Offshore Tax Compliance: How Many People Choose to Give Up Their Passports?
U.S. tax authorities began a stepped-up enforcement campaign on offshore account reporting requirements in 2008. It hasn’t really let up since.
Indeed, with the passage of the Foreign Account Tax Compliance Act (FATCA), these requirements have become even more burdensome for U.S. taxpayers with foreign income or assets.
The burden is such that an increasing number of people are choosing to give up their U.S. passports. How many people have done this? In this post, we will answer that question.
Last year, nearly 4,300 U.S. citizens and green-card holders gave up their passports in 2015. According to CNNMoney, the exact number was 4,279. This was a 20 percent increase over the year before.
It was also the continuation of a trend. The number of U.S. taxpayers who their up their citizenship or long-term resident status has set records for each of the last three years. Of course, not all of these renunciations were due to tax issues. But for many of them, the difficulty of complying with all of the regulations is certainly an issue.
When Congress passed FATACA in 2010, it was supposed to help fight tax evasion on a global scale. The Treasury Department has been working to implement it by working out inter-governmental agreements (IGAs) with other countries.
The new regulatory structure does not only affect individual taxpayers. It also imposes certain information-sharing obligations on foreign financial institutions.
As a result, many foreign banks are reluctant to do business with Americans. Some of these banks even refuse to do so – making it hard for many U.S. expatriates to conduct their financial affairs.
Given that there are millions of U.S. taxpayers who live abroad, the new offshore compliance regime affects a lot of people. And the increasing number of passport renunciations is a key indicator of their dissatisfaction.
