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dulouz
Joined: 04 Feb 2003
Location: Uranus
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 Posted: Sun May 28, 2006 7:51 pm Post subject: US Expat Tax Changes!!! |
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The fight to save the US expat tax break
US expats have been celebrating after the controversial plan to remove the tax break enjoyed by Americans working overseas was dropped. Or was it? As Rebecca Buckman and Dan Bilefsky report for CareerJournalEurope.com, the fight isn't necessarily over yet.
Tara Holeman begs to differ.
Holeman, 33 years old, has spent the past two years toiling in Hong Kong for a nonprofit group � Business for Social Responsibility � and is one of many expatriate Americans who currently count on the tax exclusion to make ends meet. She shares an apartment in high-rent Hong Kong with roommates and earns less than USD 80,000 a year.
If the full US Congress votes to repeal the income-tax break, "the personal liability for me would be too large to keep working in Hong Kong," says Holeman, who is originally from Nebraska. Now, she helps companies in Asia improve working conditions for their employees and learn about corporate responsibility.
For now, an unexpectedly strong onslaught of lobbying by business groups in Washington seems to have persuaded lawmakers to retain the income-tax perk for Americans working abroad, though the final outcome won't be known until at least the end of May. The consensus following a meeting Monday night between President Bush and Republican congressional leaders was that the repeal provision "will not survive," and US expatriates will continue to receive the tax break, according to a senior Senate Republican aide.
But American business groups in cities such as Hong Kong and Singapore remain on guard, noting that repealing the tax exclusion has long been supported by some congressional Democrats. The surprising thing this time, tax experts and businesspeople say, is that Republicans led the charge.
"We're still shocked," says Frank Martin, president of the American Chamber of Commerce in Hong Kong. He says he never expected this year's repeal provision to make it out of committee, and certainly not the full Senate. Chambers in Hong Kong, Singapore and other Asian countries have been urging members to send faxes to members of the US Congress to protest the move.
Martin doesn't deny that US businesses benefit from the tax exclusion, because it gives them a break when they move employees overseas on full-fledged, expatriate pay packages. Such packages typically involve "tax equalisation" for employees, through which an American company adjusts an overseas employee's compensation � with tax rates in mind � to make sure his or her take-home pay is roughly what it would have been in the US. That allows the company to handle a complicated tax situation for the worker, but also to benefit if the tax rate in the foreign country is lower than that in the US. The exclusion also helps businesses afford other perks often essential to luring Americans abroad, such as help with private-school tuition and yearly trips home.
Hurting the less fortunate
But repealing the exclusion would also pinch many less-fortunate Americans in low-tax overseas locations such as Hong Kong, Saudi Arabia and Singapore. These workers include US taxpayers hired on increasingly common "local" pay packages � which contain fewer perks and are cheaper for companies to provide � and people like teachers and not-for-profit workers, who enjoy no corporate largess.
American Stephen Elting and his wife, Cheryl, both of whom teach English in Hong Kong, are good examples: Their combined salaries last year were just under USD 80,000. Doing away with the tax exclusion "doesn't really sound like a good deal to us," says Elting, aged 33.
He says he and his wife didn't move abroad to save on their taxes. For them, "it was just a chance ... to explore a different part of the world that most people from America wouldn't see," Elting says. "I wonder, if this [tax bill] passes, if it will actually deter people from doing something like what we've done."
If the USD 80,000 exclusion were repealed, American expatriates like the Eltings could get a tax credit for paying foreign taxes; they don't get that credit now if they take the US tax exclusion. But the new credit still wouldn't make up for the higher US taxes they would have to pay. The top tax rate in Hong Kong is 15.5 percent, compared with 38.6 percent in the US.
Jill Elsner, a managing director for tax consultancy US Asia Tax & Business Services Ltd in Hong Kong, estimates that a US taxpayer earning exactly USD 80,000 in Hong Kong, and paying about USD 12,000 a year for housing, would pay an extra USD 7,300 in total taxes if the exclusion were repealed. Elsner says she has been deluged with calls and other inquiries in the past week about the possibility the tax break could end.
Doing away with the exclusion would make hiring American workers more expensive, and could encourage US companies overseas to start hiring employees from places such as Britain and Australia, says Richard Weisman, a tax lawyer and partner with Baker & McKenzie in Hong Kong. Britons and Australians working abroad don't pay taxes to their home countries, but if Americans abroad were no longer excluded from paying taxes on the first USD 80,000 of their foreign earned income, many would demand higher salaries to compensate.
