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Why US Citizenship Renunciations Have Hit An All-Time High

  • Written by Dave

The gentleman who maintains the International Tax Blog has posted the latest  US citizenship renunciation figures. Last year say 1,781 renunciations and was 16% higher than 2010. Those renunciations are at the highest level since he started tracking the figures in 2004. He speculates, and I think he’s probably correct, that 2011 was the highest number of renunciations in US history. In fact, I’m going to go out on a limb and suggest that 2012 will be higher still.

What's going on here? Why are the number of renunciations increasing? One caveat: as the Renunciation Guide makes very clear, and as I can attest after having viewed some of the data firsthand, the published data on renunciations is crap. Names are duplicated, some names are apparently missing, as we see updates posted later, and there's no way to cross-reference these names to anything reliable because there's just not enough information. Further, while my many years of work with raw data tells me that when data is bad it's usually consistently bad, that's for computer-managed data. But for this data, as far as I can tell, it's largely a manual process of handing this data from the various consulates, over to some central office of the State Department and then over to the IRS. It's also entirely possible that there have been political decisions involved in how this data is moved around and presented.

So while it's not as bad as making life-altering decisions based on an email starting with words "I know this email will come as a surprise", you'd be a fool to make definitive conclusions based on this renunciation data.

But many people will tell you I'm a fool.

The names are published in line with a 1996 law designed to "name and shame" expatriates. Naming is rather silly as many of the names are generic (Jennifer Black, I'm talkin' 'bout you!) and, as already noted, some names are omitted and others are likely misspelled.

But what about the "shame" bit? You could say that there are three types of people who renounce.

  1. Those who want others to know they’ve renounced.
  2. Those who don’t care if others find out they renounce.
  3. Those who do care if others find out if they renounce.

Obviously, for groups 1 and 2, the shame bit isn’t going to matter. But for the third group, what does it mean?

For people considering renouncing, many of them say the same thing: they didn't want to renounce. They did not want to give up this part of their culture and history. They're still Americans even if they're living in another country. They have to be pushed pretty hard to renounce. They've gone through so much pain to get to that point that even if they don't want others to know they've renounced, I don't think it's going to be their biggest worry (and, of course, many probably don't know their name will be published).

So the "name and shame" seems pretty silly, but what's driving those renunciations?


I read expat blogs and forums quite a bit (no surprise there) and there's a firestorm of talk from people thinking about renouncing. Others are just going into hiding. The IRS witch hunt against people overseas who were unaware of their unusual tax situation, the variety of heretofore unadvertised laws impacting expats, combined with outrageous penalties for failure to file tax returns when you don't owe any tax (not to mention insane filing costs for said returns) is causing many expats to realize that the US government doesn't give a damn about them. We're having our rights stripped, we're having our benefits cut, and we get offered a ridiculous OVDI program where we can face huge penalties for not paying back taxes but at least we don't face jail time? Yes, people are pissed.

Some people impacted didn't realize they were American (yes, that happens). Many aren't "expats" and were born outside the US and never lived or worked there, but have an American parent. Others are too poor to afford the tax preparation fees (we expats pay a hell of a lot more than you do and we don't have plenty of US tax specialists here). Retirees abroad living off their savings are facing bankruptcy because they didn't know about the these laws.

When you move abroad, you often don't realize you still were liable for US taxes, but no one tells you. The consulates don't inform you. Many Americans are now only finding out when they start doing research to understand why their bank closed their account because they're American. New passports have tiny print in the back saying you still have to pay taxes to the US if you move abroad but many people still don't have those passports or they don't read the fine print.

We're finding out now, the hard way, that these poorly advertised laws are now being enforced mercilessly. I suspect many expats will simply "disappear" and hope they're never found while even more are going to renounce. It's a sad thing that this is happening, but the IRS has made absolutely no serious effort to educate people prior to threatening many of them with bankruptcy or jail time.

Next year is going to be interesting.

Dave Lister

The world's most sought-after consultant on international tax planning, investment immigration, and global citizenship. Dave has personally lived this lifestyle for over a decade, and now works with entrepreneurs and investors who want to live free.

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