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ID-78-13 1 (1978-02-21)

handle is hein.gao/gaobaawtf0001 and id is 1 raw text is: DOCUEENT RESUME 05135 - [B05454691 Impact on Trade of Changes in Taxaticn of U.S. Citizens Employed Overseas. ID-78-13; B-137762. February 21, 1978. 98 pp. + 5 appedices (22 pp.). Report to the Conqress; by Elmer 5. Staats, Comptroller General. Issue Area: International Economic and Military Programs: U.S. Balance of Trade (602); Tax Admin;.stration (1503);Tax Policy: Tax Provisions Impact on Economic Stabilization and Growth (2700). Contact: International Div. Budget Function: International Affairs: International Financial Programs (155). Organization Concerned: Department of the Treasury. Congressional Relevance: Congress; Hcuse Committee on Ways and Means; Senate Committee on Finance. Authority. Internal Revenee Code of 1964. Tax Reform Act of 1976. P.L. 95-125. For 50 years, tax exemptions cr tax treaks have been given on income earned by U.S,, citizens eiployed abroad. The Tax Reform Act of 1976 reduced the amount of the tax break, and by the spring of 1977, U.S. individuals and businesses operating overseas were expressing concern that this reductiok might force many citizens to return to the United States and seziously reduce the competitiveness of U.S. industry abroad. Findings/Conclusions: Companies survey, overseas indicated increases of up to $22 million a year in employee compensation costs resulting from the tax change. These increased costs could result in lost contracts or in the replacement of Americans with foreign nationals, with possible adverse effects on U.S. exports. Indirect costs could result from: tax reinLursenents becoming taxable to both host governments and the U.S. Government, increased complexity and cost of preparing returns, and confusion and apprehension over how U.S. employees abroad will be treated fro& the tax standpoint. Or the assumption that the tax iacrease would be passed along to customers, an econometric model estimated the econcmic impact of reduced incentives on the gross national product, exports, and employment. Te results showed a generally smaller effect than vas fore.ast by company officials, but the full impact of the tax increase on the U.S. economy cannot ke objectively uieasured. Recommendations: To enhance its oversight cf the tax incentives provided for Americans employed overseas, Congress should spell out specificelly what it expects the incentives to achieve. The Department oi the Treasury, in consultation with the Department of Commerce should: periodically evaluate the effectiveness of tax incentives in achieving their objectives, ccmpare the tax incentives with other policy instruments designed to achieve similar objectives, and report the results of its evaluation reqularly to the Congress. (ERS)

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