What is the Difference Between FATCA and Citizenship Based Taxation (CBT)?

Understanding FATCA: An Overview

The Foreign Account Tax Compliance Act (FATCA) is a U.S. federal law enacted in 2010 with the goal of combating tax evasion by U.S. taxpayers holding financial assets outside the country. FATCA primarily imposes reporting obligations on foreign financial institutions (FFIs) and certain non-financial entities to disclose information about financial accounts held by U.S. citizens, U.S. lawful permanent residents, or entities with significant U.S. ownership. This helps the Internal Revenue Service (IRS) identify taxable offshore income and ensure compliance with U.S. tax laws.

Under FATCA, FFIs are required to register with the IRS and provide annual financial account information for specific account holders. Failure to comply may result in a 30% withholding tax on payments of U.S.-source income and other reportable amounts to the non-compliant institution. Individual account holders, on the other hand, must also disclose their foreign financial assets to the IRS if their total value exceeds certain thresholds, which vary based on tax filing status and residency.

FATCA applies globally and has influenced cross-border financial practices significantly. To facilitate compliance, the U.S. government has entered into intergovernmental agreements (IGAs) with various countries. These agreements often streamline information sharing between FFIs and the IRS, aligning FATCA requirements with local laws.

FATCA is separate from standard U.S. tax filing processes but works as an additional enforcement mechanism. It impacts not just U.S. taxpayers but also global financial institutions, increasing administrative burdens. By requiring extensive reporting, FATCA strengthens efforts to enhance transparency and reduce offshore noncompliance by tracking hidden income or assets held abroad. This far-reaching law has fundamentally altered the way global financial systems interact with U.S. tax regulations.

Defining Citizenship-Based Taxation (CBT)

Citizenship-Based Taxation (CBT) refers to the taxation system in which a country’s citizens are subject to tax obligations based on their citizenship status, regardless of where they reside or earn income globally. Unlike territorial taxation systems that tax income generated within a country’s borders, CBT requires individuals to report and potentially pay taxes on their worldwide income, irrespective of their physical location. The United States is one of the very few countries that enforces citizenship-based taxation.

Under CBT, all U.S. citizens and certain lawful permanent residents (often referred to as Green Card holders) must file annual tax returns with the Internal Revenue Service (IRS). This requirement is enforced even if they live abroad, do not maintain significant ties to the U.S., or earn no income domestically. The duty to file applies equally to those who have dual citizenship or have lived abroad for most or all of their lives.

Compliance with CBT encompasses reporting all sources of income earned globally, including wages, dividends, rental income, and certain forms of foreign pensions. Additionally, U.S. citizens abroad may face accompanying filing obligations such as the Foreign Bank Account Report (FBAR) and specific reporting requirements under the Foreign Account Tax Compliance Act (FATCA). These overlapping regulations aim to ensure transparency on global financial assets.

Critics of CBT highlight its complexities and financial strain, especially on expatriates who often face double taxation unless mitigated by tax treaties or credits. Proponents argue that it prevents tax evasion by eliminating incentives for citizens to exploit offshore tax shelters. Despite these debates, CBT remains a foundational element of the U.S. tax code, shaping how expatriates handle their financial and tax planning.

Historical Context: The Origins of FATCA and CBT

The roots of the Foreign Account Tax Compliance Act (FATCA) stem from mounting concerns over tax evasion by U.S. citizens utilizing offshore accounts during the late 20th and early 21st centuries. Enacted in 2010 as part of the HIRE Act, FATCA aimed to promote transparency and ensure U.S. tax authorities could track global financial assets. At its core, FATCA requires foreign financial institutions to disclose information about accounts held by U.S. taxpayers. By doing so, it seeks to determine income or assets that may otherwise go unreported to the Internal Revenue Service (IRS).

Conversely, Citizenship-Based Taxation (CBT) traces its history to the Civil War era. In 1861, the U.S. government introduced income tax on citizens—including those residing abroad—to fund war efforts. Unlike most other countries, which primarily impose taxation based on residency, the U.S. continues the principle of taxing based on citizenship. This system obliges U.S. citizens, regardless of their domicile, to file annual tax returns and report worldwide income.

