The American passport has always been considered as the all-access-pass to the world. Where those from other countries (such as some Middle Eastern countries) might have trouble entering other countries, the American passport is renowned for its abilities to open doors, even in countries such as The Democratic People's Republic of Korea (more colloquially known as North Korea).
But now, the IRS has found that record numbers of American citizens who live abroad have renounced their citizenships. Traditionally, those who have renounced their citizenships have been noted to have funds overseas that they wish to protect from IRS scrutiny; but now, as the numbers rise to record highs, there are a plethora of reasons as to the number of renunciations, and taxes may only be partially responsible.
During the first quarter of 2014, a little over 1000 Americans renounced their citizenships. In 2013, nearly 3000 Americans renounced their citizenships, a number that is certain to be dwarfed at the end of 2014.
A law called the Foreign Accounts Tax Compliance Act (FATCA), passed in 2010 by the US Congress, forces US citizens living abroad to declare their incomes and assets earned and held in foreign countries and pay taxes on them. Though it takes effect 1 July of this year, many are frightened of its far reach. This is in addition to paying taxes to the country in which the US citizen resides, something that many would call an undue burden.
The new law has caused trouble for those who have lived abroad for many years of their lives. For not reporting foreign assets, foreign banks that serve Americans living in countries that have agreed to comply with FATCA can close their accounts and turn them away while effectively blacklisting the American citizens from using other banks within the country. This includes those who were born in the United States but lived most of their lives outside the country.
The issue of renunciation hasn't always been down to paying dual taxes, however; it can be political as well. In a Reddit.com AMA (a forum where someone, typically a celebrity/expert of some kind, answers question posed by Reddit users), Monty Python member and noted film director Terry Gilliam explains that he renounced his American citizenship because, "[sic] I thought I had paid for enough bombs, bombers, and tanks in the 40 years I paid taxes in America while I lived in England. As long as I've done my share in blowing up more innocent parts of the world, I feel I've done my job as an American, so now I'm going to be supporting the British arms race."
This article is copyrighted by Travelers Today, the travel news leader
