The threat of an increase in U.S. taxes, combined with other factors, could lead to a surge in the number of Americans seeking to renounce their citizenship, said an adviser working in the space.
The number of US citizens seeking to renounce citizenship will increase “dramatically” because they seek to free themselves as taxes rise, an adviser in charge of those individuals told this publication.
The United States taxes its citizens around the world – the only major country to do so – and expats must file annual returns with the Internal Revenue Service. With the Biden administration set to raise income, capital and estate taxes in the coming year, wealthy Americans are in the crosshairs. And for expats, they can only escape the net if they renounce their citizenship.
David Lesperance, a Canadian-born counselor who works with HNW people looking to cut heavy taxes, said it was a busy time, and not just because of the situation HNW Americans find themselves in.
The pandemic has also halted waiver processes, and as countries open up there could be a surge of cases.
“You have to remember that since the start of the pandemic, many American missions (where you have to renounce citizenship) have been closed or are operating at reduced capacity. For example, I recently received an email from the US Embassy in Bern, Switzerland, saying they had a waiting list of 400 people for waiver appointments… and this no. is just one of 307 US missions abroad! So in summary, the expatriation rate will continue to accelerate dramatically, ”he said.
The number of waivers grew rapidly last year despite COVID-19’s business disruption, according to Americans Overseas, a Europe-based organization specializing in U.S. tax preparation. A record 6,705 Americans renounced their citizenship in 2020, a 260% increase from 2019, when 2,577 U.S. citizens did. The increase is all the more striking given the number of U.S. consulates that were closed for much of 2020 as the pandemic raged. The previous record year for waivers was 5,411 cases in 2016.
For so long, the United States has been a beacon attracting immigrants, including HNW people seeking to escape high taxes, oppression, and lack of opportunity. You have to get used to the transition to quitting the rich. A list of thousands of these American expatriates is published by the Federal Register.
So why do people go out?
“Taxation is almost always a major factor, but rarely the only one. Control of strategic philanthropy; disenchantment with partisan political paralysis; Concerns about civil unrest and growing societal violence amplified by the widespread possession of firearms are also frequently mentioned. Add to that the realization that the majority of wealthy people have successfully lived their entire lives without a US passport or full-time residence in the US, and you can see why expatriation is exploding, ”said Lesperance.
“All of these factors have arisen because the pandemic has forced many to overcome the inertia inherent in the lives of their previously carefully organized lives. We all know the poster showing the island of Manhattan as the center of the world. These people were driven out of New York and discovered that they could survive and thrive elsewhere. This gave them the prospect of looking at the fiscal future as the mayor of New York; the governor and federal politicians had planned for them. Since an organization on the move tends to stay on the move, many have decided not only to move to a low-tax state, but also to equip themselves to legally and permanently exit the US tax system, ”he said. -he declares.
There is no doubt that tax increases of one form or another are coming. Wealth managers told this news service that tax increases, both at the federal level and, in some cases, at the state level, are expected in the wake of the COVID-19 pandemic. US Senator Elizabeth Warren is also pushing for a US wealth tax.
US citizens cannot easily escape the system by moving abroad. Even before the tighter controls enacted under the U.S. Foreign Account Tax Compliance Act (FATCA), every U.S. citizen / green card holder was in the tax net, a situation that only affected one other. country: Eritrea. Other large countries tax citizens by residence.
Lesperance has its eponymous law firm, Lesperance & Associates, and has been managing it since April 2017; prior to that, he worked at David S Lesperance Professional Corp, from 1994 to March 2017. Trained in Canada, he was previously a lawyer in various law firms.
Lesperance holds strong views on taxation, arguing that the idea that the wealth tax recently proposed in the UK is a “one-off” measure is a myth. “There is no single tax.” “My clients are on the operational assumption that a wealth tax would be permanent,” he said.