The intestines are regretful. The rich Chinese feel that immigrating to the United States is the worst decision in this life.
The high taxes in the United States have made many immigrants overwhelmed. A lady who did not want to reveal her full name claimed to "regret her death."
Ms. Wu didn't want to reveal her full name, but she didn't mind revealing her own voice: "I regret my death, and all my friends regret it." When she talked about her American identity, her regret was beyond words. She said that she had been thinking about giving up her American citizenship for more than a year, and even swore that "I will never go back again."
Her story is not alone. For the rich Chinese, American citizenship has now become a besieged city. People outside want to go in, but people inside want to come out. This was almost unimaginable ten years ago, when immigrating to the United States was still the ultimate dream of many wealthy Chinese people, but now the situation is very different.
It is not only the Chinese who are entangled, in fact, American rich people of all ethnicities are fleeing the United States. According to data from the Federal Register of the U.S. government, the number of people who renounced American citizenship has risen sharply in recent years, from 2008 in 235 to 2011 in 1788. This does not include permanent residents who renounce their green cards.
Behind this change, the biggest determinant is tax
"Every dollar you save ends up in the hands of the tax bureau," said tax lawyer Matthew Lederviner. "This is one of the reasons why people give up American citizenship."
"A country of all taxes"
Only death and taxation are inevitable. Franklin’s famous quote describes the United States as the "country of ten thousand taxes".
In the United States, there is an income tax for working, an asset profit tax for investing, a sales tax for selling, a consumption tax for buying, a real estate tax for buying a house, a gift tax for giving gifts, and an inheritance tax for leaving an inheritance to your children if you die. In addition to federal taxes, states also collect various taxes on their own. For example, New York State once collected "wig tax."
Because taxes are too high and too complicated, examples of abandoning one's citizenship for tax avoidance are not uncommon in the United States. John Dolans III, the heir to Campbell Soup’s property, moved to Ireland after giving up his US citizenship. After that, he sold 10.5% of the family business; tanker giant John Frederickson moved from Norway to Cyprus, the latter The tax policy is much more favorable.
In May of this year, Eduardo Saverin, one of the co-founders of Facebook, contributed the most controversial "defection": The Brazilian billionaire who officially immigrated to the United States at the age of 5 announced his renunciation of his American citizenship. He chose to become A Singapore citizen.
At that time, public opinion in the United States was in an uproar, and outsiders interpreted that Savelin's move was to avoid taxation: at the time when Facebook went public, according to the upper limit of its offering price range, Savelin's 5310 million shares were valued at $38.4 billion. If he does not give up his nationality, Saverin needs to pay at least US$6 million in taxes. However, after he “leaves the US”, since Singapore does not have a capital gains tax item, he only needs to pay the US government another 1.5. XNUMX million taxes are enough.
Saverin’s move aroused a lot of scolding. Democratic Senator Chuck Schumer even denounced him as a "traitor." But there were also opposite voices. Forbes published an article stating that taxation is something people build. The impediment of a perfect government, "When someone stands up to resist the arrogance of the government, we should praise their actions."
Such apparently neo-conservative remarks should make many new immigrants of Chinese American descent feel sad. In China, it is popular that "buying a house in Beijing's third ring road can catch up with buying a villa in New York", but no one told them to pay transaction tax when buying a house. There are also annual valuation taxes and municipal construction taxes. At that time, there was also asset income tax waiting for them.
With the recession of the economy, this "ten thousand tax" has made citizens feel more pressured. In comparison, the preferential tax policies of many Asian countries and regions are much more lovely. According to data from the US Embassy in Singapore, about 2011 Americans in Singapore renounced their American citizenship in 100, almost double the 2009 in 58.
In addition to the various types of taxes, the more important point is that US tax collection follows the "personal principle." For many wealthy new immigrants of Chinese descent, because most of their income is obtained outside the United States, and they are not even deposited into their accounts in the United States, they will have an illusion that they do not need to pay to the United States government. Income tax. But this concept is wrong.
