TAXES LEAD AMERICANS TO RENOUNCE CITIZENSHIP

The long arm of the U.S. tax collector is leading growing numbers of Americans living abroad to give up their citizenship, a Calgary lawyer says.

About eight million Americans are residents of other countries, including approximately one million based in Canada, Alexander Marino of Moodys Gartner Tax Law says.

The U.S. is the only major country that levies income taxes on its citizens wherever they live, and has passed laws making collection easier. As a result, the number of people renouncing their citizenship has grown from a few hundred annually to 5,411 in 2016.

Marino, who has worked on thousands of renunciation cases, speaks around the world on this subject and is making a free presentation Saturday from 10 a.m. to noon at the Fairmont Hotel Macdonald.

Here’s a condensed, edited version of an interview with the Philadelphia-born expert, who moved to Calgary in 2012.

Q Why is taxation a concern for American expats?

A The U.S. has been taxing on citizenship for decades and decades. What changed in 2010 was then U.S. president Barack Obama signed the Foreign Account Tax Compliance Act, or FATCA, into law. It’s a snitch program. Countries around the world, including Canada, make their banks, brokers and financial institutions find out who their U.S. citizen customers are and turn over that information … You can’t hide anymore. Also, the December 2017 tax reform was absolutely punishing on U.S. citizens who have an interest in a privately owned non-U.S. company … outside the U.S.

Q What’s the issue?

A Not only could there be taxes owing, but there are penalties for not filing some of the reporting forms that U.S. citizens living abroad need to file … They can say you owe taxes and interest and penalties.

Q How can the American government collect?

A Some clients will say ‘I will do nothing, screw them,’ but travelling to the U.S. after would be a big no-no. The other issue is if you have any U.S. stocks, bank accounts or real estate, they can take that. If you die owing Uncle Sam and your estate makes distributions without paying the IRS, they step in … It’s very, very difficult to live in Canada and treat the U.S. like North Korea with the connectivity the two countries have.

Q What are the benefits of renouncing U.S. citizenship?

A The obligation to file these returns every year (ends). It’s expensive, it’s a pain … About 95 per cent of U.S. citizens living in Canada don’t owe anything to the IRS because there’s a treaty between Canada and the U.S., but when you fall into that five per cent, that hurts. Another reason is U.S. estate taxes.

Q What are the downsides?

A For many living in less-safe areas of the world … if something happens to you, Uncle Sam won’t come looking. You can no longer vote in U.S. elections or live in the U.S. 12 months a year … And after you renounce, you will be treated like any other Canadian (worker) who would need a work permit or visa or green card.

Q How complex is the process? A It can take more than a year. The average cost range for government and legal fees is $10,000 to $17,000.