Why do Americans become Swiss?

Wealthy Americans have recently been increasingly renouncing their US citizenship and submitting applications for Swiss passports.

The trend was started four years ago, and is growing year by year. Last year alone, 1.780 Americans gave up their passports, which is 235 more than in 2008, reports B92.

The US Embassy in Bern, Switzerland had to hire new staff to deal with the new mess. What exactly led to this phenomenon?

It is known that Swiss banks are the most popular in the world among large banking clients, and for several reasons.

First of all, the political stability of that country is important, because Switzerland has not waged a single war since the 16th century, and then the exceptional security of Swiss banks.

The risk that money placed in a Swiss bank could be lost or lose value is almost zero.

The third is the stability of the currency and many financial experts will confirm that the Swiss franc is one of the most stable currencies in the world.

The next reason is the first-class quality of banking services, and Swiss banks pay great attention to the discretion and confidentiality of their clients. If the clients are not criminals, it is very difficult for anyone to get information about them and their money in Swiss banks.

The latter is the main reason why rich Americans who want to avoid paying taxes to their home country choose Swiss banks.

They are helped in this by the Swiss centuries-old tradition of respecting banking secrecy above all else.

Namely, the USA is the only country in the OECD (Organization for Economic Cooperation and Development) that collects taxes from its citizens regardless of which country they live in and conducts detailed investigations against tax evaders in offshore centers. In the US, tax evasion is a serious crime.

Increasing pressure

But the recently passed even tougher US laws to prosecute tax evaders have meant that even the Swiss have had to give in to their tradition and banking discretion.

"Most of the tax evasion problems of US citizens with addresses outside the US are happening in Switzerland," according to US tax experts.

"We are putting absurd tax laws into force precisely because of those who constantly avoid paying their obligations and hide money, mostly in Swiss banks."

Thus, in 2008, the two largest Swiss banks - UBS and Credit Suisse - were targeted by the American authorities. Both underestimated the determination of the American authorities' fight against tax evasion, so UBS, the largest Swiss bank, paid a $2009 million fine in 780 because it "helped" tax evasion in 4.700 cases of American tax evaders by keeping banking secrets.

The collapse of the institution of banking secrecy led to the fact that then more than six million Americans living abroad began to weigh the profitability of keeping their American passport, and by switching to Swiss citizenship, they would avoid paying taxes to the USA.

"Because of this, the trend of renouncing American passports will continue and the number of those who will decide to take that step will increase. FATC (Foreign Account Tax Compliance Act) will put more and more pressure on banks to betray tax evaders," predicts Matthew Ledvina, American lawyer specialized in tax litigation.

But Ledvina understands why Americans increasingly resort to these methods.

"American tax laws cause a lot of frustration among expats because every dollar saved ends up having to be paid back to the US in the form of taxes," says Ledvina.

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