The year 2013 is poised to set a record for the highest number of expatriations ever by US citizens. The total figure so far this year is 2,369, which is one third more than the 1,781 who left in the whole of the previous record year of 2011.
This year’s US passport ditchers will probably include rock star Tina Turner, who took out a full Swiss passport last April.
This growing expatriation trend has nothing to do with offshore tax evasion that the US is so keen to have stamped out because it actually reflects sophisticated and absolutely legitimate tax planning.
The problem is the US is one of only two countries – the other is Eritrea – to tax their citizens on their worldwide income, regardless of where they live or work. Accordingly, dumping your passport can save you a lot of money if you are a US citizen with financial or business interests abroad.
Other expatriation stimuli include exorbitant American inheritance taxes and new US Treasury reporting requirements that put off many small and medium-sized foreign banks from dealing with American customers.
Many of those who dump their passports already have dual citizenship in countries like Switzerland and Canada.