"The US is the only developed country in the world that continues to impose world-wide income tax on its citizens that are working overseas," Weisman says. The tax exclusion is not so much a perk, he argues, as an effort "to place Americans [working abroad] on an even footing with citizens from other countries."
Across Europe, American chambers of commerce also have been lobbying US senators, warning of the added burden the repeal of the tax break will bring to American businesses abroad. The American Chamber of Commerce in the Czech Republic, which hosts US companies such as Philip Morris, Johnson & Johnson and Coca-Cola, said it fears that scrapping the tax break will result in the retreat of American expatriates from executive positions in Asia, Europe and Africa as well as a winding back of American influence in the areas of teaching, theatre production, environmental advocacy and journalism.
Fostering misunderstanding
"Without the cultural and intellectual exchange, the misunderstanding of America and its policy will likely increase, removing a balancing influence on the growth of violent anti-Americanism," wrote Weston Stacey, executive director of the Czech Chamber, in a recent letter sent to Charles Grassley, chairman of the Senate Finance Committee.
Terrence Valeski, chief executive of Prague-based Eurotel, a telecommunications company with USD 1 billion in annual revenue and 2,500 employees, said he feared the scrapping of the tax will mean the end of Prague's reign as a magnet for foreign investment by US companies. He said the repeal of the tax would make it very difficult to recruit senior managers from the US, who were already reluctant to leave American-style income taxes behind.
Roger Adams, a Lisbon-based American accountant who advises American expatriates on their income taxes, warned that the repeal of the tax would be a double blow to workers as well as companies. For example, he noted that, under the current exemption, a single person living in Portugal, who makes USD 100,000, would pay USD 2,704 in income taxes to US tax authorities. If the tax break is repealed, that same person would pay USD 24,308 in income taxes.
"Why would that person want to stay in Europe?" asked Adams. "If we lose the exemption it will be a nightmare for Americans living in Europe. It will make all the benefits of European living � the food, the culture � much less attractive."
22 May 2003
Rebecca Buckman and Dan Bilefsky are staff reporters for the Wall Street Journal.
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dogbert
Joined: 29 Jan 2003
Location: Killbox 90210
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| Posted: Sun May 28, 2006 8:07 pm Post subject: |
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May 2003?
********
The sudden, and retroactive, imposition by the U.S. Congress last week of much higher taxes on Americans living abroad has left individuals and companies scrambling to regroup, while many executives and entrepreneurs assert that the move could backfire by hurting U.S. business interests at home and abroad.
The $69 billion tax cut signed into law May 17 raises taxes on Americans living overseas by $2.1 billion over the coming decade...
http://www.iht.com/articles/2006/05/26/business/tax.php |
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mack the knife
Joined: 16 Jan 2003
Location: standing right behind you...
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| Posted: Sun May 28, 2006 8:13 pm Post subject: |
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The keystone to this whole article:
Flying under the radar. |
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Wangja
Joined: 17 May 2004
Location: Seoul, Yongsan
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| Posted: Sun May 28, 2006 9:14 pm Post subject: |
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| Yet one more reason to remain un-green carded. |
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kingplaya4
Joined: 14 May 2006
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| Posted: Sun May 28, 2006 10:42 pm Post subject: Re: US Expat Tax Changes!!! |
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| dulouz wrote: |
| Quote: |
The fight to save the US expat tax break
US expats have been celebrating after the controversial plan to remove the tax break enjoyed by Americans working overseas was dropped. Or was it? As Rebecca Buckman and Dan Bilefsky report for CareerJournalEurope.com, the fight isn't necessarily over yet.
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This country keeps getting worse and worse. We pay some of the highest taxes in the world (don't forget we pay more than just income taxes) and we hardly get anything for it except a lot of prisons and the rest of the world hating us because of all the conflicts we escalate. Maybe I can immigrate to Canada once I'm done teaching... |
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hogwonguy1979
Joined: 22 Dec 2003
Location: the racoon den
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| Posted: Sun May 28, 2006 11:25 pm Post subject: |
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the way I read it it shouldn't effect us here in Korea, we don't get the perks that people with american companies here get. I don't even bother messing with the housing exclusion.
what concerns me is the "stacking" thing, if you own rental property or god forbid you actually work in the US while on a trip there (like my so is doing now) they tax that income at a rate that would apply if all your income applies. Example if you earn say $36000 here in Korea and say you have interest or something for like $1000, that thousand instead of being taxed at the rate for $1000 (you exclude the $36,000 earned here) now its taxed at the rate for $37,000 that could put a bite in your wallet
my advice is to FAX your congressmen and Senators about this, especially that b@stard Charles Grassely of Iowa, he put this in at the last minute and tried to get the FEI repealed a couple of years ago.
