Tax break helps Americans abroad
American businessmen based overseas were reacting with near childlikeglee this week to news that provisions expected to be signed into law in a few days by President Reagan will exempt foreign income of up to $95,000 from US taxation by 1986.
"It,s an extremely favorable development for American business abroad," said ITT Europe vice-president Donald R. Ealy. "It will boost the American presence in europe -- and increase exports."
Americans working abroad have been complaining bitterly that the previoustax law -- the 1978 Foreign Earned Income Tax Act -- made it prohibitively expensive for companies to keep Americans in key overseas positions.
It meant Americans were taxed by both the US and foreign governments -- and multinational corporations, through "tax-equalization programs," were picking up the tab. The result was an exodus "in droves," as Ealy put it, of Americans from Europe to offices back home.
The new law means that beginning next year Americans abroad will be exempted from paying US taxes on the first $75,000 earned outside the country, rising in annual increments to $95,000 by 1986. Some housing costs will also be deductible.
American executives based in Brussels say the new provisions will have thedouble-edged effect of keeping Americans already overseas, and of encouraging US companies to to replace Europeans who have been replacing Americans since the early '70s.
An increase in US exports to foreign countries can be expected as a directresult of the new tax provisions, according to American businessmen and lawyers in Europe.
It will enable US companies in Europe, for example, to return Americans toimportant positions in purchasing departments now held by Europeans, says internationallawyer Eric Osterweil of the American Chamber of Commerce in Belgium.
Recently, non-American purchasing agents have followed their instincts todeal with companies familiar with them, and in Europe, those companies have been mainly European.