Wealthy Americans Relinquish U.S. Citizenship to Avoid High Taxes

In 2012, a Bloomberg report found a growing number wealthy Americans were choosing to give up their U.S. citizenship rather than pay high taxes when living outside of the country. Now, in light of the expiration of the payroll tax cut, 2013 could be the biggest year for expatriation due to high taxes to date.

Some of the more notable Americans who have recently given up citizenship include actor Jet Li, Facebook co-founder Eduardo Saverin and socialite Denise Rich.

U.S. Zeroes-In on Tax Evasion

Four years ago, whistle-blower Bradley Birkenfeld triggered a crackdown on tax evasion, which was meant to stop wealthy Americans who stored money in offshore accounts to avoid paying high taxes.

Though this was intended to stop Americans living in the country who stored money in other places, it also applies to individuals living outside of the U.S. who store money in the banks of countries they reside.

The U.S. is the only nation in the Organization for Economic Cooperation and Development that taxes citizens wherever they reside. In facing taxes within foreign countries they live in as well as paying American taxes due to their U.S. citizenship, many wealthy Americans are weighing whether remaining a U.S. citizen is worth it.

Americans Giving Up their U.S. Citizenship

Andy Sundberg, secretary of Geneva’s Overseas American Academy, shared that 1,780 expatriates gave up nationality at U.S. embassies last year, which is an increase from 235 in 2008. The number has increased so quickly that the embassy redeployed staff to clear the backlog of Americans queued to relinquish their passports.

Another reason Americans are ready to give up their passports is that many non-U.S. banks feel it’s too risky to deal with Americans abroad after the Birkenfeld and the U.S. probed USB and 11 other Swiss financial firms for aiding offshore tax evasion.

Due to difficulties acquiring accounts in some countries and facing taxes from the United States, Americans are deciding  that giving up their U.S. passports and relinquishing their citizenship is the right choice to make.