The US is harming itself and business interests through its worldwide system of taxation, an American business lobby in Hong Kong argues.

A lobby of US businesses in Hong Kong has turned its fire on the extra-territorial tax regime of the US, arguing that America should switch to a territorial system as used by the vast majority of countries around the world.

The system, which imposes US taxes on expat Americans, discourages US persons from working abroad and hits the benefits to the American economy of having such citizens gain experience and create wealth, the American Chamber of Commerce in Hong Kong said in an open letter to President Donald Trump.

“We would like to express our strong support for the US shifting to a system of territorial taxation for corporations and individuals to boost US competitiveness in doing business overseas,” the signatories said. 

At present, US legislation affecting expats and Green Card holders, known as FATCA and enacted in 2010, has encouraged a raft of foreign financial services firms to shut their doors to US clients, seen as a compliance burden. Groups such as American Citizens Abroad have lobbied to encourage authorities in Washington to make it easier for US expats to access financial services. One consequence of current law is that an increasing number of Americans are repudiating their citizenship. 

“The US system of imposing worldwide individual taxation has led to a diminution of US expatriates being employed by both American and foreign companies outside the US,” the letter, signed by Walter B Dias, chairman, and Tara Joseph, president. 

“This [expat] community helps ensure US-made goods and services have commercial viability in the markets in the Asia-Pacific region. American men and women representing US companies overseas help increase employment of Americans both at home and abroad as they the most effective advocates and exporters of US-made goods and services,” the letter continued. 

“The US system of imposing worldwide individual taxation has led to a diminution of US expatriates being employed by both American and foreign companies outside the US,” the authors said. 

The letter went on to state that the current system means employers are forced to pay additional amounts to equalize Americans working abroad so that employees aren’t force to pay the cost of a foreign assignment. The situation means many US citizens are not price-competitive in overseas markets.

The call comes at a time when Congress is debating proposals to let US corporations that have parked overseas earnings in foreign jurisdictions to bring them back and pay a reduced, one-off tax charge. There are also calls on the US to slash its corporate tax rates as these can go as high as 40 per cent, about double the average level among industrialised nations in the OECD.