Canadian Americans Renounce Citizenship On Account of FATCA

Last year in 2013, an estimated 2,999 people renounced their American citizenship worldwide. This year, the figures from Canada alone could easily eclipse that number. Tax lawyers in Canadian law firms are seeing a steady trickle of angry citizens coming in and asking to renounce their relationship with Uncle Sam. As many as four or five people each week for the last month, and the number is only expected to increase. With Canada applying the FATCA laws from the 1st of July, resident Canadians who have a link to the US are at a loss to protect their savings and incomes and have taken to this extreme step to show their anger.

This is Obama’s America.

Not American and yet fined for taxes

An estimated one million Americans and citizens with dual citizenship reside in Canada. Many of them have not even felt the need to call themselves Americans for a lifetime because they were either born in Canada, or have lived there almost all their lives. Suddenly being asked to pay huge amounts of taxes on their life savings is a real blow to these people.

America has never seen so many want to leave before.

America has never seen so many want to leave before.

Alex Marino, a US tax lawyer who leads the renunciation practice group at Calgary’s Moody’s Gartner Tax Law LLP, has said in an interview that the current renunciation process is fuelled to a large extent by the tax laws. Despite their simmering anger, Marino said his clients do not speak publicly of their decision to renounce as they fear repercussions. The IRS has publicly announced its decision to review those who renounce citizenship, and making a hue and cry about it in the current environment would be foolhardy.

The US immigration act actually has the provision to bar people from entering the country if it is shown that they gave up their citizenship to avoid taxes. Marino’s clients, and many others like them, fear that they will not be able to travel to the US for work or to meet family if they speak publicly against the FATCA.

Accepting this as a real possibility, Allison Christians, a specialist in tax law at McGill University’s Faculty of Law, said in a recent interview that the US could opt to exercise this right soon. Tax lawyers in Canada and elsewhere who represent clients renouncing their ties with the US should be wary of a crackdown in the near future if the numbers continue to rise up speedily.

FATCA was the final blow for many people.

FATCA was the final blow for many people.

Renunciation comes at a cost

Tina Turner recently made a huge splash by renouncing her ‘American-ship’ and turning to the Swiss authorities for shelter. But for everyone else, it may not be that easy to give up on Uncle Sam. The US consulate requires one to prove that they have been tax compliant for the last five years, and if you have not, or if you have properties exceeding $2 million, you are required to pay a heavy ‘exit tax’. Though the IRS has a voluntary filing program, the fear psychoses is such that people are resorting to extreme steps to extricate themselves of this financial mess says US tax lawyer Max Reed.

If America just lowered their taxes and stopped spending money it did not have, this would not be happening.