FATCA and CBT are interlinked yet distinct policies that evolved from separate concerns. While CBT focuses on the responsibility of individuals based on citizenship, FATCA enlists foreign entities as intermediaries in enforcing tax compliance. FATCA intensified after high-profile scandals involving offshore accounts exposed loopholes exploited by wealthy individuals to avoid taxation. Similarly, CBT’s endurance reflects the perspective that citizenship carries enduring financial obligations to the U.S.

Both policies reflect broader concerns about fiscal responsibility and transparency on a global stage. However, their implementation and objectives—while complementary—address taxation from different structural and historical perspectives. Understanding these origins provides clarity about their respective purposes and interconnection in modern tax law.

Key Objectives of FATCA and CBT: Why Were They Introduced?

The Foreign Account Tax Compliance Act (FATCA) and Citizenship Based Taxation (CBT) were introduced with distinct yet interconnected objectives, targeting global tax compliance and revenue collection for the United States government. Both initiatives emphasize the need to combat tax avoidance, but their methodologies and execution differ significantly.

FATCA was enacted in 2010 to address the issue of offshore tax evasion by American taxpayers through foreign financial activities. It aims to improve transparency by requiring foreign financial institutions (FFIs) to report information about accounts held by U.S. citizens, green card holders, and certain entities. FATCA seeks to:

• Identify tax evasion: By tracking undisclosed income and assets held abroad, the U.S. can close loopholes used to evade taxes.
• Promote accountability: FFIs are compelled to act as enforcement agents, ensuring compliance by their American account holders.
• Generate revenue: FATCA helps the U.S. recoup lost tax revenue that results from undeclared offshore income.

CBT, by contrast, is a foundational aspect of U.S. tax policy originating long before FATCA. It mandates that U.S. citizens pay taxes on their worldwide income, regardless of residency. The primary goals of CBT include:

• Equitable taxation: Citizens and green card holders remain liable for tax contributions even when living abroad, ensuring they support federal programs.
• Prevent income shifting: CBT minimizes opportunities to exploit foreign tax systems to shelter income or reduce tax liability.
• Consistent policy: By taxing based on citizenship rather than residency, CBT establishes a uniform framework for revenue collection.

While FATCA focuses on curtailing offshore tax noncompliance via institutional reporting, CBT frames a broader approach to taxation based on global income. Together, they represent U.S. efforts to strengthen international tax enforcement and promote fiscal responsibility among its citizens.

How FATCA Works: Reporting Requirements and Enforcement

The Foreign Account Tax Compliance Act (FATCA) relies on a framework of reporting obligations and enforcement mechanisms aimed at identifying U.S. taxpayers holding financial assets outside the United States. This legislation requires both non-U.S. financial institutions and U.S. taxpayers to take specific actions to ensure compliance with the law.

Under FATCA, **foreign financial institutions (FFIs)**—which include banks, investment entities, and insurance companies—must report detailed information about accounts held by U.S. persons. FFIs are required to identify clients who are U.S. citizens, residents, or entities in which U.S. persons hold substantial ownership. These institutions must report account balances, names, addresses, and in some cases, transactions related to these accounts to the Internal Revenue Service (IRS). Failure to comply with these reporting requirements can result in a 30% withholding tax on certain U.S.-sourced payments made to non-compliant FFIs.

For individual U.S. taxpayers, FATCA imposes annual reporting requirements for specified foreign financial assets exceeding certain thresholds. Taxpayers must file IRS Form 8938 (Statement of Specified Foreign Financial Assets) along with their annual tax returns. This includes reporting foreign bank accounts, stocks, bonds, and any interest in foreign trusts or partnerships. The thresholds differ based on filing status and residency but generally start at $50,000 for individuals residing in the United States.

To enforce compliance, the IRS collaborates with foreign governments through intergovernmental agreements (IGAs). These agreements facilitate the exchange of information between countries and encourage FFIs to meet their required disclosures. Additionally, the IRS has implemented strict penalties for non-compliance, including fines of up to $10,000 per failure to file or disclose required information. In cases of willful non-compliance, criminal charges may also apply. Such enforcement measures ensure that FATCA addresses tax evasion effectively.

Citizenship-Based Taxation: A Breakdown of Tax Obligations for U.S. Citizens Abroad

Citizenship-Based Taxation (CBT) requires U.S. citizens, regardless of where they reside, to report their worldwide income to the Internal Revenue Service (IRS). Unlike many countries, which tax individuals based on residency, the United States taxes its citizens no matter where they live. This tax framework imposes unique obligations on U.S. citizens abroad.

