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WSJ: Americans Renounce Citizenship at Record Clip to Avoid Heavy Taxes

By Dan Weil   |   Tuesday, 13 Aug 2013 07:46 AM

Wealthy Americans living abroad are renouncing their citizenship in record numbers to avoid high U.S. taxes on their investments held overseas.

More U.S. citizens renounced their citizenship in the first half of the year than in all of 2012, and renunciations are running at a pace to make 2013 a record year, The Wall Street Journal reports. The renunciation list for the second quarter hit an all-time high of 1,130 names.

Lawyers tell the paper that the main reason for the renunciations is the Foreign Account Tax Compliance Act (FATCA), which requires foreign institutions to disclose the overseas assets of U.S. citizens to the U.S. government. The law is scheduled go into effect next July 1.

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The idea is to find people who are dodging taxes through offshore investment vehicles.

"With the looming deadline for FATCA, more and more U.S. citizens are becoming aware that they have U.S. tax reporting obligations," Matthew Ledvina, a U.S. tax lawyer at Anaford AG in Zurich, tells Bloomberg. "Once aware, they decide to renounce their U.S. citizenship."

Some Americans are attracted by Hong Kong, where the individual tax rate tops at out at 15 percent. And they're put off as much by U.S. red tape as its tax rates, The Journal reports.

"My decision was less about the actual amount of taxes I had to pay, and more about the system," an investment banker who renounced his U.S. citizenship to become a citizen of Hong Kong tells the paper.

"I'm not an ultra-wealthy dude. It was the hassle with all the paperwork."

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