Create a Fair Taxation Regime for American Workers and Companies Abroad
AmCham and APCAC work to improve taxation U.S. taxation policy for both American workers and American companies. The following are arguments that we present to Members of Congress and officials in the executive branch.
U.S. policy is often unintentionally harmful to Americans who are on the front lines of the sales forces in Asia and elsewhere promoting U.S. exports. For instance, the United States is the only developed country to tax its citizens on their worldwide income. The U.S. tax system coupled with recent changes to U.S. tax law has weakened the competitiveness of individual Americans relative to non-Americans. We are deeply concerned that legitimate efforts to widen the tax base and eliminate “loopholes” might wrongly target the few remaining protections that exist to protect overseas U.S. workers against the worst effects of double taxation and the unfair burdens of a global taxation regime.
Consequently, in many American multinational companies operation in Asia, there are fewer Americans among their staff each year. One company in the services sector, for example, has 4,200 employees across the region, among them approximately 200 expatriates, of whom only two are Americans. Yet we know that Americans working abroad directly support U.S. employment by promoting our exports and drawing on their U.S. connections in their professional lives.
It is especially important to encourage U.S. companies to hire Americans for overseas positions as every American moved to an overseas office means one more open position in the U.S. that could be given to an employed American in the continuing difficult domestic job market. Further, we know that U.S. competitors send thousands of employees to be trained on the ground in their U.S. operations. It is essential that the United States make a real effort to ensure that the future cadre of American business leaders gets hands-on training in those markets that are producing their toughest competitors. We realize that as the President and Congress work to reduce the federal budget deficit, there will be intense, and completely proper, scrutiny of various tax benefits, deductions and exclusions. However, this scrutiny should fully consider the above-noted benefits to U.S. exports and jobs of the many Americans employed overseas as well as the negative consequences for our competitiveness if budget negotiations reduce or eliminate the protections afforded by the Foreign Earned Income Exclusion under Section 911 or further limit the full crediting of foreign tax paid by Americans abroad.
Furthermore, U.S. companies currently operate at a distinct disadvantage to their foreign competitors. The United States is one of the few countries in the world that taxes its corporations on their world-wide income rather than adhering to a “territorial” taxation system. As one critical aspect of creating a level playing field, updating U.S. tax policy would help make American corporations competitive with foreign competitors. This includes adopting a territorial taxation system like other developed trading partners.