Lobby Group To Fight Higher Taxes On US Expats

Source : The Straits Times, Apr 07, 2008

A UNITED States tax policy is affecting American expatriates working in Singapore and elsewhere so badly that a group of American chambers in the region has headed to Washington to campaign for a change.

The unhappiness among American expats and companies in Singapore stems from a 2006 tax law that has resulted in higher taxes for those who work outside the United States.

There are about 15,000 Americans working in Singapore. In 2006, US investments in the Republic grew to US$60.4 billion (S$83.6 billion).

Unlike citizens of most countries, Americans are taxed based on their worldwide income.

Last week, the Asia-Pacific Council of American Chambers of Commerce, a group of various US chambers in the region, launched in Washington a coalition representing Americans working abroad.

The Alliance for a Competitive Tax Policy seeks to eliminate what it sees as the unfair taxation of American expats that has resulted in the biggest tax increase for them in 30 years.

Senator Jim DeMint from South Carolina and Representative Gregory Meeks from New York are sponsors of this legislation. They were joined by the president of Amcham Korea, Ms Tami Overby, and representatives from several Washington-based business associations.

Ms Kristin Paulson, the chairman of the Asia-Pacific council, said: 'The changes in the tax law that Congress passed in 2006 have increased the tax burden on Americans working abroad by as much as US$25,000. This is simply unfair and discourages Americans from taking jobs outside the United States.'

According to Amcham Singapore, about four million Americans worldwide are affected.

'These tax law changes are detrimental to America's global competitiveness, and it is more expensive to hire Americans relative to hiring Europeans or Australians than previously.'

What the 2006 revision to the tax law did was to push many Americans working abroad into a higher tax bracket, even though their salaries and benefits remained the same.

The income tax deduction for housing costs was capped at a lower level. High tax rates were levied on payments made by employers, even though these were payments to reflect the higher cost of living overseas.

Simplistically, under the previous regime, a housing benefit of US$12,000 was taxed and additional housing costs were tax-free. The 2006 tax bill reversed the situation, giving a mere US$12,000 in tax-free housing benefits and taxing the rest. That hit expats hard in places like Hong Kong and Singapore, where housing costs are relatively higher.

Previous lobbying has seen the tax-free amount rise to about US$56,000 now for expats in Singapore. This is still untenable for many of them.

Take a standard American family who gets about $120,000 a year for housing. Deducting the tax-free amount of US$56,000 means that about $40,000 is still taxable. At the top rate of 38 per cent, an expat needs to shell out an additional $14,000 in taxes.

Mr Landis Hicks, a former chairman of Amcham Singapore, told The Straits Times: 'The realisation of the impact of the law has really hit home over the last year or so since the tax bills arrived.

'There is mounting concern among the American business community that the number of Americans severely affected by the cost of the tax will rise.'

'We are very concerned for the long term, that this will reduce the number of Americans working outside the US. We are trying to bring awareness to lawmakers of the serious impact on American competitiveness that the tax has.'

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'This is simply unfair and discourages Americans from taking jobs outside the United States.'

MS PAULSON, chairman of a group of US chambers in the Asia-Pacific, on the effects of a 2006 tax law on Americans working outside the US