U.S. citizen and Mayor of London, Boris Johnson, slams FATCA
The Mayor of London and potential future Conservative leader/British Prime Minister, Boris Johnson has joined the army of voices against America’s controversial global tax law, the Foreign Account Tax Compliance Act, or ‘FATCA’. Speaking as part of a recent book tour on the Diane Rehm show, Mr Johnson was characteristically forthright in his views against FATCA.Born in New York and having never given up his U.S. citizenship, the London Mayor cannot escape the Internal Revenue Service (IRS) and the clutches of FATCA.
Since he sold his home in the UK he is eligible to pay tax on the sale in America, but Mr Johnson remains adamant in his refusal to pay. So what is the alternative for the Mayor? He could renounce his U.S. citizenship, which he claimed he was going to do in 2006, but even if he went ahead it wouldn’t solve his problem, as citizens must confirm five years’ tax compliance to the IRS before making an exit and settle any outstanding bills.
The number of American expats renouncing their citizenship as a direct result of FATCA, according to the U.S. Treasury Department, rose by 220 per cent in 2013. However a deVere Group survey undertaken earlier this year revealed that a massive 73 per cent of the 7.6 million Americans living overseas are tempted to give up their U.S. passports.
To rub further salt in the wound, the fee to renounce citizenship has risen recently from $450 to $2,350, supposedly due to the increase in workload as renunciations continue to rise.
This highly-contentious law, described by critics as ‘the worst law most Americans have never heard of’, requires every foreign financial institution in the world to report their American clients’ financial activities to the IRS, aiming to catch out tax evaders who may have undisclosed undeclared income in foreign banks.
Americans overseas holding assets over $50,000 are subsequently being rejected from non-U.S. financial institutions in their country of residence as the law is too expensive and arduous to comply with.
Opponents of this law argue that it will do little, if anything, to resolve the worldwide issue of tax evasion.
Whether Mr Johnson makes the decision to renounce his U.S. citizenship remains to be seen, but he certainly wouldn’t be alone in his plans to escape the grasp of FATCA.
I would urge him, and all other Americans and so-called ‘accidental Americans’, to first explore all the available options to mitigate the FATCA hammer blow.
Many of deVere Group’s American expatriate clients have, for example, discovered the benefits of an overseas supplementary pensions contract will do just this.
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