The Republican committee document states that TTFI is a “fair, equitable and efficient taxation of nine million American citizens living overseas because it taxes each American’s worldwide income only once in the country where she actually resides and receives government services”.
It added that the US is the “only industrialised country in the world that taxes foreign-source income of its citizens living overseas by Citizenship-Based Taxation (CBT), resulting in double taxation”.
The committee also highlighted Fatca as having been implemented as a result of CBT. It said that the legislation, which forces overseas Americans to declare offshore assets to the Internal Revenue Services (IRS), has “serious negative consequences”.
“The US should tax on the basis of information within the control of the US and its territories, and not require or depend on unconstitutional information sharing with other countries around the world,” the RNC document said.
Financial institutions have turned away or actively closed the accounts of US citizens as a result of Fatca, which can see the US withhold 30% of all transactions by non-compliant foreign financial institutions.
In mid-August, the US Court of Appeals for the Sixth Circuit dismissed a legal challenge against Fatca that involved US senator Rand Paul.
Vocal Fatca critic and deVere Group founder and chief executive Nigel Green, “champions the growing movement in the US and internationally to support territorial taxation and replace citizenship-based taxation in America”, he told International Adviser.
“Currently, US citizens suffer arguably one of the worst tax regimes in the world. It’s high time that this draconian system was abolished and America joined the rest of the civilised world, which has recognised that residence and/or territoriality are the only criteria upon which a fair income tax system should be based.
“The tax regime of the US is not the global standard. Why is this? Simple: it is fundamentally wrong to tax people for their national identity,” Green said.
While US Republicans are trying to get their country away from CBT, South Africa is bucking the global trend and are embracing it.
In the February 2017 Spring Budget, then finance minister Pravin Gordhan confirmed plans to remove a tax exemption on overseas earnings and implement a new system to tax citizens living and working overseas in low or no tax jurisdictions.
South Africans living and working in low and no tax jurisdictions, such as the UAE, will be among the worst hit by the removal of the exemption.
Tax credits will be available for those paying income tax in their offshore jurisdiction, with any difference in tax due payable to the South African Revenue Service (Sars).