According to the Association of Americans Resident Overseas, there are approximately 6.32 million US citizens not including military personnel currently living outside the United States. In the last few years there has only been an average of around 189 American citizens who have denounced their citizenship and given up their passports annually. As of 2013 there have been around 1,113 Americans abroad who have denounced their citizenship in the last three months, according to the Federal Register. This significant increase is majorly in part due to the changes taxation laws and enforcement that have come into play after international tax evasion was brought forward by Bradley Birkenfeld four years ago who gave up information to the IRS that lead to a massive fraud investigation.
The new regulations have come from the Organization of Economic Cooperation and Development, who strive to generate and enforce taxes on American who are living abroad. They are desperately trying to have better enforce and collect the owed tax money due to their large budget deficit particularly in the years following Bradley Birkenfeld. The new laws and regulations are said to bring in about $8.7 billion over the next 10 years in a projection that was done by the Congressional Joint Committee on Taxation.
The Fair and Accurate Transactions Act, which the US has begun actively enforcing, was signed into action in December of 2003 by George W. Bush as an amendment to the Fair Credit Reporting Act. FACTA, as many people call it, ensures that foreign financial institutions have to report all information and accounts or foreign entities in which they hold substantial ownership interest held by American taxpayers to the IRS. Americans are being turned away from Swiss and German banks as the rules and regulations tighten.
This is demonstrating a very negative response as most Americans currently living abroad are weighing their options and determining if it keeping their citizenship is worth the cost. There is an added compliance cost for the international companies in a better effort to make sure that the hired Americans are filling their 8938 forms correctly in their tax returns and asset declaration. On average it can cost companies around $5000 a person not to mention the time involved. With the added pressure on international companies, it makes it harder for those American’s abroad to get and maintain jobs as well as secure a mortgage or life insurance.
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