The United States is the only country to tax the earnings of its citizens abroad. Double-taxation, as it is known, is hurting American interests abroad and making the employment of U.S. citizens a toxic proposition for foreign companies.
Writing in the Wall Street Journal, which is behind a paywall and requires subscription, Colleen Graffy assails this policy and says the U.S. government has long created hardships for Americans who live abroad, “and much of the problem relates to the tax code.”
Americans are the only citizens in the world that are subject to double taxation.
“America is the only country that taxes citizens on their global earnings, and in 2010 Washington exacerbated that by passing the Foreign Account Tax Compliance Act, or Fatca. As this law comes into force, it is doing immense harm to Americans and American interests abroad.”
The U.S. government enacted these plans to counter terrorist financing, tax evasion, and money laundering, but this remedy is worse than the illness. The Foreign Account Tax Compliance Act was enacted in 2010 and the main provisions came into effect in July of 2014. According to Graffy, Fatca requires foreign financial institutions to report the identities of their American customers and any assets those Americans hold. If an institutions does not comply, they are liable for up to 30% withholding tax on any of their own transactions in the U.S.
“This provision was enacted without regard for its effects on the 8.7 million U.S. citizens living abroad, who have essentially been declared guilty of financial crimes unless they can prove otherwise,” writes Graffy in the WSJ. “Many institutions no longer consider their American clients worth the burden and potential penalties of the law, and are abandoning them in droves. Being an American overseas has become a liability, and not just because it’s difficult to open or keep a bank account. Americans are now often seen as toxic.”
[Click here to read the full report in WSJ (subscription required)]
[An abbreviated version of the post appears on AramcoExpats website]
