Last year, at least 1,788 people renounced their U.S. citizenship; many of them did so due to heavy taxation.
In actuality, the number is probably higher. The Internal Revenue Service releases the names of those who give up their citizenship (referred to as “name and shame”), and some who renounced say they haven’t seen their name on the list yet. The IRS began listing former citizens in 1998; last year’s number set a record.
In recent times, more and more citizens have given up their citizenship. The number of people who did so in 2011 is more than the total for 2007, 2008 and 2009 combined.
Most commonly, Americans living abroad are the ones who renounce their citizenship. Few countries tax their citizens on income they earn while living abroad, but the United States does. And, reportedly, the tax process for such Americans is quite strenuous.
Two regulations in particular have expatriates disgruntled.
The first regulation stems from a change to the Report of Foreign Bank and Financial Accounts. Americans who fail to disclose overseas bank accounts of at least $10,000, including investments or an account held with a spouse, will be penalized for noncompliance.
“Disclosing joint accounts I hold with my wife and anyone I ever want to do business with — that’s just too much. My wife’s account is none of their business,” Peter Dunn said. Dunn was a dual U.S. and Canadian citizen, but he recently renounced his U.S. citizenship.
The second regulation, the Foreign Account Tax Compliance Act, asks foreign financial institutions to disclose information on U.S. clients.
“They’re going to drop Americans like hot potatoes,” said Francisca N. Mordi, vice president and senior tax counsel at the American Bankers Association. “The foreign banks are upset enough about the regulations that they’re saying they just won’t keep American customers, and it’s giving (Americans living abroad) a lot of sleepless nights.”