Established in 2010, the Foreign Account Tax Compliance Act – or FATCA – mandates stiff penalties for foreign financial institutions that don’t report the assets of US citizens of green card-holders
American expats from both sides of the US political spectrum are calling for an end to laws that mean they have to report and pay US taxes on money earned abroad, with Democrats and Republicans alike calling for the practice to be abolished.
Established in 2010, the Foreign Account Tax Compliance Act – or FATCA – mandates stiff penalties for foreign financial institutions that don’t report the assets of US citizens of green card-holders, leading many banks around the world to avoid American customers altogether.
Together with a system of citizen-based taxation, the regulations mean that 9 million US citizens living overseas are unable to avoid paying taxes both to their country of residence and to the US.
According to US government figures, income from taxes on US residents living abroad amounts to approximately $792 million each year – forming just a small portion of the government’s estimated FY 2020 tax income of $3.64 trillion.
“It’s so unfair. You end up paying your local tax [abroad] and Uncle Sam’s tax,” said Solomon Yue, the Oregon-based CEO and vice chairman of Republicans Overseas.
Conversely, US multinational firms are subject to territorial taxation and only pay taxes where they make money.
We [Republicans] want the US government to tax individual Americans the same way,” Yue added. “That’s the kind of thing we’re working on at this moment.”
Even in the tax-free countries, local members of both political parties are in agreement that the current system should be abolished.
“The overwhelming majority of Americans, including most members of Congress, don’t understand this is a global anomaly that needs to be reformed,” said Tony Graham, an executive committee member and the spokesman of Democrats Abroad.
At the moment, only one other country – Eritrea – has a similar system of citizen-based taxation.
Dr. Steven Anderson, a former chairman of Republicans Overseas, said that while progress on repealing the legislation has been slow, many Republicans believe he will do away with FATCA in the event that he is re-elected in the upcoming American elections.
“Certain candidates come out and say they’ll address it. Trump did the same. He says he’s addressing it,” he said. “I’m hoping something will happen. It has to change.”
AMERICAN CITIZENS ABROAD
ACA is a qualified 501(c)(4) non-profit membership organization. ACA favors a balanced approach to subjects, supporting efforts that provide tangible results and practical solutions. ACA is the premier thought-leader on issues affecting US citizens living and working overseas. ACA does not provide tax or investment advice.
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