Apart from Eritrea, no other country taxes citizens on a worldwide basis. If the US falls into line with other countries, what would the tax impact be? A group advocating for US expats is finding out.

The tax revenue impact of shifting the US from its worldwide to a residency-based system is being explored by American Citizens Abroad. 

ACA said in a statement last week that American Citizens Abroad Global Foundation, a public charity, has commissioned a national accounting firm to prepare a report into the tax effect of changing how the US raises revenues.

At present, Americans must file tax returns even if they’re not residing in the US.

Apart from Eritrea, no other country taxes citizens on a worldwide basis. Most nations, such as the UK, Germany and Switzerland, for example, have residency-based tax. A problem with the US system is that expat citizens struggle to open bank accounts and conduct regular financial transactions because they’re seen as a heavy compliance burden.

ACA said the study comes at a time when Congress is considering enacting some version of residence-based taxation. It referred to remarks made last by President Trump, who said “Once and for all, I’m going to end double taxation on our overseas citizens.”

Representative LaHood (R-IL) plans to re-introduce his "Residence Based Taxation for Americans Abroad Act" (H.R.10468) bill (which would end double taxation), originally introduced last Congress, but it has not received a score from any budget office or agency. 

“The revenue estimates – the numbers – are critical. They are the ‘coin of the realm’ when it comes to crafting detailed provisions and convincing Members that RBT is the way to go,” Charles Bruce, chairman, ACAGF, said. 

ACAGF has studied the revenue score of RBT since 2016 and will now have updated estimates for ACA membership and policymakers. 

“The two prior studies by ACAGF laid the groundwork on modeling techniques and key data,” Jonathan Lachowitz, chairman, ACA, said. “They are references to prior work on Capitol Hill. This new work will update and build upon this prior work and show Members – particularly the new Members of Congress – how this can work for their constituents without negative trade-offs.” 

The ACA said President Trump's support for a "gold card" aimed at HNW foreigners coming to the US underscored the case for residency-based taxation.