Record number of wealthy Americans dropped US citizenship in 2020, say IRS figures

Leaving the US for lower-taxed climes can be an appealing solution for high-wealth Americans targeted by legislation

(EPA-EFE)

The number of wealthy Americans renouncing their citizenship in favour of a foreign country hit a record high in 2020, according to figures from the IRS.

As reported by Axios, the agency publishes a quarterly report listing people with more than $2m in assets who have renounced their citizenship or given up their green cards. The most recent figures show that in 2020, 6,707 people took one of these steps

The US taxes people based on citizenship wherever they are in the world, and since the law requires wealthier expatriate Americans to report the value of some assets abroad, the incentives at work encourage them to look for another less expensive nationality.

Among the high-net-worth Americans to have defected to other countries since it was brought in is Tina Turner, who opted to become Swiss in 2013.

The specific legislation covering Americans’ foreign assets is the Foreign Account Tax Compliance Act (or FATCA), which was passed in 2010 to crack down on non-compliance by Americans storing their assets in foreign accounts. It requires foreign financial institutions to report on these accounts, while certain account holders themselves also have to declare their assets.

The intention behind FATCA was to crack down on individual tax evasion and sniff out more sinister instances of financial manipulation.

However, FATCA has proved onerous for people beyond the obvious targets; as reported by The Connexion, the legislation applies to people who enjoy American citizenship because they were born on American soil even if they have never lived, worked or maintained assets in the US itself.

According to the website, some 40,000 people in France alone are afflicted in this way, and attempts to obtain some kind of relief from the US government are ongoing.

The last several US elections have seen numerous Americans express an interest in fleeing to Canada in response to the results and the state of politics more generally. The effect on the shape of the American electorate has so far been negligible, though there was a detectable uptick in American applications for Canadian permanent residency after Donald Trump was inaugurated in 2017.