U.S. citizenship was renounced by a record number of former American citizens in 2015, up 400 percent from just five years ago.
While it’s impossible to know why each of those 4,279 people decided to resign their rights as an American citizen, a large portion of them were likely doing so to avoid hefty taxes. The U.S. is one of just three countries in the world with citizenship-based tax laws — the other two of which are Eritrea and North Korea — jokingly referred to by some as the “Evil Axis of Taxation.”
That situation became even more difficult in 2012, when the Foreign Account Tax Compliance Act (FATCA) was passed. International banks would have to report any income from American citizens to the US government. If they allowed someone to slip through the cracks, the U.S. would slap a 30 percent tax on all future transactions with them.
In turn, many have chosen to end business with customers holding U.S. citizenship altogether. That’s making simple activities, like opening a bank account, turn into a headache for Americans abroad. Additionally, other forms of income like pensions and savings are also gone after for taxes.
Of course, it’s not just money at the heart of the issue with U.S. citizenship. While they may live abroad, many Americans still find it very difficult to divorce themselves from what is the most central part of their identity: nationality. Jane, a soon-to-no-longer-be American living in Paris, told BBC News that she was agonizing over the eventual decision.
“It’s not going to be easy at all. It’s the last thing I ever thought of doing. I’m very proud of being an American. It’s what I am when I look in the mirror. If it weren’t for Fatca [the Foreign Account Tax Compliance Act] and the decision by the bank, I’d never be doing this. Never ever. It’s just breaking me in half.”
Even if U.S. citizens who decide to drop their passport are saving thousands — or even millions in some cases — in taxes, the government has responded to an increased desire to defect with steeper fees to do so. During the last few years, the fee has rocketed from just under $600 to more than $2,300. Some, like Jane, find that last grab for money distasteful — especially after already being unhappy to walk out the door in the first place.
“They first of all make laws that make life impossible and then when you decide it’s impossible and you’ve got to do something that’s against what you believe in your heart, they’ve gotta just up the fees like a bunch of extortionists.”
Officials say the purpose of the new rules are in order to prevent off-shore accounts that serve tax evasion purposes, not go after the English teacher making $20,000 a year. Yet from the massive increase in renouncing U.S. citizenship, it seems that FATCA has had at least some undesired effect.
Of course, there are other possible factors. With Donald Trump’s controversial rhetoric and years of invasive foreign policy tarnishing American reputations abroad, it might not be that surprising that some United States ex-pats are renouncing their citizenship in favor of another land to call home. Even Secretary of State John Kerry recently commented on how those holding U.S. citizenship were being constantly asked about the country’s presidential elections.
“Everywhere I go. Every leader I meet. They ask about what is happening in America. They can’t believe it. I think it’s fair to say that they are shocked. They don’t know where it’s taking the United States of America.”
For more information on renouncing U.S. citizenship, you can visit the American state department’s website.
[Photo by Sandy Huffaker/Getty Images]