A staggering number of Americans residing abroad are tempted to give up their U.S. passports in the wake of tougher asset-disclosure rules under the Foreign Account Tax Compliance Act (FATCA), according to a new survey.
The survey by financial consultancy deVere Group asked expatriate Americans around the world “Would you consider voluntarily relinquishing your U.S. citizenship due to the impact of FATCA?”
Seventy-three percent of respondents answered that they had “actively considered it”, “are thinking about it” or “have explored the options of it.” On the other hand, 16 percent said they would not consider relinquishing their U.S. citizenship, and 11 percent did not know.
The survey carried out in September 2014 polled almost 420 Americans living in Hong Kong, China, Indonesia, Thailand, Philippines, Japan, India, UK, UAE and South Africa.
FATCA, which came into effect on July 1, requires foreign banks, investment funds and insurers to hand over information to the U.S. Internal Revenue Service (IRS) about accounts with more than $50,000 held by Americans. The controversial tax law is intended to detect tax evasion by U.S. citizens via assets and accounts held offshore.
“For long-term retired U.S. expats, of which I am one, who are paying significant U.S. taxes, the value of U.S. citizenship often comes to mind,” a U.S. citizen residing in Bangkok told CNBC.
“What do we get in return for our U.S. passport? Only three things in my opinion,” said the 69-year-old, who requested to remain anonymous.
“First of all, a passport that is extremely convenient for worldwide travel, second we can vote in U.S state and national elections and third we can pay taxes on both our U.S. and foreign income. That’s it. When you add the new FATCA policies, it obviously adds more thought to the question: Is it worth keeping?”
It’s alarming that nearly three quarters of Americans abroad said that they are going to or have thought about giving up their U.S. citizenship, said Nigel Green, founder and chief executive of deVere Group.
The survey’s findings follow the release of new data by the Federal Register on Friday, which showed that the number of Americans renouncing U.S. citizenship rose to 776 in the three months to September, up 39 percent from the same period a year earlier.
Incidentally, the U.S. Department of State (DoS) last month hiked fees for processing renunciation of citizenship to $2,350 from $450, saying that it requires “consular officers overseas to spend substantial amounts of time to accept, process, and adjudicate cases.” The fees, which had previously been subsidized, are now reflective of the true cost, it said in a media notes.
“Nationality, especially for an expatriate, is an incredibly important part of one’s identity and typically it’s a very emotional issue too. It is our experience that most Americans are extremely saddened at the prospect of giving up their U.S. citizenship to avoid the harsh implications of a new and utterly flawed tax law,” said Green.
“However, it should come as little surprise that such a high number are prepared to do so because FATCA’s reporting requirements are excessively onerous, burdensome and expensive. Also many non-U.S. banks and other financial institutions will no longer work with Americans which can make living outside the U.S. achingly complicated.”
Many foreign banks and wealth managers have begun turning away U.S. expatriates, deterred by the new regulations that place the reporting burden on financial institutions rather than on individuals.