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/
“Christian Exodus” has some interesting info re “personal secession” and resettelement areas:
http://www.christianexodus.com/index.php?option=com_content&view=section&id=9&Itemid=66
ping
I suppose if I worked hard and took risks and finally became successful enough for the scumbag politicians to paint a target on my back, I’d look for a way to shelter my money, too.
I suppose if I worked hard and took risks and finally became successful enough for the scumbag politicians to paint a target on my back, I’d look for a way to shelter my money, too.
Not just the “wealthy” are planning to leave. I talked to a young woman yesterday. She agrees with me that Zero is out of control. She sees no way to survive as a young conservative in Oregon. Methinks she will soon sell her real property and go ex-pat in a foreign nation.
The US would become THE place to do business. We could actually outgrow Obama’s financial mess.
Under FairTax, the USA will become essentially the world's most favorable business environment because of no more taxes on earning money. That right there will bring at minimum US$20 TRILLION in repatriated American-owned liquid assets and new foreign investments in the USA, essentially the world's largest "private bailout."
John used to post here as ActionAmerica until he was banned for criticizing Bush.
“Perhaps those people don’t want their successes to be confiscated by a malevolent socialist government and redistributed to an illegal or the local crack-whore”
Again.......I repeat.....go.......but once the dust settles don’t expect to come back to open arms. And further more, I’d like to start taking bets on the ratio of these people that voted for this marxist to begin with. Oh but surprise, surprise, they are on ‘the list’. Good Riddance.....they better hang onto their precious wealth while they can because where ever they go...it will be up for grabs. They can run like the damn rats they are or stay and fight with us that they consider specks upon their shoes.
PS.......Angry? That doesn’t even scratch the surface.
Fantastic post dfwgator
Rats they may be. But rats know enough to leave a sinking ship. And that should worry us.
No doubt our politicians will note this story and do precisely the wrong thing. Instead of concluding that taxes are too high, Congress will undoubtedly try to squeeze more money out of those who earn high incomes.
Remember the response of the governor of New York when he was told that Rush Limbaugh was leaving the state to avoid the high taxes there. Governor Paterson said that if he had known Limbaugh would leave New York, he would have raised taxes sooner.
Personally, I am less concerned about the rodents going over the side than the water rising in the hold.
“A real American fights to change the perceived failings of his government. For all of your wealth, you are pathetic.”
Absolutely. These so called ‘wealthy’ people.......they are going to lose it all eventually anyway. They are not welcomed here and further more, when they run for ‘cover’ guess who they will be running to? And I say ‘kick their asses back out into the line of fire’
Then fold em. Let me buy a ticket for you (one way of course)to Syria, Saudi Arabia, or any other brutal regime...you want nice weather how about Cuba....or maybe Venezula. Suck up to the rich rats that ran.......see how far that gets you.
“Personally, I am less concerned about the rodents going over the side than the water rising in the hold.”
So grab your bucket
I am not a millionaire but I am reading a lot on Panama.
You too.
Are they doing it out of greed, or are they starving the beast by taking their "capital" off the table. My guess is the former. The only other reason is Obama's subtle Antisemitism. If someone wanted a not so Pro-Islamic country, Australia has shown not to friendly as well as Northern Italy. The question is what is the oppourtunity cost of going to these countries, AU, your guns, and a Gov't 401(k) annunity, Italy a tax system that becomes a benchmark for evasion. Others talked about as havens for us are debatable as well, Poland, NZ, Singapore, Brazil and Costa Rica. As someone close to the Jewish community, this has been spoken off, trust me....
Well supplied thank you
This administration, including the little Jewish Hitler Rahm Emanuel, has shown nothing but a blatant disregard for Israel and are overtly antisemitic. There is no subtleness in their hatred of the Jewish nation. Hope all of you Jews that voted for this Marxist are happy with yourselves. Be sure to get those gold fillings removed from your teeth before Rahm and his brother have a go at you.
Several years ago, there was a crowd of bombastic “citizen of the world” types on FR, known pejoratively as the FROBL (Free Republic Open Borders Lobby), who loved to mock American workers as lazy and overpaid, and that they deserved to lose their jobs. That illegal immigrants saved them money, and meant more $$$PROFIT$$$, so it was a good thing, no matter what. China? No threat, just lazy Americans complaining.
They all loved Dubai. What was not to love for such people? Virtual slave class to do all the dirty work, minimal taxation on the special, protected class of expats, decadent adult entertainment galore, so long as you stayed within districts created for that.
I assume their formerly expensive, but now cheap condos are sinking into the gulf along with all the other ridiculous manmade islands shaped like palm trees and such, in that ill-conceived, beyond-the-reach-of-most-financial-regulation Disney World for hot, dirty money and the people who covet it.
Good riddance. If and when it all goes down, short of having some off-grid hidey hole way back up in the Andes or something, it’s not going to be any better elsewhere, and will quite possibly be much worse.
/rant off
Disclaimer: Opinions posted on Free Republic are those of the individual posters and do not necessarily represent the opinion of Free Republic or its management. All materials posted herein are protected by copyright law and the exemption for fair use of copyrighted works.