APCAC Leads Coalition to Eliminate Unfair Taxation of U.S. Citizens Working Abroad

Sen. DeMint, Rep. Meeks Address Pending Legislation and Impact on U.S. Competitiveness

April 1, 2008 - The Asia-Pacific Council of American Chambers of Commerce (APCAC), together with several of its member American Chambers of Commerce in Asia, launched a coalition in Washington today on behalf of Americans living and working abroad. The Alliance for a Competitive Tax Policy seeks to eliminate the unfair taxation of American expatriates against what has been the biggest tax increase on American expatriates in 30 years.

Rep. Meeks (D-NY) and Sen. DeMint (R-SC), are sponsors of legislation to eliminate the unfair taxation of foreign income of U.S. citizens, and participated in the launch of the Alliance for a Competitive Tax Policy on April 1 on Capitol Hill. They were joined by APCAC members Tami Overby, who is President & CEO of AmCham Korea, William Oberlin, Chairman of AmCham Korea, and representatives from several prominent Washington based business associations, and the Washington tax and trade firm of Akin Gump.

The U.S. is the only industrialized country in the world which taxes its citizens on income earned internationally. U.S. citizens working abroad are taxed by both the country they live in and by the U.S.

The Tax Increase Prevention and Reconciliation Act (TIPRA) of 2006 included several provisions which significantly increased the taxation of Americans working and living abroad.

Effects of Taxation on Competitiveness

The current American tax system unfairly penalizes many Americans working overseas. In many cases, as a direct effect of TIPRA changes, Americans working overseas are often pushed into the highest tax bracket, although their salaries and benefits remain the same. Additionally, higher marginal rates were levied on employer-provided payments reflecting the higher cost of living overseas, and the deduction for housing costs was capped at a lower level.

Kristin Paulson, chair of the Asia-Pacific Council of American Chambers of Commerce, said, “The changes in U.S. tax law that Congress passed in 2006 have increased the tax burden on Americans working abroad by as much as $ 25,000. This is simply unfair and discourages Americans from taking jobs outside the United States.”

The US tax system harms America’s competitiveness by making it even more expensive to hire Americans relative to hiring Europeans or Australians than previously. Experience has demonstrated that Americans often are the best “salespeople” for American products.

Several studies have shown a direct correlation between citizens working overseas and U.S. exports. A 2005 PriceWaterhouseCoopers study estimated that removing the cap on the foreign earned income exclusion would increase U.S. manufactured exports by US$ 14.4 billion supporting 137,319 domestic jobs in the U.S.

About APCAC

The Asia-Pacific Council of American Chambers of Commerce (APCAC) consists of 25 member AmChams in 19 countries and economies. APCAC AmChams represent the growing interests of over 50,000 executives and over 10,000 businesses in 19 countries and economies of the Asia-Pacific region. The APCAC membership manages trade volumes in excess of US$ 400 billion and direct investments (FDI) of nearly US$ 300 billion.