Expat Americans say US tax laws ‘put them at a disadvantage’: survey

Almost four out of five expat Americans believe that having to comply with the onerous US system of citizenship-based taxation while abroad “puts them at a professional disadvantage compared to others working in their [current] country of residence”, a new survey has found.

The survey, carried out last summer by the Americans Abroad Global Foundation (ACAGF), in conjunction with the College of Business of the University of Nevada, Reno, found that 78% of American expatriates thought that they were being held back by the complex package of tax rules they are obliged to comply with, which expats of virtually every other country in the world are not required to meet.

Since the United States taxes Americans on their worldwide income, regardless of where they live (citizenship-based taxation), or even how long they have lived outside of the US, Americans living overseas have always had to comply with various special provisions, such as the foreign earned income exclusion (FEIE), foreign tax credit, housing provisions, and disclosure requirements, that other nationalities don’t face.

But things began to get much more complicated and – for many American expats, expensive and difficult – after new legislation, known as FATCA, was signed into law in 2010. FATCA obliges non-US financial institutions to report to the US tax authorities on the assets and income of their American account-holders.

Those institutions that didn’t immediately stop accepting Americans as clients once FATCA came into force now typically charge them more for the costs of complying with the legislation; at the same time, few American expats are able to navigate their US tax returns without expert help, which also adds to their costs.

In a statement announcing the results of the study, ACAGF and the University of Nevada noted that the perception of the majority of the respondents surveyed “was consistent with the sentiment that the US government is not concerned about the impact of FATCA on its citizens living abroad”.

Among the other key findings of the survey, which was carried out between June 16 and Aug. 15, of a cross section of 684 adults ages 18 and older, living in more than 60 countries:

  • Sixty-four percent of the survey’s respondents said they had voted in the 2012 US Presidential election, a significantly higher turn-out than the stateside average
  • Eighty-six percent of respondents said that FATCA needs to be reworked, in order to ensure Americans overseas have access to basic banking services, and that it should include a “same Country exemption” provision. A same country exemption means that the expats and their financial institution would not need to report to the Internal Revenue Service on any accounts they held in institutions located in the country in which they are currently living, and, normally, paying tax
  • In general, the expat Americans surveyed said they generally felt that the IRS was “not keeping them informed about how to comply with [the US’s] evolving tax laws”

Sonja Pippin, an associate professor of accounting at the University of Nevada, said the findings of the survey reveal that Americans living abroad feel the US Government “does not recognise how the FATCA legislation is negatively impacting them, limiting their ability to maintain legitimate [bank accounts] and financial relationships”, and that, in many respects, it “simply does not care how the legislation is affecting a community of law-abiding citizens who have chosen to live overseas for work or personal reasons”.

Data to be used

ACAGF chairman Charles Bruce said the survey’s data would be used as a baseline for future work aimed at “informing the public, creating educational programmes and advocating for legislative changes to address the issues of Americans abroad”.

Based in Rockville, Maryland, the ACAGF is a charitable organisation that supports education and research on issues affecting Americans abroad.

To read and download the report, click here. 

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