Trump won’t end ‘double taxation’ of Americans overseas, accountancy firm warns

Donald Trump’s presidency is unlikely to mean a tax break for Americans living in the UK despite his pledge to end the system of so-called ‘double taxation’, an accountancy firm has warned.

The Republican President-elect said during his campaign that he would reform the taxation of millions of US citizens overseas if he were re-elected to the White House.

In a statement last month, Trump wrote: “I support ENDING the double-taxation of overseas Americans!”

US citizens living outside the country must file tax returns with the Internal Revenue Service (IRS), which can mean they have to pay taxes in the US and their country of residence – depending on whether a double tax agreement exists between the two nations or not.

But following Trump’s election victory this week, experts at Blick Rothenberg warned overseas Americans are unlikely to benefit, as the reform would struggle to pass Congress.

John Havard, a consultant at the audit, tax and business advisory firm, said: “President-elect Donald Trump did hint at relaxing the US taxation of US citizens living outside the USA in the latter part of his presidential campaign.

“Measures which either reduce or eliminate the US taxation of overseas Americans would be attractive to those US citizens living overseas.”

But he added that the economic cost of taxation for a US citizen living in the UK is “unlikely to be materially reduced”.

“This is because the tax rate is determined by which of the UK or the US taxes a particular item at the higher rate,” he added.

Havard said: “Under the UK government’s proposals to reform the taxation of ‘non-doms’, in most cases where an American has lived in the UK for more than four years, the UK will have the higher tax rate. 

“This means relaxing the rules for taxing US citizens living outside the USA will not materially impact the overall economic cost of taxation if they are in the UK.”

He added: “Also, getting support in Congress for eliminating the US taxation of US citizens living outside the USA is likely to be difficult. 

“Without a super majority in the Senate, any change would need to pass by budget reconciliation. Such a measure would result in less revenue for the US Treasury and the need to identify an offsetting revenue raiser.

“It will be hard to convince politicians with a predominantly US domestic agenda that revenue raisers should be applied for the benefit of Americans living overseas if that were to involve sacrificing something on their US domestic wish list.”

The warning will come as a disappointment to Republicans Overseas, who welcomed Trump’s earlier comments, saying it would be “life-changing for millions” and “a testament to President Trump’s commitment to economic freedom.”