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Law to Exclude US Ex-Citizens Judged To Have Avoided Tax

19 June 2013   (0 Comments)
Posted by: Author: Mike Godfrey
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Author: Mike Godfrey

Two US Senators have filed an amendment to the Immigration Reform Bill, that will automatically bar former citizens eligible to pay the exit tax from re-entering the USA unless they can show the Department of Homeland Security that they did not renounce US citizenship for tax purposes.

The amendment has been put forward by Senators Jack Reed (D-RI) and Chuck Schumer (D-NY), and is described by Reed as a measure against "expatriate tax dodgers." Reed introduced a similar law in 1996, after a billionaire businessman renounced US citizenship, became a citizen of Belize, and then returned to his hometown in Florida as a Belizean consular official. Last year, Schumer proposed the "Ex-PATRIOT" Bill, following the decision of Facebook co-founder and partial owner Eduardo Saverin to renounce US citizenship.

As with the Ex-PATRIOT Bill, the new amendment, known as the Reed-Schumer amendment, will apply an automatic exclusion to ex-citizens with either a net worth of USD2m, or an average income tax liability of at least USD148,000 over the last five years. However, while the Ex-PATRIOT Bill included a provision by which the exclusion would be waived if the ex-citizen could demonstrate to the Inland Revenue Service that he or she had not in fact renounced citizenship primarily to avoid tax, the new amendment requires the ex-citizen to provide "clear and convincing evidence" to the Department of Homeland Security.

Reed stated: "American citizenship is a privilege. But it seems that a privileged few are trying to game the system by accumulating wealth and benefiting from the greatness of the United States and then renouncing their citizenship to avoid paying their fair share of taxes. They are welcome to leave our country, but they should not be welcomed to return without playing by the rules and paying what they owe."



Section 240A of the Tax Administration Act, 2011 (as amended) requires that all tax practitioners register with a recognized controlling body before 1 July 2013. It is a criminal offense to not register with both a recognized controlling body and SARS.

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