Double Taxation
New Overseas?
Why Is It Wrong?
Trade and Treaties
Export Tax
Wrong Answer
A Level Field
The Contract
History of Failure
26 Talking Points
No Jurisdiction
No Representation
The Good
The Bad
The Undecided
What To Do
Form Letter
Export Tax

AMERICAN CITIZENS ABROAD - News Report,  Spring 1994

Andy Sundberg,             INTERNET:

ACA's Position on Taxation of American Citizens Abroad:


"ACA believes that the US Government should not tax the foreign source income of US Citizens who are bona fide residents of a foreign country, or who have met an appropriate test of physical presence outside the United States during a taxable year.

   US citizens who qualify under the bona fide residence rules or under the physical presence rules, should be treated for tax filing puposes in the same way that non-resident aliens are now treated. They should be required to file a US Federal income tax declaration only if they derive taxable income from a US source."


ACA'S position is based upon US Government official policy from 1929 to 1962. In 1962, the US Congress under pressure from labor unions, decided that the Tax Code should be used to discourage US entrepreneurs from working and investing abroad, as this was deemed to be equivalent to exporting jobs. The Tax Code was the chosen weapon to fight against this perceived threat.

   The world has changed greatly since 1962. The international economic system is much more cost conscious today, and much more knowledgeable. Today, companies think twice before accepting the extra cost of hiring a US citizen to work abroad. Many US corporations have sent almost all of their employees back home. 

This is a rational response on their part to US tax policy.

   US corporations abroad find it cheaper to hire foreigners even at the same base pay, because no other government has placed an EXPORT TAX on its expatriate workforce. The US Government taxes overseas base income, as well as allowances for cost of schooling, cost of living, home leave, and other benefits. Corporations usually agree to pick up the extra tax burden so that employees do not take home less pay than their non-US counterparts. Companies pay a very expensive premium to the US Government for the luxury of each additional US citizen on their payroll.


   Does it really matter that the US treats its overseas citizens differently than the governments of all of our trading partners? ACA believes it does.

FIRST, it impoverishes the base of US citizens with knowledge and experience in overseas markets. This feeds back into products and services that are not optimally designed to meet foreign market needs. Paradoxically, some US employers even hire foreignerss to work in the US on international management, technical or marketing assignments because there were no qualified US candidates.

SECOND, when foreigners replace US citizens in marketing and procurement jobs abroad, US products and services are not given the "chauvinistic push" that citizens of all nationalities give to their home country's exports. There are many documented cases of US citizens being replaced in jobs abroad by foreigners, followed by cancellation of orders for US products and services.

THIRD, dual taxation has sharply reduced the number of US entrepreneurs abroad, especially in developing countries, where US business practices could be the most efficient way to promote rapid economic development.


   The OECD has developed a model tax treaty based on residence-based taxation. All OECD members use this model for their bilateral tax treaties EXCEPT the US. ACA asks the US to go back to this standard too. This would level the playing field for US employees abroad and companies that employ them.

   The ACA position is also based on the recommendation of the President's Export Council in 1979, which reported that our policy of citizenship based taxation of overseas citizens was causing great harm to the United States.

   We ask the Congress to give us back what we once had. The right to be fully competitive in our search for employment abroad, and in setting up and operating new entrepreneurial businesses all over the world.

                                          What to do


[Double Taxation] [New Overseas?] [Why Is It Wrong?] [Trade and Treaties] [Export Tax] [Studies] [Wrong Answer] [A Level Field] [The Contract] [History of Failure] [26 Talking Points] [No Jurisdiction] [No Representation] [Legislation] [The Good] [The Bad] [The Undecided] [What To Do] [Form Letter]