US political parties, other overseas groups ramp up resi-based tax campaign

As lawmakers in Washington debate what President Trump’s promised tax reforms should look like, various organisations representing expatriate Americans are ramping up their campaigns aimed at replacing the country’s unique and much-criticised “citizenship-based” taxation with a tax regime that taxes people on the basis of where they live. 

Although they don’t all agree on some of the details, the Democrats Abroad, Republicans Overseas, Americans for Tax Reform, the Heritage Foundation, American Citizens Abroad  (ACA) and a number of American chambers of commerce and similar expat groups are now said to be singing from the same “residency-based taxation” hymn sheet.

“Taxing [expat Americans] based on citizenship dates from the Civil War, and was put in place for reasons no longer in keeping with the international world economy of today,” the ACA said in July, in comments submitted to a Senate Finance Committee on Reforming Tax for Overseas Americans.

“RBT would translate into more jobs for Americans and more exports, given that it would allow small businesses to deploy employees overseas to sell US goods and services,” ACA executive director Marylouise Serrato added, in the ACA’s submission.

“Current tax policy makes this too costly for both small and large businesses. This problem was confirmed in testimony at hearings held by the House Ways & Means [Committee] in May.”

Among the organisations working on getting the American tax laws changed is the Isaac Brock Society, a blog initially founded by frustrated Canadian-Americans in 2011, who back then were struggling, and many of whom continue to struggle, with the American government’s intensifying efforts to come after expats for unpaid taxes and failing to file tax returns. As reported, it has now become a source of information gathering – and sharing – for American expats around the world.

Until around 2011, American expatriates were often oblivious to the fact that the US, unlike every other country in the world except Eritrea, taxes on the basis of citizenship, and that consequently, the only way expatriate Americans can ever escape their US tax obligations is to renounce their citizenship, which is a time-consuming and, lately, increasingly costly business.

When the US introduced the Foreign Account Tax Compliance Act in 2010, however, which required non-US banks and other “foreign financial institutions” to report to the US tax authorities on their US citizen clients, matters suddenly became complicated for expatriates, and many found themselves being ordered to pay back taxes and penalties they hadn’t been aware they owed.

One of the Isaac Brock Society’s bloggers, who goes by the name Barbara and who is evidently a member of the Republicans Overseas organisation, yesterday posted what she called a “call to action”, in which she commanded her fellow expat Americans to “Write your letters, people!!”

“You must act now! No excuses!” she went on.

“Please share with all fellow Americans overseas, regardless of party affiliation or non-affiliation, and accidental Americans! If you do nothing, nothing will change!”

Noting that the US has not had tax reform for 31 years, she added, “if we miss our window now, we will not see another chance for 20 more years.

“At the initiative of Republicans Overseas, the [Republican National Committee] recently adopted a White House-approved resolution supporting the change from citizenship-based taxation to residence based taxation via the RO’s proposed Territorial Taxation for Individuals (TTFI). We have champions and sponsors in both the House and the Senate.

“We have found tax loopholes that TTFI would close, thereby making TTFI revenue positive. The ingredients for success are lined up–but we’re missing one: the massed voices of ordinary overseas Americans.

“What we need now is for our representatives to hear from as many overseas Americans as we can gather.”

‘Once-in-a-lifetime opportunity’

Also calling for action from fellow expats, in a column in Bermuda’s Royal Gazette, was Charles Bruce, an American attorney with Bonnard Lawson-Lausanne in Switzerland, who is also chairman of the ACA’s Global Foundation and serves as the ACA’s legal counsel.

“All this presents a great, maybe once-in-a-lifetime, opportunity to end the taxation of Americans residing abroad,” he wrote.

“This is not a silly dream. It is a very real possibility. Work on the legislation is under way.”

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