'We can no longer afford to be American citizens'
Well, you could always move to Canada, right? Think again. The Foreign Account Tax Compliance Act (FATCA) comes more fully into effect this year, and as The Globe and Mail's Barrie McKenna explains, "FATCA will force the hand of many Americans in Canada, making them choose between compliance or giving up their U.S. citizenship." Here's why:
For the roughly one million Americans and dual citizens living in Canada, it is going to be a lot trickier to avoid the long arm of the IRS. Financial institutions will begin collecting citizenship information along with the social insurance numbers of customers with accounts worth more than $50,000.
Expatriates with assets of more than $200,000 will have to disclose details of their holding every year or face steep penalties. […]
Many people caught in the trap have sought legal advice. Others have hired accountants to help them file years of back taxes, taking advantage of new rules that waive penalties for late filers who owe little or nothing to the IRS. Others are taking the more radical step of renouncing their U.S. citizenship.
Cal Thomas found one such American expatriate, who has lived in Hong Kong for the last quarter century and has come to the conclusion that he could no longer "afford to be an American." Excerpt:
Seven years ago, Sam left a major investment banking firm based in the U.S. to join another international bank. The law required that his 14 years of pension savings become current income and taxed it at a rate of 35 percent. He says he could not roll over the account due to a "quirk" in the law. Hong Kong citizens are taxed at a rate of only 15 percent.
Another consideration, he says, was the refusal by Hong Kong banks to allow him to open a securities account. The reason? "None wanted to deal with onerous U.S. reporting requirements. My own bank could not even open an account for me to invest in local securities."
"I had paid over $1 million in U.S. taxes but didn't receive any benefits, nor did my wife and kids. (She maintains her U.S. citizenship.) As I saw the massive U.S. deficit continue to climb, it became clear that the government would likely raise taxes further. I finally decided to expatriate. … A dozen of my friends who have lived over 10 years in Asia have done the same. We can no longer afford to be American citizens."
Well, at least no one is contemplating having the IRS check your tax returns at the airport, right? Well….
Speaking at an international tax conference in Tel Aviv last week, Ifat Ginsburg of the law firm Ginsburg & Co. Advocates said that "we're going to see more and more people who are going to renounce their U.S. citizenship" to avoid expected tax hikes and closer scrutiny of their overseas accounts by the Internal Revenue Service.
"I also think the IRS will be much more sophisticated," Ginsburg said during a discussion of future tax trends. "When you come back to the U.S., you'll have to sign [at the airport] that you filed your U.S. tax returns."
I've written a bunch of stuff on FATCA; start here. All links via Marvin Van Horn's excellent FATCA_Fallout Twitter feed.