More US expats say ‘bye-bye Miss American pie’
The last quarter of 2009 witnessed a dramatic upswing in the number of Americans living abroad who are giving up their citizenship.
According to The Federal Register, a government-owned publication, 502 expatriates renounced US citizenship or permanent residency in the last quarter of 2009. By comparison, there were 235 renunciations in 2008 and 743 for the whole of last year.
Although such a number may sound tiny – according to the latest statistics, about 5.2 million Americans are living abroad – experts say the expatriation trend looks set to rise before leveling off again. Now experts are trying to understand what is motivating people to make such a dramatic decision.
One reason for the sharp spike in expatriations could be connected with US tax laws.
Americans, unlike other nationals, are subject to taxation in both their country of citizenship and country of residence (although, happily, they are exempt from taxes on the first $91,400 they earn abroad).
Additionally, the US government has implemented tougher rules requiring expatriates to report any foreign bank accounts exceeding $10,000, with stiff financial penalties for noncompliance.
“As a US citizen, you're expected to pay US taxes,” writes Liz Pulliam Weston in MSN Money. “To quote IRS publication 54, ‘If you are a US citizen or resident alien, your worldwide income generally is subject to US income tax, regardless of where you are living.’”
According to the website for Overseas Americans Week, an event held in Washington last week that focused on the needs of US citizens living abroad, new changes to the US tax law may make it less attractive for foreign companies to work with Americans.
“As a result of the recent passage the HIRE legislation which included the Foreign Account Tax Compliance Act (FATCA), foreign financial institutions, foreign trusts, and foreign corporations are being required to provide information about their US account holders, grantors and owners, which will only accelerate the growing unwillingness of foreign financial institutions to accept US clients rather than comply with the even more intrusive and onerous regulations.”
The conclusion, some experts fear, is that “American partnerships with foreign investors will be impeded, and foreign investment in the United States will be restrained.”
US law requires those who have more than $10,000 in a foreign trust or bank account to report those accounts on their tax returns. These requirements were implemented so as to prevent Americans from hoarding undeclared assets in offshore banks without giving Uncle Sam his fair share. But with many people still feeling the aftershocks of the last global financial crisis, it is more common to hear – especially among a tax group that spends most of its time abroad – the rallying cry “no taxation without representation.”
“I simply got fed up with paying out so much of my earnings to the government,” says Martin, a freelance photographer working in advertising who forfeited his citizenship last summer. “One day I woke up and came to the conclusion that my US citizenship was not doing me any favors. But I can still go back, and there has never been a problem with getting an American visa.”
According to one individual who relinquished his American citizenship, it was frustration with the US government that motivated his decision.
Brian, an English teacher from Minneapolis who now calls Russia home, said he made his decision to relinquish his US citizenship on the very day that the Iraq war broke out in March, 2003.
“That was the final straw for me,” he said. “Although I don’t have money stashed away in some offshore bank account, I… came to the conclusion that I would not longer help the United States fund its military campaigns around the world.”
Yet the 41-year-old father of two, who is married to a Russian national, says he still wants his children to have American citizenship.
“I figured that it was not my right to deprive them of their American passports,” says Brian, who did not wish to disclose his last name. “That is a decision that they will be able to make for themselves when they are old enough.”
Relinquishing US citizenship seems to be much easier then acquiring it: Brian, who is now trying to gain Russian citizenship, said he only had to fill in a few forms at the US consulate and hand over his passport, which he said was mailed back to him cancelled.
“Now I really am a man without a country,” he says with a nervous laugh. “But my conscience is clear.”
But for anybody who is having thoughts about relinquishing their US citizenship, a caveat courtesy of the US government:
According to the website of the US Department of State: “US Persons intending to renounce US citizenship should be aware that, unless they already possess a foreign nationality, they may be rendered stateless and, thus, lack the protection of any government. They may also have difficulty traveling as they may not be entitled to a passport from any country.”