Leaving America for good may be a painful process, but it is also a very expensive one. According to a recent report, the feds are raking in millions from password renunciation fees every year. U.S. residents who plan to give up their citizenship need to fork out $2,350 for each passport.
The report also shows that federal authorities minted $12.6 million in passport renunciation fees since 2014, when the fees were hiked five times over. Before the fall of 2014, U.S. long-term residents and citizens had to pay only $450 to toss their passport.
But the big money the U.S. government is making from people who want to leave the country does not originate only from the extra charges. More and more residents plan to bid the U.S. fare well every year.
In 2015, 4,279 Americans cut the ties with the U.S., which is a 20 percent rise from two years ago, or 18 times than in 2008. Dianne Mehany, an attorney that helps people with their renunciation charges, believes that the U.S. government is currently looking for new ways to boost revenue.
But not all the money stays in the country. Some cash goes to U.S. consulates and embassies on foreign soil that need to process the requests for citizenship renunciation. Chris McLemore, an international tax attorney, explained that the number of expats skyrocketed in recent years and so did the processing costs.
Plus, while the ‘exit tax’ may seem huge, federal tax experts noted that the U.S. government could have made a lot more from expats’ in future taxes if the latter decided to stay in the country.
Yet, higher renunciation taxes may deter people from leaving the U.S. because an average American needs to shell out about $20,000 to get his or her renunciation paperwork in place.
Other tax experts believe that the tax to exit the country may rise even further as more and more people plan to bid Uncle Sam farewell every year. One cause for the record number of expats ditching citizenship may be the complicated tax paperwork they need to file every year even though they live and work overseas.
After the U.S. Foreign Account Tax Compliance Act came into affect in 2010, the provisions against tax evasion have given expats tremendous headaches. Because of the regulatory complications, some foreign banks even declined to do business with U.S. clients ever since.
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