizenship because of the burden of complying with stepped-up foreign account compliance requirements.
We wrote about this, for example, in our September 27 post last year.
In today’s post, we will update you on the story. Our main point will be that passport renunciation is continuing to occur in large numbers.
In the first three months of this year, more than 1,000 U.S. taxpayers who are living abroad gave up their passports. This number includes both U.S. citizens and green-card holders.
Last year, nearly the number of U.S. passport renunciations reached nearly 3,000. But the numbers for this year are already on a pace to exceed that number.
Fuller implementation of the Foreign Account Tax Compliance Act (FATCA) is likely to be one of the factors driving this increase. FATCA imposes various requirements on foreign financial institutions to share data about their U.S. clients with U.S. authorities.
But even without FATCA, the number of passport renunciations has already been rising for the past five years. Renunciations rose in response to stepped-up offshore account enforcement by U.S. authorities. This enforcement threatened not only stiff civil penalties, but also included the possibility of criminal charges for certain types of offshore account reporting violations.
Indeed, the number of criminal prosecutions that U.S. authorities have initiated in the last five years exceeds 100. And more than 43,000 taxpayers have been forced to pay back taxes, interest and penalties on their foreign accounts.
But the offshore crackdown by Uncle Sam has also resulted in more and more Americans living abroad choosing to cut their ties to the U.S. Nearly 8,000 taxpayers have done so since 2009. By comparison, the number who did so in the entire previous decade was less than 5,000.
Source: The Wall Street Journal, "Expatriate Americans Break Up With Uncle Sam to Escape Tax Rules," Liam Pleven and Laura Saunders," June 16, 2014