Two-thirds of US expats are considering giving up their US citizenship due to regulatory complexities stemming from the Foreign Account Tax Compliance Act, a new global survey has found.

A “remarkably high” two-thirds
of Americans who live outside the US are considering renouncing their US
citizenship due to regulatory complexities stemming from the Foreign Account
Tax Compliance Act, a new global survey has found.

deVere Group asked 400 of its
US expatriate clients if they’re thinking about relinquishing
their US
citizenship due to the impact of FATCA, in response to which 68 per cent
said they’ve “actively considered it,” “are thinking about it” or “have
explored the options of it.” Just under a fifth (17 per cent) said they
wouldn’t
consider it, while 15 per cent weren't sure. This is not the first time
deVere has polled its clients on this subject and identified the same
trend. 

FATCA was implemented in 2010
by the US government to crack down on expat citizens who might be evading taxes
by using foreign accounts. It requires that individuals report their financial accounts
held outside of the US, while foreign financial institutions report to the
Internal Revenue Service about their American clients. This
involves “substantial compliance obligations” for all non-US FFIs
worldwide. Some critics insist that FATCA will do little, if anything, to truly curb
tax evasion but merely pile on costs to an already burdened financial industry.

“More and more of our
internationally-based American clients are now telling us, usually with a heavy
heart, that they would be tempted to give-up their US citizenship to avoid what
they feel is the unfair, complex and oppressive burden of FATCA,” said Nigel
Green, founder and chief executive at deVere Group.

“FATCA is a huge imposition on
ordinary Americans who happen to live and/or work outside the US and will
involve significantly more expensive and laborious reporting
requirements. In addition, due to the onerous and costly impact of FATCA,
many non-US financial institutions will no longer work with Americans - even if
they have been clients for decades - which can make life outside the US
‘challenging’ to say the least,” Green added.

According to official
statistics, the number of American expatriates relinquishing their US
citizenship surged in the second quarter of 2013 to 1,131, compared with
189 in
the same period a year ago. Green believes that the
citizenship-renouncing trend is “likely to have skyrocketed” since it
was revealed
that Facebook co-founder Eduardo Saverin instead became a resident of
Singapore, while Tina Turner is now a Swiss citizen.

But he urges those thinking of going down this route to “explore all the available planning options” to possibly negate
some of the unfavorable aspects of FATCA. “This is especially important
as there are certain established federal regulations aimed at discouraging
Americans from renouncing their citizenship for tax reasons. These
complex rules can include hefty ‘exit taxes’ and/or ‘gift taxes’, although
there are many exceptions that can be applied,” he said.

While some foreign firms are turning away US clients as they are
deemed a compliance burden, others have bitten the bullet. In the UK,
for example, Brown Advisory rolled out an investment management and tax
reporting service aimed at US expats
living in the UK in August to plug the so-called “financial advice black
hole” that appears to be manifesting.