A new proposal against FATCA, if enacted, could bring US tax structure closer to Hong Kong.
(Photo credit: Chris Lusher)
Last Friday in the US, the Republican National Committee (RNC) approved unanimously a proposal to repeal the Foreign Account Tax Compliance Act (FATCA), and advocates for elimination of taxes on American income generated overseas.
Under the current citizenship-based taxation system, Americans overseas often pay taxes to both the country they reside in and the US, which creates a significant financial burden on them.
The resolution, initiated by Republican Overseas and passed by the RNC last Friday, suggests that double taxation results in “higher cost to hire overseas American workers”, thus “puts American job seekers at a significant disadvantage to other non-American workers”.
In addition to the citizenship-based taxation system that was instigated in the nineteenth century, FATCA, passed in 2010 under the Obama administration, requires both US and foreign banks to report information about accounts held by US citizens to the Internal Revenue Service (IRS) of the US.
According to the resolution, FATCA has led to various negative consequences, including banks denying access to banking and other financial services to overseas Americans in order to avoid the obligation to report to the IRS.
The RNC’s Territorial Tax Reform proposal also pushes the American government to impose greater taxation on non-resident alien individuals’ gains on sales of US listed securities and assets other than real property and real property holding companies.
American Overseas, an organisation that helps US citizens overseas to be tax compliant and which has a chapter in Hong Kong, also backs the proposal.
The RNC provides national leadership to the Republican Party, which is the ruling party right now in the US. It articulates and promotes political platforms of the party. It urges President Trump to adopt the proposal in the upcoming tax reform package.