The South China Morning Post is reporting that many former Chinese Nationals are thinking about renouncing their US citizenship. Such actions would have been almost unimaginable a decade ago, when getting a US passport was the ultimate Chinese status symbol.
The reason behind many change of heart for many Chinese is the United States’s Foreign Account Tax Compliance Act (FATCA). In 2010, The Internal Revenue Service (IRS) stepped up its tax collection efforts by enacting the Foreign Account Tax Compliance (FATCA), aimed at cracking down on citizens who evaded paying taxes by keeping assets outside of the US. The IRS expects the tightened FATCA compliance to generate as approximately $9 billion over the next decade.
Under FACTA, American citizens and permanent residents, known as green card holders, are taxed on their worldwide income regardless of where they live. While numerous other countries, including China, tax their citizens’ global income, the United States and the IRS have garnered the majority of worldwide attention because of their aggressive stance and the sophisticated systems they use to track down assets of its citizens and permanent residents.
The South China Morning Post reports:
“With all this compliance burden, we think that the trend of US citizens at least thinking about giving up their citizenship” will continue, said Anthony Tong, a tax services partner at PricewaterhouseCoopers in Hong Kong.
Many wealthy people are deterred from giving up their citizenship halfway through the process when they learn the IRS will inspect their income globally looking for evidence of tax evasion, said Timmas Deng, a Hong Kong lawyer who specialises in immigration. “It’s very hard to find a Chinese entrepreneur with an impeccable tax reporting history,” he added.
John Gaver, author of The Rich Don’t Pay Tax!…Or Do They?, argues that vast and increasing numbers of wealthy US citizens are just “dropping out” – taking all their wealth and quitting the US without ever formally renouncing their citizenship.
To read the article in its entirety, click here.