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As of September 12 2014, U.S. State Department has issued that all U.S. Citizenship renunciation fees will rise from USD 450 to USD 2,350; more then a 400% rise.
Announced by the State Department, they claim that the fee hike was needed to reflect the “extremely costly” process of consular offices handling the renunciations. But a more scandalous reason may be due to the record number of U.S. Citizens and green-card holders renouncing their allegiance to the United States. The amount of people renouncing are expected to beat 2013 numbers.
The Wall Street Journal reported that according to a State Department spokesperson, three-quarters of the renunciations that are being handled are from offices in Canada, UK and Switzerland.
Forbes reports that there is a backlog at the consular office in Toronto of duel Canadian-U.S. citizens who are seeking to break away from their allegiance to the USA. The delay is expected to last through January 2015.
Given the increasingly burdensome regulations on Americans’ “offshore” financial accounts via the Foreign Account Tax Compliance Act, it would seem that the U.S. government is trying to make an attempt to curb Americans from avoiding the IRS’s claws. In addition to the fee, an extensive interview process is required to renounce your USA citizenship.
The only countries that currently collect taxes on citizenship (including green-card holders) is the United States of America and Eritrea. Eritrea is a small country in Africa!
When looking at who is renouncing, many are not wealthy individuals looking to hide millions in some offshore bank account. Many of the individuals renouncing are actually middle-to-low income people, unaware of their tax obligations while living abroad. When their tax obligations are discovered, paying a tax preparer $350, plus whatever taxes are imposed, is just not worth it.