Wealthy Americans queue to give up their US citizenship

Rich Americans renouncing US citizenship rose seven-fold since UBS whistle-blower Bradley Birkenfeld triggered a crackdown on tax evasion four years ago.

About 1,780 expatriates gave up their nationality at US embassies last year, up from 235 in 2008, according to Andy Sundberg, secretary of Geneva's Overseas American Academy. The embassy in Bern, the Swiss capital, redeployed staff to clear a backlog as Americans queued to relinquish their passports.

The US, the only nation in the Organization for Economic Cooperation & Development that taxes citizens wherever they reside, is searching for tax cheats in offshore centres, including Switzerland, as the government tries to curb the budget deficit.

Shunned by Swiss and German banks and facing tougher asset-disclosure rules under the Foreign Account Tax Compliance Act, more of the estimated 6 million Americans living overseas are weighing the cost of holding a US passport.

Renunciations are higher in Switzerland because American expatriates expect extra scrutiny of their affairs after the UBS case and as the US probes 11 other Swiss financial firms for aiding offshore tax evasion, said Martin Naville, head of the Swiss-American Chamber of Commerce in Zurich.

"We've got absurd tax laws coming into force because of the activities of certain people who tried to hide money," he said.

Taxing Americans resident overseas is a "hangover from the Civil War", according to Jackie Bugnion of American Citizens Abroad. The rules make it harder for Americans to hold foreign bank accounts and gain access to mortgages, she said.