According to a recent survey of government data, Americans are continuing to renounce their citizenship at the highest levels on record since 2016.
5,816 Americans gave up their passports in the first six months of 2020, thus presenting an over ten-fold spike from the last six months of 2019, when 444 citizens relinquished their citizenship, according to research by the Enrolled Agents and Bambridge Accountants New York.
2,072 Americans gave up their citizenship in 2019 in total.
The surge in renunciations during the first half of 2020 also breaks a previous record set in 2016, when 5,409 Americans gave up their citizenship over the course of the year, which was itself a 26 percent jump from figures registered in 2015.
The new data compiled by Bambridge Accountants and drawn from the Federal Register does not offer the reasons motivating citizens to give up their passports, yet Alistair Bambridge, partner at Bambridge Accountants New York, was cited by PRNewswire as suggesting that the COVID-19 pandemic impacted the “huge turnaround” of US expats renouncing.
Previously, the trend had been towards a steep decline since 2017.
"The current pandemic has allowed individuals the time to review their ties to the U.S. and decide that the current political climate and annual US tax reporting is just too much to bear,” said Alistair Bambridge.
The country’s federal tax rules are suggested by experts as a likely explanation for many renunciations.
The US levies tax based on nationality rather than residence, forcing many Americans abroad to file with the IRS (and in some cases pay tax) even if they haven't lived in the country for years.
But bearing in mind that the tax burden has remained unchanged of late, and failed to previously impact the citizenship renunciation figures, the current surge is suggested as having been triggered by other reasons, such as the coronavirus pandemic or political turmoil.
"For U.S. citizens living abroad, they are still required to file U.S. tax returns each year, potentially pay U.S. tax and report all their foreign bank accounts, investments and pensions held outside the U.S. For many Americans this intrusion is too complicated, and they make the serious step of renouncing their citizenship as they do not plan to return to live in the US," says Bambridge.
The pace of Americans jumping ship started to accelerate in 2010, when the Foreign Account Tax Compliance Act (Fatca) became law and was implicated in record-breaking numbers of US citizenship renunciations throughout the 2010s, writes Fortune.
At the time, the act was perceived as a means of stemming tax evasion by US citizens living or working abroad.
Those who decide to abandon their US citizenship must pay a $2,350 departure fee as well as pay any back taxes they owe the IRS.