Monday, March 30, 2015

London Mayor and Possible Future UK PM Hounded Into Renouncing His Dual American Citizenship

Thanks to the IRS, one of Britain's most famous politicians — indeed, London's mayor is a possible future prime minister — has been hounded into renouncing his American citizenship, reports The Economist.
BORIS JOHNSON, the mayor of London, is British-American by birth—and by temperament. He mixes the can-do frontier spirit with self-deprecating wit. After being sacked as a shadow cabinet minister, he said: “There are no disasters, only opportunities. And, indeed, opportunities for fresh disasters.” He is relentlessly optimistic. “Voting Tory will cause your wife to have bigger breasts and increase your chances of owning a BMW M3,” he once promised.

Yet Mr Johnson (pictured) is so fed up with the Internal Revenue Service (IRS) that he is renouncing his US citizenship. He says he wants to affirm his commitment to Britain—a wise move for a man who hopes to be prime minister some day. But he has also talked of “getting a divorce from America” because of its “incredible doctrine of global taxation”. He became American by “an accident of birth”: his father was studying in New York. Half a century later this made Johnson junior liable for American capital-gains tax on the sale of his primary home, in north London; Britain levies no such tax. He harrumphed last year that this was “absolutely outrageous” and said he wouldn’t pay. (He later settled for an undisclosed sum.)

The number of Americans giving up their passports has shot up, from less than 1,000 a year in the late 2000s to a record 3,415 in 2014. A new spur is the Foreign Account Tax Compliance Act (FATCA) of 2010, which makes it a lot harder for Americans overseas to get (or keep) bank accounts, pensions and mortgages, because foreign financial firms don’t want the administrative hassles that FATCA throws up. The law also increases filing requirements for citizens—and thus stokes fears that honest mistakes will be punished.

A neighbour of this correspondent, who was born in America but moved to Britain as a child, recently received a huge bill from the IRS, out of the blue, for many years of unfiled taxes. He had not realised that he owed anything; he had always paid taxes promptly in Britain. The IRS was so aggressive that he feared he might lose his technology business; he even discussed divorce with his wife as a way to shield their assets. In the end, he settled for a six-figure sum. He, too, has since renounced his citizenship.
Related: • Keeping the IRS happy grew ever more time-consuming and costly, until it became intolerable
A massive breach of the Fourth Amendment: The vast majority of those renouncing citizenship are middle-class Americans, living overseas, fully compliant with their U.S. tax obligations