Wealthy people are renouncing US citizenship: blame the taxes
As it become known, the number of people who renounced their US citizenship in favor of a foreign country hit an all-time high in 2020: 6,707, a 237% increase over 2019. New tax and estate measures proposed by the Biden administration could, if implemented, accelerate this trend. The people who flee tend to be ultra-wealthy, and many of them are seeking to reduce their tax burden. Mind that only the U.S. and Eritrea tax people based on citizenship rather than residency. For most countries, if you are a citizen but don’t reside there, you aren’t taxed in that country.
When numbers started swelling?
In 2010, when Congress passed the Foreign Account Tax Compliance Act, or FATCA, which increased reporting requirements and penalties for expats. FATCA “kind of flushed people out of the bushes,” says Andrew Mitchel, an international tax lawyer based in Connecticut who tracks the numbers. It “effectively deputized all the banks around the world to tattletale on U.S. citizens.” But the Wall Street Journal discovered that the lists aren’t up to date: A lot of people who were reported to have renounced citizenship in 2020 actually did so years earlier.
Who would want to renounce US citizenship?
Some are “accidental Americans,” who were born here but didn’t live here that much. For example, U.K. prime minister Boris Johnson was born in the U.S. but only lived here as a small child, and subsequently renounced his citizenship.) A lot of people who take this drastic step are tech zillionaires: Eric Schmidt, the former Alphabet CEO, has applied to become a citizen of Cyprus. And maybe there will be more of them to seek dual citizenship because of the tax burden. President Biden has proposed raising the top capital gains tax to 43.4%, and while it’s unclear whether that will pass, it did prompt a lot of calls to tax lawyers from people wanting to find out which foreign countries might grant them citizenship. US government spent a lot of money like many other countries to implement anti-covid measures including supporting people who lost their jobs. Ans now government needs to find a way to bring cash flow to the national budget.
A lot of people who would like to renounce US citizenship just can’t get the appointment. With coronavirus shutting down interviews for renunciation, the next lists will only contain relinquished green card holders, who can do it by mail. Says David Lesperance, an international tax lawyer based in Poland who specializes in helping people renounce U.S.
And what about dual citizenship?
But that is not only about taxes. During first pandemic waves citizens of US experienced for the first time in their lives what does it feel to be on a limit. Because many boarders were closed to them, holders of so powerful document – passport of US citizen. Everybody understood that this was not for life. Since the 1st of July 2021 citizens of US are allowed to enter EU, for example. But that doesn’t stop wealthy American people from being interested in getting citizenship by investment. For example, citizenship of Montenegro. Because people want to have insurance of a kind, they want to be protected and stay above any situation.
Source: AXIOS