U.S. citizens living overseas must file an annual federal tax return, provided their income exceeds the standard filing threshold. This threshold depends on the individual’s filing status, such as single, married filing jointly, or head of household. They must report not just U.S.-based income but all income earned abroad, including wages, rental income, dividends, and interest.

The IRS provides certain exclusions and credits to alleviate double taxation. These include the Foreign Earned Income Exclusion (FEIE), which allows qualifying individuals to exclude up to a specified amount of foreign-earned income from U.S. taxation, and the Foreign Tax Credit (FTC), which offers a dollar-for-dollar credit for taxes paid to foreign governments. However, these benefits come with strict eligibility requirements and reporting rules.

Additionally, U.S. citizens with foreign financial accounts may need to file an FBAR (Report of Foreign Bank and Financial Accounts) if the total value of their accounts exceeds $10,000 at any time during the year. Certain foreign assets may also trigger the requirement to file Form 8938 (Statement of Specified Foreign Financial Assets) under FATCA regulations.

Failing to meet CBT obligations can lead to significant penalties. U.S. citizens abroad must navigate a complex system of overlapping rules, deadlines, and forms, often requiring professional tax assistance. By understanding the obligations associated with CBT, individuals can minimize their compliance challenges and potential financial risks.

Comparing FATCA and CBT: Are These Policies Interconnected?

FATCA (Foreign Account Tax Compliance Act) and Citizenship-Based Taxation (CBT) are two key components of U.S. international tax policy that, while distinct, share areas of overlap. Understanding their relationship requires an exploration of how each policy functions independently and interacts with the other.

FATCA is a legislative measure designed to combat tax evasion by U.S. citizens and residents who hold financial assets abroad. Enacted in 2010, FATCA obligates foreign financial institutions (FFIs) to report details about accounts owned by U.S. taxpayers. If FFIs fail to comply, they face significant penalties, including a 30% withholding tax on certain U.S.-sourced payments. FATCA operates as an enforcement mechanism, essentially linking global financial systems to the Internal Revenue Service (IRS). Its reach extends beyond individuals, encompassing corporations, trusts, and investment funds.

CBT, on the other hand, is a taxation framework requiring U.S. citizens—regardless of where they live—to pay taxes to the United States on their worldwide income. This policy is unique; most countries use residence-based taxation. Under CBT, citizens living abroad must file a U.S. tax return, even if they also pay taxes in their country of residence. They may use mechanisms like Foreign Earned Income Exclusions or Foreign Tax Credit to mitigate double taxation, but the obligation itself remains.

The two policies are interconnected because FATCA effectively aids in enforcing CBT. FATCA’s reporting requirements enable the IRS to identify U.S. taxpayers with foreign income, aligning with CBT’s global coverage. By compelling FFIs to disclose financial data, FATCA reinforces CBT compliance, ensuring that expatriates and international account holders meet tax obligations. This synergy creates a comprehensive oversight framework, integrating income disclosure with taxation.

In practice, FATCA has intensified the challenges associated with CBT, including increased paperwork and higher compliance costs. Together, these policies place financial and administrative burdens on U.S. citizens abroad, raising debates about fairness and feasibility while advancing the U.S. government’s commitment to tax accountability at a global scale.

Impacts of FATCA on Foreign Financial Institutions and U.S. Citizens

The Foreign Account Tax Compliance Act (FATCA) has far-reaching implications for foreign financial institutions and U.S. citizens. Enacted in 2010, the legislation aims to combat tax evasion by U.S. citizens who hold financial assets abroad. Its requirements create unprecedented regulatory burdens and financial consequences that affect stakeholders in different ways.

Foreign financial institutions (FFIs) face significant compliance obligations under FATCA. These institutions are required to identify and report account information of U.S. taxpayers or foreign entities with substantial U.S. ownership to the Internal Revenue Service (IRS). To achieve this, FFIs must adapt their systems, resources, and internal processes to meet the complex reporting requirements stipulated by the law. Non-compliance is penalized with a substantial 30% withholding tax on U.S.-source income paid to the institution, causing global frustration for banks and firms unwilling to comply or unable to afford the enhanced infrastructure FATCA demands.

