Posted on 09/06/2009 3:05:12 AM PDT by Maggie Maggie Maggie
As offshore havens comply with transparency demands, a growing number of ultra-wealthy Americans are handing back their passports
Private client lawyers and relocation specialists are reporting a surge in wealthy Americans living abroad who are prepared to give up their citizenship to avoid the scrutiny of US tax authorities.
Although such a move means they have to pay an exit tax, lawyers say this is a price people have become more willing to pay this year, now the fall in asset values has reduced the size of the imposition.
Jay Krause, a partner at private-client specialist law firm Withers, said: “The number of inquiries from US citizens wanting to expatriate from their citizenship has increased rapidly in the last year.”
The level of interest is set to increase following the tax disclosure deal between the US Government and UBS of Switzerland, involving the names of 5,000 alleged US tax evaders being handed over to the authorities. The UK concluded a tax deal with Liechtenstein last week.
Because of this, many ultra-wealthy individuals who have chosen to become stateless now cruise outside coastal waters in their mega-yachts in the belief that if they stay on the move, tax authorities will not be able to catch up with them. One analyst who did not want to be named, has estimated the number of stateless tax evaders amounted to a few thousand.
This implies the quantity of money outside the grasp of global tax authorities could be trillions of dollars. Under US tax laws, the worldwide income of any US citizen or resident is subject to tax. The US is the only country in the world that requires its citizens to stump up, no matter where they live.
Krause said current economic conditions are making it more conducive for Americans to contemplate paying exit tax demands from the US Internal Revenue Service. “The mark-to-market provision in the Exit Tax from the IRS is a big incentive,” he said.
In the final months of the Bush administration, the US Government introduced a package of tax reforms that included an amendment to the exit tax on US citizens and long-term green card holders who expatriate the US.
The tax allows US citizens and permanent residents wanting to renounce citizenship or permanent residency to pay a one-off income tax on gains over $600,000 (€420,000). All assets beyond this amount are valued at mark-to-market.
The exit tax allows a clean break from the US tax system from the date of expatriation without imposing the previous 10-year period after expatriation where tax rules used to apply – another big incentive, say lawyers. One of the other benefits of the amended exit tax is that a former US citizen who has expatriated will be able to travel to the US without his income becoming taxable. Under the previous exit tax this was not possible.
Krause said many people looking to give up US citizenship are accidental Americans. These are either those born in America when their non-citizen parents might have been living there for a short period, or the offspring of an American parent living abroad. Both categories qualify automatically for US citizenship.They may not take up a US passport, but they will still be subject to US taxes unless they expatriate. “More and more accidental Americans are looking at the fall in asset prices in the last year and taking up the option to expatriate,” said Krause.
Official figures on US expatriate cases reported by the IRS every quarter show about 90 people giving up their citizenship in the first half of 2009.
But one prominent lawyer, who did not want to be named, said: “There has been for some time a view that the IRS has been under-reporting these numbers.”
The IRS denies this. Some argue the figures are more or less meaningless. John Gaver, who edits right-leaning website Action America, said in an article published on the site: “What these lists fail to show is the vast and increasing numbers of wealthy US citizens who are just ‘dropping out’ – taking all of their wealth and leaving the US without renouncing. They just disappear off the US tax rolls and appear on some other country’s tax rolls.”
Anecdotal evidence also suggests there has been a surge of inquires from Americans looking at taking up citizenship of another country.
Christian Kälin, a partner at residence and citizenship planning consultancy Henley Partners, said his firm has had a big rise in such inquiries.
He said: “Tax reasons might be the biggest reason why US citizens will want to drop their passports, but security issues will also influence their decisions.
“For example, we saw a huge surge in inquires from US citizens contemplating acquiring an alternative passport after the Mumbai killings.”
The terrorist attacks in Mumbai last November targeted Americans among other foreigners.
Kälin said citizenships of the Caribbean Islands and western European countries prove to be the most popular for ex-American passport holders.
He said: “St Kitts and Nevis is the favourite alternative citizenship option for US citizens. Many will also be looking at Austrian citizenship, but it costs the most.”
St Kitts and Nevis is favoured for its perceived security, while Austria is one of the few European countries where it is possible to purchase citizenship.
