Worldwide, a total of 3,000 Americans gave up their citizenship last year in the wake of new regulations compelling banks to provide information to US tax authorities on all American accounts. Embassies will not reveal the breakdown by country, but a disproportionate number are believed to be in Switzerland as it is the country hardest hit by the US effort to track and tax money held in offshore and secret bank accounts.
“Americans are toxic now,” said Ron Banks of the American International Club (AIC) in Geneva. “Banks no longer want us, but who can blame them? US Internal Revenue Service (IRS) reporting requirements are just too onerous.”
Marsha and her husband Larry*, who have lived overseas for nearly 50 years and are now retired in Canton Vaud, gave up their passports in 2013 after struggling for several years to bring their affairs into compliance with FATCA (the Foreign Account Tax Compliance Act) and paying thousands of dollars to tax attorneys in the process. “Up until 2008 there was a tax treaty between Switzerland and the United States and we paid no tax,” said Marsha. “But in 2010, we got all our papers in order, paid over 100,000 francs in back taxes, but our lawyer also advised us to participate in the Voluntary Disclosure Program, to report all foreign bank accounts. The process took more than two years.”
Marsha said they realized they had inadvertently “become a part of the US criminal justice system in joining the Voluntary Disclosure Program. There may have been valid reasons for the US government to start this process to track down criminals,” she said, “but it has ended up treating ordinary citizens as criminals while the real criminals are finding ways to continue hiding their money. No Swiss bank will any longer invest your money if you’re an American or even an ex-American. You can only put it in a savings account at no interest.”
This story is not unique. Martin*, a retired businessman in Geneva, wanted to refinance the mortgage on his home but was told this was no longer possible for Americans. Then he learned that his US retirement account is taxable in both countries. Marylee*, a divorcee who has lived over 20 years in Prangins, had a similar experience. “When I was told I had to pay taxes in both countries, I decided to renounce my citizenship, become Swiss and never speak English again or reveal my origins.” The US is the only country in the world, apart from Eritrea, that taxes citizens legally residing overseas.
Americans may also be persona non grata in the work place. “Americans working for companies with signatory authority over the company’s bank accounts would have to declare these accounts under FATCA,” noted Banks. “And this goes for all foreign companies, churches, clubs, etc.”
On a recent visit to Geneva, Marylouise Serrato, executive director of American Citizens Abroad (ACA), which lobbies the US Congress about American expatriate problems, said a lot of US citizens overseas are breaking the law without knowing it. But she said some relief is at hand. Last month the IRS released its Streamlined Foreign Offshore Procedures (SFOP) to simply the process of tax compliance. Details can be found on the ACA website www.americansabroad.org.
“The IRS acknowledges that the great majority of Americans overseas are not criminal tax evaders,” said Serrato, “but individuals who were non-compliant due to simple errors, omissions or because they were not aware they needed to file income tax returns.” Unlike the Voluntary Disclosure Program, SFOP does not involve a detailed questionnaire and follows normal filing procedures with the only special requirement being to sign a form confirming that non-compliance was not willful.
* names changed