Nobody likes taxes and if you are an expat from the US then you probably dislike one in particular, the Foreign Account Tax Compliance Act (Fatca).
The legislation, which, came into full effect on July 1, 2014, has many implications, particularly for US expatriates.
The majority (73 per cent) of Americans who live outside the US are tempted to give up their US passports in response to the introduction of Fatca, reveals a new survey by an independent financial advisory organisation.
The findings come as Federal Register data shows that the number of Americans renouncing US citizenship increased by 39 per cent in the three months to September after the new global tax law came into force.
In a global poll, deVere Group recently asked more than 400 of its American expatriate clients: ‘Would you consider voluntarily relinquishing your US citizenship due to the impact of Fatca?’ and cumulatively, 73 per cent of respondents answered that they had ‘actively considered it’, ‘are thinking about it', or ‘have explored the options of it’.
On the other hand, 16 per cent of the respondents said they would not consider relinquishing their US citizenship and 11 per cent did not know.
“It is alarming that nearly three quarters of Americans abroad said that they are going to or have thought about giving up their US citizenship,” said Nigel Green, founder and chief executive of deVere Group.
“Nationality, especially for an expatriate, is an incredibly important part of one’s identity and typically it’s a very emotional issue, too. It is our experience that most Americans are extremely saddened at the prospect of giving up their US citizenship to avoid the harsh implications of a new and utterly flawed tax law.
“However, it should come as little surprise that such a high number are prepared to do so because Fatca’s reporting requirements are excessively onerous, burdensome and expensive.
"Also many non-US banks and other financial institutions will no longer work with Americans which can make living outside the US achingly complicated,” he added.
The survey highlights that Fatca has been designed as a tool to counteract tax evasion and has resulted in additional reporting requirements for all US citizens overseas.
Fatca opponents argue that it will do little, if anything, to tackle the important international matter of tax evasion.
According to Jessica Cook, a private client advisor with AES International, Global Wealth Management, many Americans residing overseas are reporting banking lock-out as some foreign financial institutions have simply chosen to eliminate their US client basis in order to minimise their exposure to Fatca reporting requirements, withholding fees and potential penalties.
“Some experts even believe that there are risks that this law will make it less desirable for foreigners to do business with Americans.
“There may even be a reduced desire to hold dollar-based assets. The possibility that the new law will make it more difficult to open foreign accounts of any type could impact some nearly 7 million Americans who live and work abroad,” she explained.