God Bless America  |
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hairy sue
Joined: 18 May 2006
Location: weewee heaven
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| Posted: Mon May 29, 2006 12:21 am Post subject: |
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| hogwonguy1979 wrote: |
| what concerns me is the "stacking" thing, if you own rental property or god forbid you actually work in the US while on a trip there (like my so is doing now) they tax that income at a rate that would apply if all your income applies. Example if you earn say $36000 here in Korea and say you have interest or something for like $1000, that thousand instead of being taxed at the rate for $1000 (you exclude the $36,000 earned here) now its taxed at the rate for $37,000 that could put a bite in your wallet |
You've excluded tax on $36,000. Where's the bite? |
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hogwonguy1979
Joined: 22 Dec 2003
Location: the racoon den
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| Posted: Mon May 29, 2006 3:48 am Post subject: |
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| hairy sue wrote: |
| hogwonguy1979 wrote: |
| what concerns me is the "stacking" thing, if you own rental property or god forbid you actually work in the US while on a trip there (like my so is doing now) they tax that income at a rate that would apply if all your income applies. Example if you earn say $36000 here in Korea and say you have interest or something for like $1000, that thousand instead of being taxed at the rate for $1000 (you exclude the $36,000 earned here) now its taxed at the rate for $37,000 that could put a bite in your wallet |
You've excluded tax on $36,000. Where's the bite? |
the bite is under the old system the $1000 would taxed at the $1000 bracket level or maybe the 11%. Now its taxed at the $37,000 level which could mean its taxed at the next level.
since my so is working in the states for now, we may get killed next year because of this. She may of been at the zero bracket amount given she is coming back in Aug, now you will have to put in my money and whatever money she earns here even though its exempt from US tax and that means we will be taxed at the 11%-15% levels given our income before the exclusion will be in the $60,000 it will be taxed at that level even though it may be only $10000 in actual US income |
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hairy sue
Joined: 18 May 2006
Location: weewee heaven
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| Posted: Sun Jun 04, 2006 11:23 pm Post subject: |
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| hogwonguy1979 wrote: |
| hairy sue wrote: |
| hogwonguy1979 wrote: |
| what concerns me is the "stacking" thing, if you own rental property or god forbid you actually work in the US while on a trip there (like my so is doing now) they tax that income at a rate that would apply if all your income applies. Example if you earn say $36000 here in Korea and say you have interest or something for like $1000, that thousand instead of being taxed at the rate for $1000 (you exclude the $36,000 earned here) now its taxed at the rate for $37,000 that could put a bite in your wallet |
You've excluded tax on $36,000. Where's the bite? |
the bite is under the old system the $1000 would taxed at the $1000 bracket level or maybe the 11%. Now its taxed at the $37,000 level which could mean its taxed at the next level.
since my so is working in the states for now, we may get killed next year because of this. She may of been at the zero bracket amount given she is coming back in Aug, now you will have to put in my money and whatever money she earns here even though its exempt from US tax and that means we will be taxed at the 11%-15% levels given our income before the exclusion will be in the $60,000 it will be taxed at that level even though it may be only $10000 in actual US income |
The old system was illogical. The exclusion should only exclude itself and not help to exclude other income. That part of the new law is more efficient. You are able to exclude what you make overseas up to 82K, but that doesn't mean if you make 82K overseas and 50K in the US the 50K shouldn't be taxed at 132K. That is your overall income and it determines your tax rate. You get a gift on the first 82,000.
Your saying you want more than an exclusion on 82K, you want your overall income to only include what you make in the USA.....too greedy. Just be happy you have an overseas exclusion. |
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hogwonguy1979
Joined: 22 Dec 2003
Location: the racoon den
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| Posted: Mon Jun 05, 2006 12:12 am Post subject: |
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| hairy sue wrote: |
The old system was illogical. The exclusion should only exclude itself and not help to exclude other income. That part of the new law is more efficient. You are able to exclude what you make overseas up to 82K, but that doesn't mean if you make 82K overseas and 50K in the US the 50K shouldn't be taxed at 132K. That is your overall income and it determines your tax rate. You get a gift on the first 82,000.
Your saying you want more than an exclusion on 82K, you want your overall income to only include what you make in the USA.....too greedy. Just be happy you have an overseas exclusion. |
the problem is they just raised taxes on expats its a huge jump to be taxed on something at the 11% level then have it go up to the 15% level this was snuck in by the Republican head of the Senate Finance committee with no warning and no time for debate. In fact many people didn't even know this was included. The US is the only western country that taxes its citizens on worldwide income even if they are non-residents
All done to give taz breaks to the richest 1% of people while the middle class and expat community gets the shaft.