According to U.S. law, U.S. citizens and permanent residents (green card holders) are required to pay income tax to the U.S. no matter where they live on the earth and where their income is derived from. Not only that, even foreign citizens who have lived in the United States for more than a certain period of time must pay taxes to the U.S. government.
Of course, there are objective difficulties in auditing overseas accounts. Therefore, during the prosperity of the US economy, the government turned a blind eye to tax evasion in overseas accounts. However, after 2008, the economic recession was accompanied by the financial crisis, and the US government deficit was soaring year by year. Paying close attention to taxation has become a major issue in Obama's term.
In March 2010, Obama signed the "Overseas Account Taxation Act" with the goal of preventing U.S. citizens and permanent residents holding green cards from abusing offshore tax avoidance.
Because it may have a significant impact on investors around the world, it was later postponed for one year. By December 2011, the rules of the Overseas Account Taxation Act were finally announced, which stipulates that they must live in the United States and have assets of more than US$12 overseas. Or U.S. citizens who live outside the U.S. and have assets of more than US$5 and foreigners holding U.S. green cards need to report to the government before April 20, 2012; the information required for taxpayers to declare includes overseas stocks And bonds, overseas pensions for people who have reached retirement age, various hedge funds and private equity funds, etc.
Punishment measures are also quite strict: hiding overseas assets and refusing to declare is regarded as deliberate tax evasion, and will be fined $5 if found. If the relevant taxes and fees are not paid after successive notices by the IRS, the maximum fine can reach US$40. If you deliberately underreport and are found out, the underreported part will be punished with a heavy penalty of XNUMX%, and the party may also face criminal prosecution.
As soon as this bill came out, people were panicked. Among them, the Chinese reacted the most. One said that because the Chinese love saving most, the target of this law is aimed at the Chinese; the other said that in mainland China, the cost of tax evasion is very low, and those new rich people who set up companies in China to obtain investment immigration capital are almost not. Someone may be able to provide "clean" tax records, so this will become a crime in front of the strict IRS.
Even more embarrassing than the mainland's rich is the Taiwanese rich. Since Taiwan and the United States have not signed a tax treaty, these Taiwanese rich will face the dilemma of double taxation. Therefore, since the introduction of the first batch of "surrender plans" by the U.S. Internal Revenue Service, Taiwanese living in the U.S. have given up U.S. green cards to preserve their assets in Taiwan.
Of course there are also optimists. This year, the English version of Taiwan's "Wang Pao" published a report titled "The Chinese Rich Don’t Fear the U.S. Overseas Tax Inspection Policy", which quoted a green card holder’s confident statement saying "The U.S. government wants to verify Chinese assets are very difficult."
He may have underestimated the determination of the IRS
In order to strengthen the investigation of illegal tax evasion, the US Internal Revenue Service established an investigation office in Beijing in 2010 and added staff to 8 existing investigation offices, including Hong Kong. At the same time, they have also hired a large number of Chinese tax inspectors. According to the US "Qiao Bao" report, these tax officers who can speak Chinese are more stringent in tax inspections than other ethnic groups.
However, the most ruthless move of the IRS is to force financial institutions to provide them with account information. They stipulate that all foreign banks that want to operate in the United States must provide the IRS with account information of U.S. citizens with deposits of more than 2013 U.S. dollars from January 1, 1, or they will be deemed not to cooperate with the U.S. government. For non-cooperative financial institutions, if they have U.S. source income, the U.S. will impose a punitive tax of 5% on their total income (not net income or profits).
