Newsmax TV & Webwww.newsmax.comFREE - In Google Play
Newsmax TV & Webwww.newsmax.comFREE - On the App Store
Tags: fatca | asset disclosure | passports | americans

Americans Give Up Passports as Tougher Fatca Asset-Disclosure Rules Start

Thursday, 07 August 2014 01:28 PM EDT

The number of Americans renouncing U.S. citizenship stayed near an all-time high in the first half of the year before rules that make it harder to hide assets from tax authorities came into force.

Some 1,577 people gave up their nationality at U.S. embassies in the six months through June, according to Federal Register data published Wednesday. While that’s a 13 percent decline from the year-earlier period, it’s only the second time there’s been a reading of more than 1,500, according to Bloomberg News calculations based on records starting in 1998.

Vote Now: Do You Approve Or Disapprove of President Obama's Job Performance?

Tougher asset-disclosure rules effective as of July 1 under the Foreign Account Tax Compliance Act, or Fatca, prompted 576 of the estimated 6 million Americans living overseas to give up their passports in the second quarter. The appeal of U.S. citizenship for expatriates faded as more than 100 Swiss banks turn over data on American clients to avoid prosecution for helping tax evaders.

“Fatca and the Swiss bank disclosure program has intensified the search for U.S. nationals beyond all measure,” said Matthew Ledvina, a U.S. tax lawyer at Anaford AG in Zurich. “It’s shocking the levels of due diligence they are going through to ensure they have cleaned house.”

Swiss banks are trawling through records going back to the 1990s to find clients with U.S. addresses and telephone numbers, and those who received schooling in the country, Ledvina said. Those identified as U.S. persons are either being asked to leave or placed in special U.S.-only sections of the institution, he said.

Imposing Tax

The U.S., the only Organization for Economic Cooperation and Development nation that taxes citizens wherever they reside, stepped up the search for tax dodgers after UBS AG paid a $780 million penalty in 2009 and handed over data on about 4,700 accounts. Shunned by Swiss and German banks and with Fatca looming, almost 9,000 Americans living overseas gave up their passports over the past five years.

Fatca requires U.S. financial institutions to impose a 30 percent withholding tax on payments made to foreign banks that don’t agree to identify and provide information on U.S. account holders. It allows the U.S. to scoop up data from more than 77,000 institutions and 80 governments about its citizens’ overseas financial activities.

In establishing the 2010 Fatca law, Congress and President Barack Obama in effect threatened to cut off banks and other companies from easy access to the U.S. market if they didn’t pass along such information. It was projected to generate $8.7 billion over 10 years, according to the congressional Joint Committee on Taxation.

Voluntary Disclosures

The start of Fatca was delayed by 18 months to give foreign banks time to comply with the law, after financial institutions including Canada’s Toronto-Dominion Bank and Allianz SE of Germany expressed concerns it was too complex.

More than two-thirds of 400 U.S. expatriates surveyed in November by Zurich-based deVere Group said they had considered giving up their passports.

As many as 106 Swiss banks entered a U.S. Justice Department program to volunteer information on how they helped clients hide money from the Internal Revenue Service, in exchange for leniency. Those banks have discovered that thousands of their clients have dual U.S.-Swiss or European citizenship, obliging them to make voluntary disclosures, said Ledvina. To avoid prosecution for handling undeclared American money, the banks must hand over account data and pay penalties.

June 30 was the deadline for turning over information on Americans considered in breach of U.S. tax rules, while July 31 marked the end of the second wave of deliveries and includes documents that show which American clients were compliant.

Compliance Costs

Switzerland is the largest cross-border financial center with $2.3 trillion of assets.

About a dozen banks, including Julius Baer Group Ltd. and HSBC Holdings Plc’s Swiss unit, are excluded from the program as they are already under investigation in the U.S. Credit Suisse Group AG, the second-biggest Swiss bank that was part of the probe, was fined $2.6 billion in May after it pleaded guilty to aiding tax evasion.

The additional compliance costs for companies to ensure that Americans they hire are filing the correct U.S. tax returns and asset-declaration forms are $7,000 per person, according to Ledvina. The U.S. accounting costs for individuals opting for expatriation are typically about $4,000 per year, he said.

Americans with a net worth exceeding $2 million and an average income tax of at least $157,000 over the previous five years must pay an exit tax on unrealized capital gains when they renounce U.S. citizenship.

U.S. citizens aren’t the only ones giving up their ties to America. The Treasury Department is also trying limit the benefits from corporations adopting foreign addresses to avoid taxes, a process known as a inversion.

Editor's Note: Weird Trick Boosts Retirement Income by 50%

© Copyright 2023 Bloomberg News. All rights reserved.

The number of Americans renouncing U.S. citizenship stayed near an all-time high in the first half of the year before rules that make it harder to hide assets from tax authorities came into force.
fatca, asset disclosure, passports, americans
Thursday, 07 August 2014 01:28 PM
Newsmax Media, Inc.

Sign up for Newsmax’s Daily Newsletter

Receive breaking news and original analysis - sent right to your inbox.

(Optional for Local News)
Privacy: We never share your email address.
Join the Newsmax Community
Read and Post Comments
Please review Community Guidelines before posting a comment.
Get Newsmax Text Alerts

Newsmax, Moneynews, Newsmax Health, and Independent. American. are registered trademarks of Newsmax Media, Inc. Newsmax TV, and Newsmax World are trademarks of Newsmax Media, Inc.

© Newsmax Media, Inc.
All Rights Reserved
© Newsmax Media, Inc.
All Rights Reserved