- AARO considers compliance with tax laws to be a fundamental obligation.
- AARO believes compliance is strengthened by simplicity and uniformity.
- Countries levy taxes on those resident or domiciled within their territory. The United States taxes U.S. citizens and permanent U.S. residents. Most expatriate Americans must annually file two income tax returns â€“ one to the USA and the other to the country of residence/domicile. Tax treaties exist to avoid double taxation. However, the cost and potential confusion involved in respecting the laws and procedures of two countries adversely affects compliance.
- AARO is aware of the recent U.N. condemnation of Eritrea for imposing a 2% tax on its expatriates. It does not believe this to be a general denunciation of citizenship based taxation.
- AARO supports American Citizens Abroad (ACA) in its effort to change U.S. tax policy to one based on residence rather than citizenship, thereby bringing America into conformity with the rest of the world.
AARO Policy on Taxation of â€œForeign-Earned Incomeâ€
- AARO believes that the United States puts itself at a competitive disadvantage by taxing the income earned by its citizens working abroad.
- The ability to send an employee abroad to manage, direct, instruct or train the employees of a foreign subsidiary is crucial to successful competition. Our trading partners have learned this lesson: a Chinese sent from Beijing to manage a plant in Cincinnati is not taxed by the Chinese government on his earnings. The United States does the opposite, giving the worker only the opportunity each year to exempt (for U.S. tax purposes) a fixed amount of income earned abroad (already taxed in the country where it is earned). The excluded income is still considered in establishing the U.S. tax rate on other income.
- AARO supports the complete exclusion of foreign-earned income from U.S. taxation. As an alternative, AARO supports an exclusion adjusted for past inflation, which would make the current exclusion over $300,000.
Recommendation made by AARO, ACA and FAWCO to Treasury in 2012 regarding a redefinition of the term â€œforeignâ€ in the FATCA context
â€œWe recommend exempting from reporting requirements â€œsame countryâ€ accounts belonging to bona fide residents abroad. A US taxpayer resident in Australia should not have to report his or her accounts in Australia to the US Government. â€œForeignâ€ should apply only to accounts outside the US and the filerâ€™s country of residence.