Republicans Abroad Europe Statement on Expat Taxation
Republicans Abroad Europe is working directly to raise awareness among party leaders, policy makers and US Presidential candidates about the adverse impact of Expat Taxation and the recent FATCA legislation on the US economy and Americans living overseas.
Our official statement on these issues is below. We encourage you to write Congress about these concerns and contact us if you would like to get involved to support our efforts to reform the tax code.
In 2010 the Democrat controlled Congress passed the Foreign Account Tax Compliance Act (FATCA), which now unintentionally threatens to chase trillions of dollars of direct foreign investment out of the United States, undermines the ability of U.S. exporters and companies to do business abroad, and subjects 6.3 million Americans residing outside the United States to an unprecedented abuse of power by the IRS—all at a time when the United States is facing record-high unemployment and requires foreign capital to service its national debt.
Instead of creating jobs in the United States by attracting foreign investment and strengthening the competitiveness of U.S. companies in international markets, the Democrat Party chose to do exactly the opposite by overzealously targeting ordinary American citizens abroad for holding assets offshore and forcing foreign financial institutions to comply with excessive IRS reporting requirements.
As a direct consequence of FATCA, American citizens abroad face stiff penalties even for “unwilful non-compliance” leading to the potential confiscation of their assets and holdings, while foreign financial institutions and investors could be penalized enormously for providing services to and doing business with U.S. citizens.
Foreign financial institutions and investors are therefore considering divestment from U.S. securities and assets altogether, placing at risk $21 trillion in foreign investment upon which U.S. capital markets, companies and ultimately millions of American jobs rely. Foreign investment in U.S. securities alone exceeds $10 trillion against an $18 trillion capitalization of the two U.S. stock exchanges.
Finally, American citizens and companies abroad are increasingly being denied new business opportunities, participation in partnerships and even simple banking and investment services, as foreign financial institutions and counterparties determine that the costs of FATCA compliance and risks of IRS penalties are simply too high.
Given the devastating impact on investment, exports and U.S. citizens residing abroad, FATCA must be repealed.
The United States faces record high unemployment and intense global economic competition. Yet, the United States is the only advanced industrialized country that taxes its citizens working and residing abroad. Whereas other leading export countries encourage their nationals to work overseas to promote their exports and gain valuable international experience to the benefit of their companies, U.S. tax law disincentivizes Americans from working abroad, particularly in critical emerging markets such as the Middle East, Asia and Eastern Europe.
The U.S. system of citizenship-based taxation means fewer Americans are incentivized to work in overseas markets to gain access for U.S. goods and services and to develop vital knowledge and skills for future international growth opportunities.
Just as the Bowles-Simpson National Commission on Fiscal Responsibility recommended a system of territorial taxation for corporations to make American business more competitive, the United States should eliminate the system of citizenship-based taxation for Americans abroad. At a minimum, the United States should lift the cap on the Foreign Earned Income Exclusion to keep pace with the depreciation of the dollar and level the playing field for Americans competing for jobs overseas.