While the number of U.S. citizens abandoning their citizenship is increasing, so too is the number of foreigners coming to U.S. shores to take advantage of so-called “investor visas” that allow them not just to put some of their cash to work in this country but also to bring their families here to live, work, and go to school—and pave the path to citizenship.
Jim Duggan, a tax, wealth and estate planning attorney at Duggan Bertsch LLC, said that Americans are looking for a way to avoid paying taxes to the U.S. while living elsewhere. “The United States is one of the only nations that will tax its citizens regardless of where they reside,” Duggan said in a statement. “For Americans residing overseas in particular, they’re weighing the costs of having a U.S. passport.”
The numbers are on the rise, and the trend drew the public’s notice after Facebook co-founder Eduardo Saverin, a Brazilian native, chucked the U.S. in favor of Singapore in what was seen, though Saverin denied it, as a means of avoiding taxes on proceeds from the Facebook IPO.
In response to Saverin’s perceived tax dodge, as reported by AdvisorOne, Senators Chuck Schumer, D-N.Y. and Bob Casey, D-Pa., introduced the Ex-PATRIOT Act (or Expatriation Prevention by Abolishing Tax-Related Incentives for Offshore Tenancy Act), which would reimpose taxes on expatriates like Saverin even after they flee the United States and take up residence in a foreign country. Their plan would also bar those people from re-entering the country.
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Ironically, Saverin may end up paying more in taxes because of the stock’s performance since the IPO. The taxes on his shares were determined as of September 2011, when Saverin made his declaration to leave the U.S., at the internal third-party valuation used for restricted stock issued to employees. At the time the shares were valued at $30.58 each. However, according to PrivCo founder and CEO Sam Hamadeh in a Web post, the share price had sunk as low as $27.72 on June 4, which would have resulted in a considerably lower tax bill had Saverin waited.
The percentage of American expats who renounced their citizenship increased from 0.008% to 0.059% between 2008 and 2011. An Investors Business Daily article pointed out that much of the increase in departures likely can be laid at the door of aggressive enforcement of existing laws that began in 2008 when the U.S. government began to push Swiss banks to stop helping Americans evade taxes.