The reason why the United States was able to resort to this move can be traced back to their lawsuit against UBS in 2009. As the second largest wealth manager in the world, UBS is known for its ability to keep wealth secretly and safely for its clients, but the IRS filed two lawsuits against UBS in 2009, accusing them of helping 5.2 American clients About 150 billion U.S. dollars of funds are concealed through secret accounts, so that the United States collects hundreds of millions of dollars in taxes every year. The U.S. Internal Revenue Service's request is simple and straightforward. It is to UBS to provide these account information to assist the United States in tracing taxes. However, this violated Switzerland's century-old bank secrecy laws, so UBS refused to provide it.
This refusal annoyed the United States. Later, the United States joined forces with France, Germany and other countries to threaten to include Switzerland on the OECD tax avoidance "blacklist" and subject it to economic sanctions. With such a disturbance, wealthy people all over the world also withdrew their capital from UBS, and UBS is almost in desperation. Under such heavy pressure, the Swiss government and UBS were unable to do anything, so after many negotiations, UBS finally handed over the information of 4550 suspects with the most recoverable value.
This public case not only nearly destroyed the traditional offshore business of the Swiss banking industry, but also strengthened the determination of the U.S. Internal Revenue Service to recover tax debts worldwide. They require banks to choose between public information and severe economic blows, and all financial institutions that have signed this agreement will become the tentacles of the IRS, helping them catch tax evaders.
The U.S. Internal Revenue Service is so fierce that it is not only tax evaders who are hurting, but even American citizens who are law-abiding in peace will be discriminated against.
Since the UBS case, many banks and financial institutions have closed their doors to American customers, because following the strict regulations of the IRS will involve too much work and risks: to judge whether a customer is an American, they need a strict System, this system should be able to find out the birthplace of the customer, or judge whether interest and dividends are transferred to a certain US account, etc. According to calculations by Tan Shiying, PwC China's U.S. tax partner, if a Chinese-funded financial institution is to fully adjust to this set of rules, it will need at least $3000 million to $1 million in additional costs.
As a result, since the beginning of 2011, many European banks, including Deutsche Bank, HSBC, and ING in the Netherlands, have gradually closed down US customer accounts. According to Chen Shushan, Director of Private Banking at DBS in Singapore, because the regulator’s attitude towards US customers is “tough”, she will not open accounts for US accounts. Another industry insider said that most hedge funds in Asia no longer accept US clients.
In fact, when Saverin later clarified why he wanted to leave the US citizenship, his official remarks were because holding a US passport was too restricted in Singapore. A spokesperson for Saverin said: "U.S. citizens are subject to strict restrictions on the types of investments and the locations where they can hold accounts. Many overseas funds and banks are unwilling to accept U.S. customers. Therefore, giving up U.S. citizenship is for financial rather than tax reasons. Consideration."
There is still a way
In this case, more and more wealthy people choose to flee the United States. Ironically, because the U.S. tax system is so detailed, even if you want to give up your U.S. citizenship, you still need to pay a "departure tax." Take Saverin as an example, he needs to pay about 3.65 million U.S. dollars, which can be postponed until he sells Facebook shares. If you choose to postpone the payment, Saverin needs to pay the US government an annual interest of 3.28%.
But there is an easier way for new Chinese immigrants
Since China does not allow dual nationality, theoretically, when you take an oath to another country, you have automatically renounced your Chinese nationality. But this "automatic" leaves a lot of operational blanks. This is the case with Ms. Wu mentioned in the beginning of the article. Although she has American nationality, she said that she is not worried about losing Chinese nationality because "it is quite common in China to have two passports."
Nowadays, Ms. Wu's life and work are concentrated in Hong Kong and the Mainland. She has no acquaintances in the United States. She said that she has never owned real estate or any assets there. She hasn't been to the United States for nearly ten years.
Ms. Wu has never traveled anywhere with her American passport, and she vowed to hide all traces of income. Once, she even refused to sign a written contract with a potential business partner, fearing that it would leave some imprints that would attract tracking by the IRS.
"When I became a citizen of the United States, I really had no idea about these legal risks." Ms. Wu said, "If only I had a lawyer for consultation."