Typically, it will cost $400,000 to secure a St Kitts and Nevis passport, whereas Austrian citizenship might run into several million euros.
http://www.wealth-bulletin.com/rich-life/rich-monitor/content/1054959505/
Ping!
If these ultra-wealthy just want to not pay their taxes it seems like the best strategy would be to join the Obama administration an pull a “Charlie Rangel”.
I’m never going back either. We need more of you wealthy types to move to Tokyo and create some nice international businesses here.
“What these lists fail to show is the vast and increasing numbers of wealthy US citizens who are just ‘dropping out’ – taking all of their wealth and leaving the US without renouncing. They just disappear off the US tax rolls and appear on some other country’s tax rolls.”
Sounds like a good option. Next, find a country with no income tax. Question, can you still use US banks without penalties. This might be a way to go for not-so-wealthy retired people, assuming they can still collect on Social Security.
At least it will keep the next generation of lawyers employed. We can’t have them on the breadlines.
They can always become Americans again by going to Palestine, Yelling, Alahu Akbar!" and getting an immigration visa under Obama's " I Love Palestinians" immigration program.
while Austria is one of the few European countries where it is possible to purchase citizenship
WADS of cash, obliging bureaucrats, and an urgent need for fresh travel papers are a connection that in most countries is dealt with by the police. But there is a respectable end to the trade. In most rich countries a hefty investment brings a visa that can eventually turn into a passport: $500,000 typically secures an American “investor visa”. For the British equivalent it is £200,000 ($392,000). But three countries—Austria, and the Caribbean island states of St Kitts and Dominica—have refined the process further, offering citizenship, in effect, for cash.
For the typical respectable applicant, a rich person from a poor country who wants to avoid hassles with visas, it looks tempting. Awarded to foreigners who provide scientific, artistic, cultural or economic benefits (ie, investment), an Austrian passport—which requires neither prior residence in Austria, nor any knowledge of German—allows visa-free entry to 125 countries and territories; St Kitts and Dominica allow entry to more than 50, including Britain (but not America). Compare that to 25 mostly poor countries for Indian passports. Customers may also be people from countries such as America, whose citizenship may expose them either to terrorism, or to the tax authorities. …
http://www.economist.com/displayStory.cfm?Story_ID=E1_RGPPPDN
You would be surprised how simple it would be to “drop-out” and keep using US banks. Once you open an account with a bank in the US...it’s pretty much permanent. They will never go back and ask questions. There is the issue of income and social security numbers....but frankly, if you only keep enough cash in a checking account to cover travel and local bills....and never show any income, then IRS never gets in your business.
As for countries willing to take you....there are probably over forty that you can work various deals with. Panama is currently one of the top ones that openly recruit....but you’ve got various options. The advantage with most of these is that they really don’t have sophisticated means to track your wealth, so other than property taxes....they won’t be in your face.
It won’t surprise me if half a million Americans “drop-out” in 2009/2010. The curious thing is that they will move their US wealth....without the involvement of the IRS and avoid further issues or taxes.
Also you can do “investor visas” and similar very easily. In the Philippines, simply buy a condo unit for $40K USD in an approved area and get an R1 visa. Costa Rica, Panama, Belize etc. have similar setups.
Then they wound’t have to worry about the IRS.
Sounds like some Action Movie plot, but it could work.
Awarded to foreigners who provide scientific, artistic, cultural or economic benefits (ie, investment), an Austrian passport.
If immigration reform passes, this becomes more of a viable option for more people.
Then people will be able to renounce their American citizenship and not have to live in a foreign country- and instead just stay here as undocumented workers.
Who cares? Use HSBC, UBS, RBS, Fortis, any one of a large number of major and stable International banks. ATMs work world-wide...;)
Open the account in an overseas locale, and the foreign office will not have visibility into it save balances. For example, an HSBC account opened in Hong Kong keeps your information private; using the HSBC branches in the US means you can withdraw or deposit, but nothing else is reported/tracked.
Regards,
Don’t let the door hit ya where the Good Lord split ya.
ping!
No Good Bastards. Make their millions off the system we have in place and at the first hint of trouble, they are scurrying like the freakin’ rats they are. I WOULD LOVE to see the list of names. And if they honestly believe by renouncing their citzenship of this great country, that they are protecting their money and assets.......wait till foreign factions find out who they are and how much they have. GOOD RIDDENCE you cowards and don’t come back.
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