More American Expatriates Give Up Citizenship

More American Expatriates Give Up Citizenship


By BRIAN KNOWLTON

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.

“It is a sad outcome,” Ms. Bugnion said, “but I personally feel that we are now seeing only the tip of the iceberg.”

http://www.nytimes.com/2010/04/26/us/26expat.html?hp

 

It is a rounding error compared to the number of people who legally/illegally immigrate to the USA. And certainly less than renounce foreigh citizenship to stay in the USA.

A number of ethnic Americans have gone back to countries like India and China, because the economic opportunities are much better there than before, and jobs in the USA are harder to come by now. Renouncing US citizenship because they want to stay is not surprising at all - for some of them, their family still lives in such countries. Some came to the USA from such places because of job opportunities many years ago.

I do not understand the point of the story. These numbers are mountain out of a molehill stuff.

 

So you are seriously saying that Chinese and Indians are giving back US paaports and renouncing citizenship ? Unreal.

 

there have been numerous stories about this the past year+

 

For Americans considering leaving the US, a great website that covers this subject is:

http://www.sovereignman.com/

I am not ready to leave the US. However, I got a passport and am learning about other countries to consider moving to if the US economic and social situation starts to unravel.

If you sign up at the website for his daily e-mails, you will receive very interesting information about living and investing outside of the US. Prior issues are also available on the website. I really enjoy reading the daily e-mails and am learning a lot about living abroad.

 

there are a couple other sites like this (used to get periodic e-newsletters from them), but cannot remember the URLs...

At minimum, it is interesting to see their ideas. part of the problem though, is that if the US goes into the hole, most of the world will probably soon follow.

For those seeking island country paradises, probably a good thing to remember, is that in tough times, some of those places might sieze the assets of foreigners a la Chavez. In other words, I wouldnt' renounce citizenship until I had full citizenship in that other place. Perm residency there is no guarantee.

Funny - I once thought Iceland would bea stable & beautiful place to hang the hat... Now with the volcanos and the financial collapse...

 

Excellent points. The founder of the website agrees and recommends having multiple residences just in case one country develops more problems than another. Of course, this can become expensive. Unfortunately, the most politically and economically stable countries (like Australia) are also the most expensive to live in. He reports on many countries in Central and South America as well as Asia that have a very reasonable cost of living with governments that are currently stable but could become unstable more easily.

 

It happened in the 60's and 70's and 80's and the 90's too. It seems to be a news story every decade or so. Most never leave the county but domicile their assets and maybe their passports elsewhere and then go visit them on occasion.