Majority of American expats call for overhaul of citizenship-based tax system

24 Jul

In a recent deVere Group survey, the vast majority of Americans living overseas said they would vote for a presidential candidate in the 2016 election who pledged to change the citizenship-based tax system to residence-based.

These statistics are not surprising.
U.S. expats living and working abroad are calling for far-reaching change in this tax law, as they, in effect, are subject to double taxation being required to pay taxes in their country of residence, as well as to the U.S. government.

America’s taxation system has long been the focus of contention for the estimated 8.7 million American expatriates around the world.  All U.S. citizens are taxed under the same personal income tax system, regardless of where they choose to live.  For the most part, it is the middle income earners overseas who are bearing the brunt, as they are paying a higher sum in tax than their counterparts residing in America.

It is a radically unfair system that financially discriminates American expats, essentially punishing them for choosing to or needing to move abroad.

Earlier this year, American Citizens Abroad (ACA) put forward a proposal to the US Senate Finance Committee for residence-based taxation for American expatriates.

Not only would this move likely equal citizen-based taxation revenue, it would greatly lessen the compliance burden for U.S. citizens overseas, it would be a more efficient form of taxation – in reducing the workload of the IRS alone – and it would enhance the country’s global competitiveness.

So how unique is the citizen-based tax system in the U.S.?

In short, very.

A lifetime of taxation regardless of residency is extremely rare.  In fact, the only other country to impose the same citizen-based system as the U.S. is the small African country of Eritrea. Somewhat telling…

Consequently, in my view, the results of this recent poll suggest now is definitely to the time to look into overhauling this controversial system of taxation in America.  U.S. Congress studied the idea back in 1995, but I am confident that the 2016 presidential candidates must now make their stance clear on this issue ahead of the election.

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