The America constitution entitles every citizen the duty of paying income taxes. The criteria use to implement the law on taxes payer has created a feeling of unfairness. The outcome from the taxation practice has resulted in taxpayers developing an interest or idea of renouncing their U.S citizenship in order to evade paying the income taxes.
Renouncing of US citizenship is justified in the immigration and nationality act. It therefore implies that most of the US citizens have escaped paying their taxes. This is because it is a right for every citizen; it therefore plays a very fundamental role in tax evasion. A person is usually required to report in a certain foreign nation and take an oath of renunciation. In this context, people would have the advantage of be exempted from paying the income tax in future but would first have to settle all their current taxes before they are expatriated (Barber, 2007 p. 34)
This serves as a better solution for tax evasion for the majority of the people but it is a different case for any citizen who possesses assets with a value greater than $2000000 because he or she would be required to pay an exit tax. Another effect of renouncing citizenship is that a person with an average net income of $147000 within a stipulated period of five years has to pay for expatriation tax.
For a complete process of citizenship renunciation, all people would have to pass through palatal aspect and legal requirement by filing with IRS. The IRS has the power to consider the tax-deferred account fully distributed. It thus means that it holds back penalties for the previous distribution and would still have to settle the income taxes at a regular level of income tax (Barber, 2007 p. 38).
The majority of the US citizen prefers dual citizenship in order to escape taxes. It is a convenient method since they retain their citizenship and they only pay income taxes based on their residency status. The IRS determines a US dual status income tax liability by applying the rule of whether a person resides within the country or is a nonresident (Berg, 2004 p. 23).
Income taxes affect a dual citizen in cases where the resources he or she uses are based in the United States. In other terms, income is taxable for both resident and nonresident. For instance, the incomes generated from sources located outside US are taxable if a resident receives it. Dual citizenship would protect an individual who gets their income from sources located outside the United States from paying taxes. Dual citizenship also provides an opportunity for people to explore resource of two distinct countries. It thus calls for a person to fulfill the entire residency requirement as per the policies of both nations.
Renunciation of citizenship gives people the advantage of escaping paying taxes by becoming an expatriate. The people evade tax liability by moving to other countries, which is echoed by the Hart-cellar Act. It outlines the right of an individual to decide on which country he or she wishes to reside. Dual citizenship on the other hand, protects the people from being levied income taxes depending on the source of their income. It simply means that individuals residing within united state but uses resources from another country to generate their income are not subject to taxation. The status of having citizenship of two nations influences the practice of evading taxation because the concern countries would have to determine whether the income or resources was generated within its boundaries (Berg, 2004 p. 33).
Both renunciation and dual citizenship are warranted as a way of escaping from paying taxes. This is because the interrupts the smooth procedure for tax collection. The IRS is not in a better position to determine if a person is subjected to pay for the income taxes if he or she decides to renounce the United State citizenship. It is also warranted because the entire process of income taxation is not fair especially to those people earning high incomes. People with high income incur high rates of taxes compared to those with low income thus creating inequality in taxation. It is also justified for people to escape from taxes because in most cases the relevant authorizes are not flexible to the economic changes hence taxation of the citizen would result in deploring living conditions. The taxes are among the causes of the poor conditions in the society. Deducting taxes from income would cause a deficit and people would not be in a suitable position to achieve or attain their needs and requirements (Barber, 2007 p. 45).
The best option of reducing tax liabilities without having to renounce citizenship is by developing or cutting down the cost of living. Implementing this is by people relocating to less populated areas or outskirt of the city and start up on agricultural projects. Doing farming would reduce the expenditure hence people would be able to obtain their needs and wants even after their tax is deducted from their income. It would reduce the cost of living and people would not feel the impact of taxation.
Barber, Hoyt L.. Tax havens today: the benefits and pitfalls of banking and investing offshore. Hoboken, N.J.: Wiley, 2007. Print.
Berg, Adriane G.. Keys to avoiding probate and reducing estate taxes. 2nd Ed. Hauppauge, N.Y.: Barron's Educational Series, 2004. Print.