The US is, famously, the only industrialised country in the world to make use of a citizenship-based taxation regime.
In what it called its “tax reform proposal” unveiled on Monday in Washington, the ACA said its proposed reforms were “aimed at increasing American jobs, exports and competitiveness, as well as addressing the specific tax situation of Americans residing overseas”.
As part of ACA’s efforts to promote its tax reform proposals, the organisation’s director, Jackie Bugnion, flew to Washington earlier this week to meet with Democratic and Republican staff of the Senate Finance Committee and the House Ways and Means Committee, as well as staff of the Joint Committee on Taxation.
As reported, ACA has been an outspoken critic of the United States’ harsh dealings with to American expatriates over tax matters generally and over its so-called Foreign Account Tax Compliance Act in particular. Beginning next year, FATCA will require non-US financial institutions to report to the US tax authorities on assets held offshore by American citizens.
The pending implementation of FATCA has already caused many banks, trust companies and other financial services entities to making it difficult for expatriates to obtain bank accounts, mortgages and otherwise live normally outside the US.
Bugnion noted that there already was a “strong movement” in Congress to shift corporate taxation from worldwide to residence-based, in order to “level the playing field” for US companies competing in the world economy.
“Following the same logic, I met with Members of Congress to convince them that the US should make this move for individuals as well, to allow Americans to compete on that same level playing field,” Bugnion said.
“ACA will be systematically contacting all congressional offices on the Senate Finance and House Ways and Means Committee to get issues concerning Americans residing overseas included in legislation on fundamental tax reform,” added Marylouise Serrato, executive director of ACA.
“Changing to residence-based taxation would be good for Americans overseas, but also good for the entire US economy.”
FATCA ‘highlights flaws’
The ACA said that what it calls the “serious flaws” in the US system of taxation have been highlighted by the difficulties the US has had in attempting to implement FATCA, which, it noted, “imposes extensive extra-territorial reporting requirements on banks worldwide”.
Indeed, it added, the “nearly insurmountable practical issues involved” are why final regulations still have not yet been issued by the IRS.
“Banks overseas are already closing legitimate bank accounts of American living abroad in order to avoid the potential penalties of this onerous and complicated legislation.
“It is impossible for Americans living and working overseas to survive without normal banking relationships, and fewer Americans overseas means less US exports and fewer American jobs.”
The ACA also argues that its new tax reforms would encourage US corporations to send more American staff overseas to represent US interests and promote American-made products, because it would cease to be cheaper, as it is now, for them to hire foreigners overseas rather than Americans.
“To conquer foreign markets in today’s global economy, US companies need to have American feet on the ground, in the form of Americans physically present overseas,” ACA said.
Details of the ACA’s new tax reform plan may be found here and here.
