Americans denounce their citizenship over predatory tax system
More and more Americans denounce US citizenship or residence permit, and the wheel keeps on turning, an article in Forbes magazine said. According to the US Treasury, the number of denunciations in 2013 compared with 2012 has doubled (2999 vs. 932). Reflecting on the reasons why Americans put their U.S. passport aside, one may come to a curious conclusion about which countries of the world are financially independent from the United States.
Forbes magazine wrote that it was presumably wealthy Americans, who denounced their citizenship. The magazine referred to one of the founders of Facebook, Eduardo Severin. Severin was born in Brazil, obtained US citizenship 14 years ago and then moved to Singapore. However, one of the readers wrote in the comments to the article that in her small town, about forty people, mostly ordinary citizens, including clerks, retirees and former military, wanted to do the same - denounce their citizenship.
What makes people want to leave their dreams-come-true country? The reason is about the Foreign Account Tax Compliance Act (FATCA) that was passed in 2010 and came into force on January 1, 2013. This law is designed to collect taxes from American citizens, regardless of where they physically reside, where their businesses and property are located and where their income is formed. The law was passed after the Congress analyzed the annual losses that the American budget was suffering due to offshore tax evasion schemes. The number was impressive - $100 billion. However, financial losses occur not only in classic offshore zones, but also in common economic space.
Taxation in the United States is based on the principle of taxpayers' citizenship, natural persons. The United States and Eritrea are the only countries in the world that levy taxes from foreign incomes of their citizens. Other countries practice resident taxation. For example, in Russia a person becomes a taxpayer after he or she stays in the country for more than 183 days within 12 consecutive months. There are cases when a person was born in the U.S. but permanently resides, for example, in Canada and has their business in Canada. This person may not even know that he or she is still a tax resident of the United States.
Severin, whom we mentioned above, denounced US citizenship prior to Facebook IPO event. If he had not refused from his passport, he would have had to pay a tax of 15 percent from $3.84 billion-worth shares. World famous singer Tina Turner also denounced the American citizenship and became a Swiss national. During the last 20 years, the retired rock star has been living in Switzerland with her husband, music producer Erwin Bach.
Forbes magazine wrote that many Americans describe U.S. tax laws as totally depressing. This is also an attempt of the U.S. government to establish direct financial control over international financial sector. The United States sent proposals to all countries to cooperate within the scope of FATCA under the motto "Americans must pay taxes to the U.S. and you must control it." From 1 July 2014, all the world's banks will have to identify such clients on seven indicators. For example, let's assume that a person's birth place is the United States and this person's name is John Ivanovich Smith, who has more than 50,000 dollars on his bank account. If he does not pay taxes, then 40 percent of his bank account will have to be transferred to Internal Revenue Service (IRS). This looks like the administrative offshore privatization in Cyprus that has recently struck the world with his insolence.
Even Swiss banks surrendered and provided the information about their U.S.-based clients and their bank accounts to the IRS. The success inspired the U.S. authorities. Currently, they either enter into a direct agreement with foreign banks or collect desired data through interstate agreements. To date, all European countries have concluded bilateral agreements with the United States. Even Canada agreed to deliver the data to the U.S., although many in Canada were infuriated with such a move of the government. Under the first option, if banks refuse to directly cooperate with the IRS, they will be blacklisted and sanctioned. For example, U.S. regulators will collect a 30-percent tax on any type of income that such banks receive in the United States.
Double taxation is a big problem for small and medium-sized U.S. businesses abroad. Ultimately, it will make tax residents escape from the country by denouncing the American citizenship. So the wheel is spinning indeed.
It is even more curious to see what countries in the world refused to follow the dictates of Washington and whose financial system is therefore not dependent on the U.S. financial capital. Russia stated in 2010 that a number of requirements of the law threatened to undermine national sovereignty. Yet, most recent reports say that the Russian Ministry of Finance conducts the negotiations. First deputy chairman of the Bank of Russia Alexei Simanovskiy expressed confidence in early November that Russia would join the FATCA agreement on time. However, China, Belarus, Cuba and Myanmar said that they would not even read the document.
Despite the fact that the bilateral agreements between the Russian Federation and the United States does not exist yet, a number of Russian banks have already posted messages on their official websites saying that they do not work with persons from the U.S. This is illegal, as such banks discriminate against their customers, Bankir.ru website said.