WASHINGTON — Amid mounting frustration over taxation and banking
problems, small but growing numbers of overseas Americans are taking the
weighty step of renouncing their citizenship.
“What we have seen is a substantial change in mentality among the
overseas community in the past two years,” said Jackie Bugnion, director
of American Citizens Abroad, an advocacy group based in Geneva.
“Before, no one would dare mention to other Americans that they were
even thinking of renouncing their U.S. nationality. Now, it is an openly
discussed issue.”
The Federal Register, the government publication that records such
decisions, shows that 502 expatriates gave up their U.S. citizenship or
permanent residency status in the last quarter of 2009. That is a tiny
portion of the 5.2 million Americans estimated by the State Department
to be living abroad.
Still, 502 was the largest quarterly figure in years, more than twice
the total for all of 2008, and it looms larger, given how agonizing the
decision can be. There were 235 renunciations in 2008 and 743 last
year. Waiting periods to meet with consular officers to formalize
renunciations have grown.
Anecdotally, frustrations over tax and banking questions, not
political considerations, appear to be the main drivers of the surge.
Expat advocates say that as it becomes more difficult for Americans to
live and work abroad, it will become harder for American companies to
compete.
American expats have long complained that the United States is the
only industrialized country to tax citizens on income earned abroad,
even when they are taxed in their country of residence, though they are
allowed to exclude their first $91,400 in foreign-earned income.
One Swiss-based business executive, who spoke on the condition of
anonymity because of sensitive family issues, said she weighed the
decision for 10 years. She had lived abroad for years but had pleasant
memories of service in the U.S. Marine Corps.
Yet the notion of double taxation — and of future tax obligations for
her children, who will receive few U.S. services — finally pushed her
to renounce, she said.
“I loved my time in the Marines, and the U.S. is still a great
country,” she said. “But having lived here 20 years and having to pay
and file while seeing other countries’ nationals not having to do that, I
just think it’s grossly unfair.”
“It’s taxation without representation,” she added.
Stringent new banking regulations — aimed both at curbing tax evasion
and, under the Patriot Act, preventing money from flowing to terrorist
groups — have inadvertently made it harder for some expats to keep bank
accounts in the United States and in some cases abroad.
Some U.S.-based banks have closed expats’ accounts because of
difficulty in certifying that the holders still maintain U.S. addresses,
as required by a Patriot Act provision.
“It seems the new anti-terrorist rules are having unintended
effects,” Daniel Flynn, who lives in Belgium, wrote in a letter quoted
by the Americans Abroad Caucus in the U.S. Congress in correspondence
with the Treasury Department.
“I was born in San Francisco in 1939, served my country as an army
officer from 1961 to 1963, have been paying U.S. income taxes for 57
years, since 1952, have continually maintained federal voting residence,
and hold a valid American passport.”
Mr. Flynn had held an account with a U.S. bank for 44 years. Still,
he wrote, “they said that the new anti-terrorism rules required them to
close our account because of our address outside the U.S.”
Kathleen Rittenhouse, who lives in Canada, wrote that until she
encountered a similar problem, “I did not know that the Patriot Act
placed me in the same category as terrorists, arms dealers and money
launderers.”
Andy Sundberg, another director of American Citizens Abroad, said,
“These banks are closing our accounts as acts of prudent self-defense.”
But the result, he said, is that expats have become “toxic citizens.”
The Americans Abroad Caucus, headed by Representative Carolyn B.
Maloney, Democrat of New York, and Representative Joe Wilson, Republican
of South Carolina, has made repeated entreaties to the Treasury
Department.
In response, Treasury Secretary Timothy F. Geithner wrote Ms. Maloney
on Feb. 24 that “nothing in U.S. financial law and regulation should
make it impossible for Americans living abroad to access financial
services here in the United States.”
But banks, Treasury officials note, are free to ignore that advice.
“That Americans living overseas are being denied banking services in
U.S. banks, and increasingly in foreign banks, is unacceptable,” Ms.
Maloney said in a letter Friday to leaders of the House Financial
Services Committee, requesting a hearing on the question.
Mr. Wilson, joining her request, said that pleas from expats for
relief “continue to come in at a startling rate.”
Relinquishing citizenship is relatively simple. The person must
appear before a U.S. consular or diplomatic official in a foreign
country and sign a renunciation oath. This does not allow a person to
escape old tax bills or military obligations.
Now, expats’ representatives fear renunciations will become more
common.
Source: NY
Times