The number of people renouncing their U.S. citizenship or abandoning green cards has soared to record levels for the third consecutive year, US Treasury Department data reveal.
The surge is likely the result of stringent U.S. tax policy, officials told the Wall Street Journal.
A record-breaking 4,279 individuals decided to call it quits with the US in 2015 in comparison to 3,415 people the previous year, according to a U.S. Treasury
The underlying cause behind the massive increase in renunciations is believed to be the Foreign Accounts Tax Compliance Act (FATCA
), which came into force in 2010. The law imposes harsh penalties for non-compliance, even if people aren’t dodging it on purpose, Andrew Mitchel, an international lawyer who analyzes IRS data, told the Wall Street Journal.
“An increasing number of Americans appear to believe that having a U.S. passport or long-term residency isn’t worth the hassle and cost of complying with U.S. tax laws,” he said.
was passed by Congress in the wake of a scandal involving UBS AG bank, following disclosures made by banker–turned-whistleblower Bradley Birkenfeld in 2009.
The probe resulted in a U.S. government clampdown on banks. The bankers were requested to unveil any information concerning U.S. citizens’ accounts abroad. More than 180,000 banks complied with the government’s demands. The encroachment on foreign banks prompted many of them to scrap business with Americans living abroad, causing some U.S. citizens overseas to give up their passports.
President Obama has hailed the law as a “global standard” in countering tax evasion.
Since the law has come into effect, U.S. authorities have collected $13.5 billion from foreign banking institutions and Americans in taxes and penalties.
The United States is the only nation within the Organization for Economic Cooperation and Development that subjects its citizens to taxes irrespective of their place of residence.
The tax collections have become a major burden for the estimated 7 million or more Americans living abroad, according to the Wall Street Journal.
Unlike many other countries, the U.S. taxes nonresident citizens on income they earn abroad and U.S. laws provide only partial offsets for double taxations when taxes are owed to both the U.S. and a foreign country.
The penalties for noncompliance have also increased dramatically — in some cases from as little as $2,000 to $70,000 annually since 1995.
(Newsmax wire services contributed to this report).
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