No new taxes my a$$ |
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hairy sue
Joined: 18 May 2006
Location: weewee heaven
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| Posted: Mon Jun 05, 2006 12:37 am Post subject: |
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| hogwonguy1979 wrote: |
| hairy sue wrote: |
The old system was illogical. The exclusion should only exclude itself and not help to exclude other income. That part of the new law is more efficient. You are able to exclude what you make overseas up to 82K, but that doesn't mean if you make 82K overseas and 50K in the US the 50K shouldn't be taxed at 132K. That is your overall income and it determines your tax rate. You get a gift on the first 82,000.
Your saying you want more than an exclusion on 82K, you want your overall income to only include what you make in the USA.....too greedy. Just be happy you have an overseas exclusion. |
the problem is they just raised taxes on expats its a huge jump to be taxed on something at the 11% level then have it go up to the 15% level this was snuck in by the Republican head of the Senate Finance committee with no warning and no time for debate. In fact many people didn't even know this was included. The US is the only western country that taxes its citizens on worldwide income even if they are non-residents
All done to give taz breaks to the richest 1% of people while the middle class and expat community gets the shaft.
No new taxes my a$$ |
The richer expats end up paying MORE because they're the ones more likely to have higher overseas housing costs and additional incomes back in the USA. |
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JZer
Joined: 13 Jan 2005
Location: South Korea
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| Posted: Mon Jun 05, 2006 3:25 am Post subject: |
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| If the USD 80,000 exclusion were repealed, American expatriates like the Eltings could get a tax credit for paying foreign taxes; they don't get that credit now if they take the US tax exclusion. But the new credit still wouldn't make up for the higher US taxes they would have to pay. The top tax rate in Hong Kong is 15.5 percent, compared with 38.6 percent in the US. |
I don't think some of your understand the new law. Before on could be exempt from paying US taxes if they were living abroad. Now you will have to pay taxes to the US on money you earn in Korea or any other country.
One will receive tax credit for the taxes they pay in Korea or other countries. If you earn between $29,700 and $71,000 your US tax rate would be 25%.
I think the Korean tax rate is about 10%. That would mean that anyone who is making 2.5 million a month or more would pay 25% in taxes to the US government. They would get credit for the 10 percent they paid to the Korean government but would still owe around 15%. Meaning you would have to pay 15 percent in taxes to a country that you don't even live in. |
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JZer
Joined: 13 Jan 2005
Location: South Korea
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| Posted: Mon Jun 05, 2006 3:27 am Post subject: |
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| The richer expats end up paying MORE because they're the ones more likely to have higher overseas housing costs and additional incomes back in the USA. |
This effects both the rich and poor. Furthermore you are concerned about the rich getting the benefit of this, ha, I wonder what hidden breaks that congressman and women have hidden for themselves that the average person does not know about. |
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korian
Joined: 26 Feb 2004
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| Posted: Mon Jun 05, 2006 3:36 am Post subject: |
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| can you not just become a non-resident for tx purposes? that's what i did (from oz) when i return to oz i'll become a resident again.... |
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Real Reality
Joined: 10 Jan 2003
Location: Seoul
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| Posted: Mon Jun 05, 2006 4:24 am Post subject: |
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| korian wrote: |
| can you not just become a non-resident for tx purposes? that's what i did (from oz) when i return to oz i'll become a resident again.... |
When you become a Non-Resident of Canada
The U.S. income tax is based on residency and citizenship, so a US citizen is taxable regardless of residency, and non-citizens are taxed only while resident. Non-residents pay tax on some types of income generated in Canada, but are generally not subject to worldwide taxation in Canada. Canada also deems individuals to have disposed of certain assets on the date of departure from Canada, whether actually sold or not.
http://www.expatriate.com/incometaxservices-expats.htm#NON-RES
Bush promises no tax increase
Drawing an unmistakable election-year line in the sand, US President George W Bush on Saturday challenged Democrats in Congress to raise Americans' taxes "over my dead body."... In doing so, he echoed 14 years later the famous promise made by his father "Read my lips: No new taxes" a broken vow that contributed to former President George Bush's reelection defeat.
The Daily Star (Volume 3 Number 833; January 07, 2002)
http://www.thedailystar.net/dailystarnews/200201/07/n2010705.htm#BODY18
Read His Lips: No New Taxes!
Economist's View (September 16, 2005)
http://economistsview.typepad.com/economistsview/2005/09/read_his_lips_n.html |
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