Michael DeSombre, Worldwide President of Republicans Overseas just submitted Overseas Americans’ Input on Individual Income Tax to the U.S. Senate Finance Committee, especially how FATCA and CBT impact Americans residing abroad negatively.
April 14, 2015
The State Department has estimated that there are 7.6 million Americans living outside of the United States. If Americans overseas comprised a separate state of the Union we would be the 13th largest state by population. Our purpose at Republicans Overseas is to represent those millions of Americans living outside of the United States. It is in this capacity that we write today to highlight two specific issues that significantly harm Americans residing overseas and can be easily remedied. The examples and problems detailed in this submission have been provided by Americans living overseas who have been negatively impacted by the Foreign Account Tax Compliance Act (FATCA) and citizen based taxation (CBT).
1. Reporting of foreign bank accounts and financial assets as implemented by the Foreign Account Tax Compliance Act (FATCA) and the Report of Foreign Bank and Financial Accounts (FBAR or FINCEN form 114) violates the constitutional rights of 7.6 million law-abiding Americans overseas and results in the denial of financial services and professional opportunities to the detriment of the individual Americans. The ability of American enterprises to export goods and services is restricted or denied because foreign financial institutions are denying or revoking financial services preventing American enterprises to engage in business outside of the United States. FATCA and FBAR should be repealed.
2. The United States is the only developed country that taxes the global income of its citizens based on citizenship (Citizen based taxation or CBT) when they reside outside of the country. This means that American citizens residing outside of the United States pay taxes both to their country of residence and, additionally, pay further taxes to the IRS. Double taxation treaties do not prevent Americans from being subject to punitive double taxation because many countries tax their residents through mechanisms other than income tax (which are not creditable against U.S. income tax obligations) and America imposes additional taxes (such as capital gains tax and the 3.5% tax for the Affordable Care Act) for which no foreign taxes may be creditable.
3. The United States implementation of CBT results in lower employment for Americans, fails to raise significant revenue and deters successful businesspersons and entrepreneurs from becoming American citizens. It is far more cost effective for any business enterprise (both U.S. and non-U.S.) operating overseas to hire any person other than an American. The extra cost of hiring an American worker hurts not just the employment of U.S. citizens but prevents U.S. enterprises from competing globally and limits any U.S. enterprise’s ability to expand its operations outside of the United States. CBT should be repealed and replaced with RBT.
4. The Senate Finance Committee should investigate the true costs and benefits of FATCA and CBT so that the maintenance or repeal of these provision would be based on accurate information rather than faulty assumptions as to the intentions of Americans residing overseas.
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