New tax rules push many citizens to give up American dream

WASHINGTON | ZURICH: The number of Americans renouncing US citizenship increased 39% in the three months through September after rules that make it harder to hide assets from tax authorities came into force.

People giving up their nationality at US embassies increased to 776 in the third quarter, from 560 in the year-ago period, according to Federal Register data published on October 25.

Tougher asset-disclosure rules that started on July 1 under the Foreign Account Tax Compliance Act, or Fatca, prompted more of the estimated 6 million Americans living overseas to give up their passports. The appeal of US citizenship for expatriates faded further as more than 100 Swiss banks began to turn over data on American clients to avoid prosecution for helping tax evaders.

The US, the only Organisation for Economic Cooperation and Development nation that taxes citizens wherever they reside, stepped up the search for tax dodgers after UBS AG (UBSN) paid a $780 million penalty in 2009 and handed over data on about 4,700 accounts.Shunned by Swiss and German banks and with Fatca starting, more than 9,000 Americans living overseas gave up their passports over the past five years.

Fatca requires US financial insti tutions to impose a 30 per cent withholding tax on payments made to foreign banks that don't agree to identify and provide information on US account holders. It allows the US to scoop up data from more than 77,000 institutions and 80 governments about its citizens' overseas financial activities.

In establishing the 2010 Fatca law, the 2010 Fatca law, Congress and President Barack Obama in effect threatened to cut off banks and oth er companies from easy access to the US market if they didn't pass along such information.

It was projected to billion over 10 years, generate $8.7 billion over 10 years, according to the congressional Joint Committee on Taxation. So far, 2,353 Americans have renounced their citizenship this year, close to the all-time high of 2,369 in the first 9 months of 2013.