In the latest quarter of 2016, through June 30, 1,158 individuals renounced US citizenship and cut legal ties with the land of the free. How many do you think renounced during the same period 10 years prior?

A grand total of 31.

That equates to an increase of 3,635 percent. The list from the past decade includes celebrities such as Tina Turner in 2013, who lives in Switzerland, and Facebook cofounder Eduardo Saverin in 2012, a Brazilian native who now lives in Singapore. Even the United Kingdom’s New York-born secretary of state, Boris Johnson, is caught in this dilemma and has signaled his intention to join the exodus.

One need not be a mathematical genius to realize that something has changed. US citizenship is more burdensome than it used to be, but why?

First, we need to be aware that renouncing citizenship is no walk in the park or a decision made lightly. As you might guess, it entails plenty of bureaucracy and a fee of $2,350. Prior to 2010, however, there was no charge. A Canadian lawyer charges $500 per person for seminars on how to pull this off successfully, and the Toronto-based Globe and Mail notes that expats in Canada can expect to wait over a year for processing. Some are even flying to other countries for their mandatory meetings to hurry up and be done with it.

There is also a catch: an exit tax (in addition to the fee). This seeks to dissuade wealthy people from expatriating and avoiding the US tax burden. The precise value of the tax gets extremely complicated and varies widely based on the individual, but it underlines the arduous nature of renouncing citizenship. Even the Internal Revenue Service is struggling to update people on what expat obligations are.

In terms of what has changed of late, it is actually a combination of two things: (1) citizenship-based taxation and (2) the Foreign Account Tax Compliance Act (FATCA). As the Tax Foundation notes unequivocally, “taxation is to blame” for the growing exodus.

Only the United States and Eritrea — one of the most tyrannical states on the planet — impose taxation on all citizens, no matter where they reside and earn their incomes. There are some exceptions to this, such as when nations have tax treaties with the United States, but essentially US citizens must pay the same tax rates to the federal government wherever they reside on the planet.

This didn’t mean much to many US expats for generations, since it went largely ignored and unenforced, and there was little way it could be enforced. In steps FATCA.

Introduced in Congress in 2009 and signed by President Barack Obama in March 2010, FATCA sought to build the monitoring and enforcement apparatus that was previously lacking. By 2012, more than half a dozen countries had agreed to its conditions, which meant an end to financial privacy for US citizens banking there. The number of countries has now ballooned, and the Treasury Department lists 113 with some degree of compliance. Only a few renegades such as Russia and China have declined to participate.

In other words, the apparatus for compliance is now in effect, and people are noticing. This cuts both ways, since there will be greater compliance, but this burden begs the question of whether there should be such an international imposition to begin with. Naturally, many people with no presence in the United States do not appreciate being taxed from afar, and now they are feeling the pinch.

Stewart Patton, an attorney based in Belize and the founder of US Tax Services, says people are indeed coming out of the woodwork: “Those who have forgotten about, ignored, or been unaware of their US tax obligations are now deciding to send the IRS all the paperwork it wants from Americans living abroad.”

He further confirms that FATCA has played a major role in the practice he has run for 13 years. “Receiving a letter from a bank is often what motivates Americans living abroad to investigate their US tax obligations,” he says. In his experience, though, mostly “accidental Americans” are the ones renouncing on account of FATCA: “Circumstances caused them to also have US citizenship … which they now view as a burden.”



John Cobin, an economist and construction manager in Viña del Mar, Chile, writes the blog Escape America Now, and is someone who has completed the process and cut all ties with the United States.

He says the “erosion of private-property rights” was the straw that broke the camel’s back, at least for his initial expatriation. Then, unlike citizens from other countries, his tax obligations followed him to Chile, and FATCA reared its ugly head, with banks discriminating against him.

“In Chile, you have complete account privacy, except for American citizens. The banks can give away all sorts of information about your account if you have a US passport.”

Beyond the wealth transfer back to the United States, Cobin did not want the headache of expensive and time-consuming compliance.

“It’s not just [normal] filing,” he explains. “You have to file several forms … I just don’t want the hassle. In Chile, there is no April 15th. Most people don’t even do the electronic 10-minute filing to claim any overage … just for the joy of not having to file a tax return. I just find it extremely liberating that I have no tax returns or anything to file, any declarations, ever.”

Patton of US Tax Services clarifies that the “expense has increased due to more complicated disclosure requirements and stiffer penalties.” However, more competitors in the compliance industry have also driven down prices and offset this somewhat.

There are various ways to respond to this trend of people saying adiós, and thus far the tendency in Congress has been to vilify the likes of Eduardo Saverin. Senator Chuck Shumer (D-NY) even introduced the “Ex-Patriot Act” in 2012, which became known as the Saverin Bill. It would have blocked all ex-citizens from ever stepping foot on US soil again and upped the exit tax to a minimum of 30 percent on all capital gains.

Such plans and attacks against an expat’s patriotism merely divert responsibility. The real question legislators should be asking is how they can offer a better deal and outcompete other nations. The distinction is attracting people to stay, rather than punishing them for leaving. In particular, the policy of taxing US citizens worldwide needs to come to an end, and that would largely vacate the need for FATCA, which is violating the privacy of citizens and imposing compliance burdens on non-US financial institutions in more than 100 countries.

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