UK: Why are Americans giving up their citizenship?

Why are Americans giving up their citizenship?

The number of expatriates renouncing their US citizenship surged in the second quarter of 2013, compared with the same period the year before - 1,131 cases to 189 in 2012. It's still a small proportion of the estimated six million Americans abroad, but it's a significant rise.

An interesting article about the impact of Fatca on US expats.

It's also interesting that the Federal Register which the BBC uses as reference also states:

For purposes of this listing, long-term residents, as defined in section 877(e)(2), are treated as if they were citizens of the United States who lost citizenship.

https://www.federalregister.gov/articles/2013/08/09/2013-19224/quarterly-publication-of-individuals-who-have-chosen-to-expatriate-as-required-by-section-6039g

The way I interpret that, the number is not strictly expatriates, but also migrants who've left.

Actually, no one knows the exact number. The official figures given have always been highly suspect, as they should include those renouncing, those relinquishing, and those turning in green cards.

A member on the Brock site (Eric) cracked the conundrum when he discovered statistics on renunciations on the FBI site. These were much higher (and seemed more accurate). These were published on Brock and discussed a great deal. A number of media outlets picked up on the story with the results being a larger number of high profile articles appearing on sites such as The Hill, a blog site read by many Congresspersons and their staffs. As a result, the 'official' figures have now begun to reflect a more accurate number, although the real number is still unknown, but is undoubtedly still higher than what is being released (at least according to the FBI figures).

It would appear the government has been embarrassed by the conflicting numbers, and views any number renouncing as an embarrassment. Articles have concentrated on the introduction of FATCA as a prime driver of the renunciations, and the IRS has responded with a 'MYTH/FACT' retort on the Treasury site, again, centred mainly around the renunciations.      

My husband saw this article today and it raised some questions for us.

Are we better off only having his name on our savings? 

We currently are joint on savings and current account.  I am 100% compliant with disclosure to the US via taxes and FBAR.

We only have one joint bank account and it has very little in it.  The big accounts are in my husband's name.  I guess I had better trust him. 

My husband saw this article today and it raised some questions for us.

Are we better off only having his name on our savings? 

We currently are joint on savings and current account.  I am 100% compliant with disclosure to the US via taxes and FBAR.

First things first: no one in the public (account holders) knows what the UK banks/building societies are going to do at this time. I've yet to find anyone within a bank/building society that knows anything as well. The UK IGA has Royal Ascent, therefore, the only thing known for sure is that the banks/(some??)building societies will be reporting to HMRC for the IRS. The given amount is accounts over $50,000 for FATCA, but this is a threshold, not a de minima amount (accounts under $50,000 could be included - no one knows).

If you are compliant, and your husband is happy for you to include joint accounts on your 1040 return and FBAR (assuming MFS), then for now, there is no reason not to carry on as is. But stay alert of any requests made by the bank/building society (for example, a request to void your rights under the data protection laws). Also, (and I know it's a chore) read the latest Terms and Conditions for your accounts. There have been changes by some institutions allowing them to share your data. 

I'm too lazy to figure out the math but is an uptake of 189 in a sample of 6,000,000 actually statistically significant?

You could also take it as an example of an aging expat American population - many of whom who have lived abroad for decades - cutting their ties with "the old country."

First things first: no one in the public (account holders) knows what the UK banks/building societies are going to do at this time. I've yet to find anyone within a bank/building society that knows anything as well. The UK IGA has Royal Ascent, therefore, the only thing known for sure is that the banks/(some??)building societies will be reporting to HMRC for the IRS. The given amount is accounts over $50,000 for FATCA, but this is a threshold, not a de minima amount (accounts under $50,000 could be included - no one knows).

If you are compliant, and your husband is happy for you to include joint accounts on your 1040 return and FBAR (assuming MFS), then for now, there is no reason not to carry on as is. But stay alert of any requests made by the bank/building society (for example, a request to void your rights under the data protection laws). Also, (and I know it's a chore) read the latest Terms and Conditions for your accounts. There have been changes by some institutions allowing them to share your data. 

Thank you the OAP!

I'm too lazy to figure out the math but is an uptake of 189 in a sample of 6,000,000 actually statistically significant?

I had to read it a couple of times to see what they meant, but it's actually saying that in the 2nd quarter of 2012 the figure was 189, in the 2nd quarter of this year it's risen to 1,131. So just on basic maths that's an increase of approx 600%. Quite a significant increase, although I'm a little sceptical as to why they've chosen one quarter. Perhaps if we could have figures over a few years.

I showed this report to DW who says that whilst she wants to apply for British citizenship she would never want to relinquish her US citizenship, and I completely understand that. She said that she wouldn't never fall into this category (amount of savings), not sure of that because what if I die and insurance pays out, but aside from that I said the problem is if banks just stop issuing accounts to US citizens because they don't want to comply with this, that would be an issue.

Perhaps if we could have figures over a few years.

