Waving less bravely
Bern and Geneva, Switzerland (GenevaLunch) – US State Department figures for 2010 confirm what many Americans who are long-term residents in other countries have suspected: the number of US citizens giving up their citizenship is on the rise. The figure was 1,485 according to renunciationguide.com, but Bloomberg lists 1,534. In both cases, the 2010 figure appears to be about double that for any year since 2003.
Renunciationguide.com, a site maintained by and for people considering giving up US citizenship, points out a number of errors in the figures and notes that clear records are not published, and that it is safe to assume the figures are higher based on inter-agency discrepancies.
The US began, in 1996, publishing in The Federal Register the names of those who renounce, and from this readers calculate the numbers.
The figures reflect completed requests, not demands and there are long waiting periods at some embassies, with Bern, for example, taking appointments for August 2012.
The number of people rose despite an administrative fee of $450 imposed in July 2010. Renouncing citizenship had previously been free of charge.
“The UN Universal Declaration on Human Rights recognizes the right to leave one’s country and to change one’s nationality, but it’s not US law,” notes renunciationguide.com.
New passport remark links passport applications to the IRS for first time
The line may grow longer, as embassies begin to provide new forms published in December 2010 for renewing US passports, which state clearly for the first time, as part of the Privacy Act information, that data will be provided (italics GenevaLunch) to the US treasury, where the IRS tax office is housed:
“Your Social Security Number will be provided to Treasury, used in connection with debt collection and checked against lists of persons ineligible or potentially ineligible to receive a US passport, among other unauthorized uses.” (2008 form, identified by the DS-82 and 02-2008 in the lower left corner, still on some US embassy web sites, and the new 2010 form)
Click on image to view larger and compare the Privacy Act Statements
The same is true for new passport applications: DS-11 from 2008 and from 2010.
The new forms include several other changes and should be read carefully by anyone applying for or renewing a US passport.
The US goverenment does not allow its citizens to renounce citizenship to avoid paying taxes, but people with dual citizenship may find the passport change to be a deciding factor in keeping just the other nationality.
US citizens with assets and income above a certain level have long been considered to give up their citizenship for tax purposes whether or not they have other reasons, as a 1998 Senate Finance Committee report stated, and the law has not changed (ed.note: figures are from 1998):
“Any individual with a net worth of $500,000 or more (adjusted for inflation) on the date of expatriation or who has an average annual net income tax liability for the five years preceding expatriation of $100,000 or more (adjusted for inflation) is irrebuttably presumed to have expatriated for tax-motivated reasons . . . and thereby is subject to tax under section 877 regardless of actual intent. All expatriates are required under the Code to provide upon expatriation a statement indicating residence and citizenship. In the case of expatriates with gross assets having an aggregate fair market value in excess of $500,000, a detailed statement of assets and liabilities is also required.”
The law has eased somewhat, however, and in 2008 a requirement was dropped that obliged wealthy former citizens to file US tax forms for 10 years after giving up citizenship, Bloomberg points out in an article on the growing number of people giving up their citizenship.
Tax compliance and long waits slowing down renunciation process
For those who want to join the line to “renounce” citizenship, as Washington labels the process, an added complication is proof that a person is “compliant” where US taxes are concerned. The issue for these people is rarely fraud, but the complexity and cost of becoming compliant.
Non-compliance may be due simply to the fact that “It’s a daunting and complex task to file a ‘resident’ US tax return, and non-residents have to further complete a foreign tax credit computation and filing. Also, some of the common software tools like Turbo Tax haven’t allowed users to file electronically with a foreign address. Finally, most people have already had to file taxes once in another country, so it’s double the work,” says Gregory Dean of US Tax in Geneva.
A translator in Paris explained to GenevaLunch why he did not file US taxes for the first 20 years of his adult life.
Zurch, Switzerland (GenevaLunch) - Bank Julius Baer joins the growing ranks of Swiss banks moving out of the US client managed wealth business. The bank announced that it has begun a gradual shift away from American customers, but the move is not hurting the bank’s overall wealth under management: the bank reports that in the first 10 months of 2009 total client assets increased to CHF234 billion and assets under management rose to some CHF 150 billion, up 17%, compared to a year earlier.
Spokesperson Martin Somogyi told GenevaLunch that details about the US client business are not available now, although the bank may provide them when it releases 2009 full year results in February 2010. He clarified that US citizens resident in Switzerland “who are tax compliant” are not part of this group and will remain bank clients.
