It’s the paperwork, stupid
It’s time to channel my inner Bill Clinton. (OK, maybe that’s not such a good idea). When he was running for election, his campaign manager’s mantra was “It’s the economy, stupid.”
Anecdotally, the people we help expatriate complain about the expense, burden, and risk of U.S. tax paperwork when they are living abroad. Quite often they owe no income tax to the United States. Despite that, they must prepare a tax return far more complex than the one that a U.S. resident would have — with the accompanying expense and risk for screwing up. And there are many opportunities for screwing up that are simply not available to a person living in the United States. 🙂
The science is settled. We now have academic confirmation. A recent study led by Dr. Amanda Klekowski von Koppenfels of the University of Kent (in Brussels) looked at U.S. citizens and expatriation. (Hat tip to Jackie Bugnion at American Citizens Abroad for alerting me to this). A summary on the University’s website refers to the paperwork and penalty problems as being central to renunciation considerations.
Other key findings I thought were interesting:
- 43% of renunciants had incomes under $100,000;
- 31% of the sample (1,542 respondents) were thinking of renunciation.
What’s regrettable about the Renunciations is that I did search of people who did with uncommon surnames and often found their Linkedin page.
Most are middle class who the US would collect zero from, however, they tended to be well educated, and ranged from small business owners, to chief surgeons, scientists, financiers, to a CEO of computer companies.
Although these people are not rich, they are involved perhaps with investment / project decision making for their respective organisations.
We’re always told not to ‘burn bridges,’ but the US somehow feels its immune from this old adage.
As the BRICs continue to build alternative infrastructure to the US dollar, people will start to ask to use the US dollar comes with basically the US Government’s terms and conditions regarding its use (who and with whom it can be used, where it can be used, when it can be used, how it can be used, and what can be purchased by using the US dollar). Compare this to a near future Chinese Yuan that will at least initially come with no such restrictions to gain competitive advantage over the US dollar. Which one would is easier to use? Answer not the US dollar.
An EU version of IBS needs to be set up to start a legal challenge to FATCA / IGA for resident EU citizens.