US tax rules sour life for Americans living abroad: expats

“It was a pretty big decision and there was a bit of anxiety,” said the 50-year-old photographer who served in the 1990-91 Gulf war and has been living in Switzerland since 1993.

But once he received his Swiss passport and handed back his U.S. one last September, “it was like a load of weight off my shoulders.”

Schmith is one of a growing number of American expats who are opting to give up their citizenship rather than deal with the increasing difficulties imposed on them by U.S. tax authorities, observers say.

John, a 60-year-old business strategy specialist who asked that his last name not be used, told AFP he had decided to give up his U.S. passport after losing sleep for years over the intricate tax filing requirements Washington places on all U.S. citizens, regardless of where they live in the world and where they make their money.

When the United States recently began pushing through regulations aimed at fighting offshore tax evasion, the implications for him — a “squeaky-clean” law-abiding citizen — became too overwhelming, he said.

“I just got more and more anxious about my ability to protect myself and my family from the administrative overhead of the U.S. government,” said John, who has been based in Switzerland since 2002.

Six European countries, including Switzerland, have recently agreed to comply with the 2010 U.S. Foreign Account Tax Compliance Act (FATCA), requiring banks to report all holdings by their U.S. clients to the Internal Revenue Service.

“Offshore tax evasion costs the U.S. jobs and billions of dollars each year, and it puts an unfair burden on the average American taxpayer to make up the difference,” Senator Max Baucus, who chairs the Senate Finance Committee and sponsored the legislation, told the New York Times last year to explain why FATCA was needed.

Jackie Bugnion, a Geneva-based tax expert working for the American Citizens Abroad lobby group, however told AFP that while the aim in theory is to “go after the wealthy resident in the United States who is hiding money overseas,” only a small minority of those affected fall into that category.

An estimated 4 to 7 million Americans live outside the country, ranging from U.S. military personnel, diplomats and others on temporary assignments, to so-called “accidental” Americans who happened to be born in the United States to foreign parents and dual citizens who may have lived most or all of their lives abroad.

According to observers, most of these people don't owe any taxes to the United States, but they still have to go through the process of filing complex IRS returns each year.

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