Your wish is my command.   

http://online.wsj.com/article/SB10001424052702303879604577410021186373802.html#project%3DRENOUNCECHART1205%26articleTabs%3Dinteractive

Give it a few seconds to load. Unfortunately, it's only up to the 1st quarter of 2012. There are other charts (Google is not my friend right now, as I can't find them) that compare the numbers given in the Federal Register VS the numbers from the FBI (which are much higher). 

.......aside from that I said the problem is if banks just stop issuing accounts to US citizens because they don't want to comply with this, that would be an issue.

Yes, that would be an issue. As I said earlier in this thread, right now, we don't know what the banks/building societies are going to do. If a building society is trying for a 'deemed compliant' status, one of the stipulations they must agree to is to allow Americans to have an account.

The UK has signed a 'Model 1 IGA' (Intergovernmental Agreement). Its express purpose is to get around the UK data protection laws and allow the banks, via HMRC, to give the financial data to the IRS. Switzerland has signed a 'Model 2 IGA'. The Swiss banks give the account info directly to the IRS with the Swiss Councils blessings. It is now very difficult for an American in Switzerland to open a new account, with only 3 or 4 of the largest banks allowing a new account. If the same happens under a 'Model 1 IGA', it would indicate a grave problem for FATCA.

As for renunciations, watch for the figures to continue growing. More and more people around the world are becoming aware of 'US Person' status. Those who have no ties to the US may find renunciation a more palatable solution.

Of particular interest (and here in the UK possibly more than other countries) is the 'Accidental Americans'; those who don't realise they are, in fact, American and a US Person for US tax obligations.

The plan is for the banks to search their records for 'US indicia'. This includes a US place of birth, other ties to the US (green card for example), or even accounts with regular transactions with the US. The banks will determine the reporting to HMRC based on this (and they can't afford to get it wrong). At the same time, they will inform the account holder that their info will be forwarded to the IRS. As this happens, we may see a number of those Accidental or Unaware Americans seek to renounce.

Do you happen to know what the $ benefit to the US to implement these measures are?  For instance, how much tax do overseas citizens generate for the US?  These new stringent measures will come at a high cost...  There must be a financial payoff?

I wouldn't mind paying my US taxes as much if I knew it was the same for most citizens living abroad.  But the US is almost the only country that does this, which I find quite cheeky.

Do you happen to know what the $ benefit to the US to implement these measures are?  For instance, how much tax do overseas citizens generate for the US?  These new stringent measures will come at a high cost...  There must be a financial payoff?

I wouldn't mind paying my US taxes as much if I knew it was the same for most citizens living abroad.  But the US is almost the only country that does this, which I find quite cheeky.

According to Wikipedia, estimates of evasion say that up to $2 trillion of income is not reported.  I expect a large chunk of that income will be hidden in overseas accounts.

"In the United States, the IRS estimate of the 2001 tax gap was $345 billion.[8] For 2006, the tax gap is estimated to be $450 billion.[9]
A more recent study estimates the 2008 tax gap in the range of $450 to $500 billion, and unreported income to be approximately $2 trillion.[10] Thus, 18 to 19 percent of total reportable income is not properly reported to the IRS.[11]"

Do you happen to know what the $ benefit to the US to implement these measures are?....... These new stringent measures will come at a high cost...  There must be a financial payoff?

I hate to sound like a broken record, but... no one knows.

FATCA originated from a rider attached at the very last minute to the HIRE Act, passed in 2010. Although an obvious amount of work went into the rider (an attempt to pass the same legislation had been before Congress in a prior bill, on its own, but it had failed), there was no cost/benefit analysis done. To this date, an attempt at a cost/benefit analysis has still not been done. The estimate (assumed to have been 'guessed' by staff) is FATCA will return $8 billion over a 10 year period, or roughly $800 million per year.

As for the cost to the FFI's (banks, building societies, etc.) around the world to prepare internal systems to accommodate FATCA (if every one was on board), the estimate ranges from 100's of billions to a trillion $.

The GAO/Taxpayer Advocate has indicated that of those US Persons actually filing a return from abroad, 92% owed no US tax. Additionally, on a Treasury page listing the outcome of the UBS (Switzerland) penalties handed out (of which I believe 50 were listed) all the individuals on the list were resident within the US.

As for the cost to the Treasury (IRS) to process overseas returns of which 92% result in $0 tax owed.......

Your wish is my command.   

http://online.wsj.com/article/SB10001424052702303879604577410021186373802.html#project%3DRENOUNCECHART1205%26articleTabs%3Dinteractive

Give it a few seconds to load. Unfortunately, it's only up to the 1st quarter of 2012. There are other charts (Google is not my friend right now, as I can't find them) that compare the numbers given in the Federal Register VS the numbers from the FBI (which are much higher). 

Thanks for that, interesting. Although the figures also include long term residents who have also renounced that, and that could be a number of reasons. I guess you can look at this and put it down  to FATCA because that has been introduced in the meantime, but perhaps if they collected info when people relinquished it as to reason  it would be better.