The Number of AmericansRenouncing Citizenship Because of the IRS Is Growing

The number of Americans renouncing citizenship because of the IRS is growing.

One of the founders of Facebook did it last week.

In 2011, 1,780 Americans did the same.

The resignation from American citizenship last week by one of the founders of Facebook, Eduardo Saverin, in order to not pay taxes, may seem odd, but really it is not an isolated event.

In 2011 1,780 Americans did the same, the majority in order to avoid having to report on their foreign bank accounts. According to the IRS (the U.S. Treasury), that figure is rising, having increased fivefold since 2008, when there were barely 226 resignations of citizenship to escape the Treasury.

Four years ago, the IRS launched a fierce campaign against citizens who hide foreign bank accounts. By law, everyone must include those accounts in their tax returns and report their earnings. The campaign began with a lawsuit from the IRS against the Swiss bank UBS AG, demanding that they open their archives and report on their American customers. After pressuring them for about three months, the U.S. government won a single victory, ensuring that the Swiss bank report to the Department of State regarding all American citizens with accounts in their branches.

But the IRS has gone further in their investigations, having now taken an interest in anyone who receives money from abroad, works for foreign companies or shares an account with a foreign spouse.

In April of last year, Peter Dunn, an American who lives in Toronto, Canada, renounced his citizenship at the Consulate. According to Reuters, Dunn explained that his Canadian wife was very annoyed with the IRS for requiring him to reveal the couple’s joint accounts.

“My wife’s accounts are none of their business,” said Dunn, who ended up becoming a Canadian citizen.

Analysts already assume that the number of resignations of U.S. citizenship will increase in the near future. At the beginning of next year, banks around the world must report on the accounts their American customers have opened in their headquarters or branch offices abroad.

The Reaction of Foreign Banks

Pressure from the Government and the IRS on the banks is so strong that some of them have begun to prohibit opening accounts for Americans abroad.

Edward Robbins, a lawyer specializing in taxes in Beverly Hills, California, confirms that the IRS “is obviously linked” to the increase in citizenship renunciations. “There is a general government push for more disclosure,” Robbins further explained.

Last month in Miami, two known South Florida entrepreneurs pleaded guilty to hiding account trails in the British Virgin Islands.

Before the IRS began increasing pressure, 200 to 400 Americans renounced citizenship annually. To renounce citizenship, it is necessary to attend a ceremony in the presence of an American diplomatic representative and sign an oath.