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105969 1 (1978-05-08)

handle is hein.gao/gaobadxzp0001 and id is 1 raw text is: DOCOURIT RESURE 05969 - 8513262971 Impact on Trade of Changes in Taxation of U.S. Citizens Employed Abroad. Hay 8, 1978. 13 pp. Testimony before the Senate Committee on Finance; by Elmer 8. Staats, Comptroller General. Contact: Office of the Comptroller Geuexal. Congressional Relsance: Senate Committee oL Finance. Authority: Tax Reform Act of 1976. Until 1976, the United S'ates provided substantial t :x incentivec to citizens employed aIaroid to promote U.S. exports and commrciAl competitiveness. This tax incentive, under 1975 tax practicep. wonl4 have aso'.cted to an estiqated $563 million in 1977 or 7 .A of the total U*S° tax liability of -vcrseas employees. However, in 1976 the Tax Reform Act increased the tax liability of citizens employed abroad by about $319 million, and the U.S. Tay Court reaffirmed the taxable status of some overseas allowances. The probable impacts on trade which could be attributed to the 1976 tax increases vare examined, and alternative methods of granting tax relief to these taxpayers were appraised. of the companies surveyt, 77% reisburs their American employes for all or part of .he additional taxes incurred as a rtsult of living abroad. These companies will have to absorb the potential ta, increase, pass the increased costs on to customers, or replace American employees with local or third-country nationals. Companies that do not reimburse their American employees ii )ose tham because of the higher tax burdens. Potential tax increases will vary gi.eat1y according to income levels, employer compensation policies, and geographic locations. The companies advised that either the increased -osts or loss of U.S. citizen employees associated with the tax changes may be the cause of lost contracts and adverse effects on U.S. exports. Basic options with regard to the question of the tax incentive involve fully taxing, partialll taxing, or making tax free all allowances and foreign-earned income. (RRS)

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