For U.S. citizens living abroad, FATCA entails a different set of challenges. Many expatriates find themselves facing restricted access to financial services in foreign countries, as some FFIs choose to close accounts tied to U.S. persons rather than incur compliance risks. Alongside these barriers, U.S. citizens abroad must comply with additional reporting requirements, such as filing Form 8938 with the IRS to disclose specified foreign assets. This adds to the already intricate obligations imposed by U.S. citizenship-based taxation.

The effects of FATCA intertwine deeply with the day-to-day lives of individuals and institutions, shaping financial behaviors globally. Transitioning toward compliance often demands both significant financial investment and extensive administrative effort, reflecting FATCA’s regulatory weight on the international stage.

Challenges and Criticisms of Citizenship-Based Taxation

Citizenship-Based Taxation (CBT), while distinctive in its global application, has faced several hurdles and critiques from various stakeholders. Unlike residence-based taxation, where individuals are taxed primarily based on their physical presence, CBT requires U.S. citizens to file taxes on their worldwide income, regardless of where they reside. This system introduces many complexities and frustrations for expatriates and others subject to this regime.

One major criticism revolves around administrative burdens. U.S. citizens living abroad are required to comply with detailed tax-reporting obligations, including filing annual returns, disclosing foreign assets through the Foreign Bank Account Report (FBAR), and complying with FATCA requirements. These procedures can become overwhelming, especially for individuals lacking access to qualified tax advisors or struggling to interpret the complex legal framework.

CBT also creates double taxation risks. While foreign tax credits aim to prevent individuals from being taxed by both the U.S. and their country of residence on the same income, the mechanisms do not always cover all scenarios. This is particularly true for situations involving income types or deductions not recognized by both tax systems. Such scenarios can leave individuals paying higher effective tax rates.

Further, CBT is criticized for its disproportionate impact on low-income expatriates. Many individuals living overseas may not earn enough to owe U.S. taxes but still incur steep compliance costs. Tax-preparing fees linked to dual filing requirements or penalties for unintentional non-compliance often create hardships for those with modest incomes.

Another key challenge arises from the loss of financial opportunities. Foreign banks and financial institutions, under FATCA, frequently close or restrict access to banking services for U.S. citizens, making it complicated to secure loans, mortgages, or investment accounts. Expatriates, wary of being perceived as liabilities, face significant obstacles in managing their financial well-being abroad.

Lastly, CBT has sparked calls for reform from advocacy groups, tax professionals, and expatriates. They argue that taxing individuals based on citizenship rather than residence is outdated and incompatible with a globally interconnected economy.

How FATCA and CBT Affect Expats and Dual Citizens

The Foreign Account Tax Compliance Act (FATCA) and Citizenship-Based Taxation (CBT) impose complex financial and compliance requirements on U.S. citizens living abroad and dual citizens. While both measures are intended to ensure tax compliance, their implications vary and often overlap, creating significant challenges for affected individuals.

FATCA requires foreign financial institutions (FFIs) to disclose information about their U.S. account holders to the Internal Revenue Service (IRS). This regulation applies regardless of where the U.S. citizen resides. Expats and dual citizens often face difficulties with foreign banks reluctant to manage U.S.-linked accounts due to FATCA requirements. In some cases, financial institutions deny services to U.S. citizens altogether to avoid compliance burdens. FATCA also mandates individuals to report foreign financial assets exceeding specific thresholds using Form 8938, adding another layer of compliance.

CBT, in contrast, subjects U.S. citizens to taxation on their worldwide income regardless of their residence. Expats and dual citizens must file a U.S. tax return annually, even if they pay taxes in their country of residence. While certain exclusions and credits, such as the Foreign Earned Income Exclusion (FEIE) or Foreign Tax Credit (FTC), help mitigate double taxation, these measures do not eliminate the requirement to file. Dual citizens, especially those who may not realize they are subject to U.S. tax laws, can face severe penalties for non-compliance.

These rules create financial, administrative, and emotional burdens. The interplay between FATCA and CBT increases the complexity of tax filings, often necessitating costly professional assistance. Navigating these obligations frequently leads to frustration and, in some cases, decisions to renounce U.S. citizenship to simplify financial and tax affairs.

Tax Compliance Costs Under FATCA and CBT

Both FATCA (Foreign Account Tax Compliance Act) and Citizenship-Based Taxation (CBT) impose tax compliance burdens on U.S. citizens and entities, particularly for those residing or operating outside the United States. While their objectives include combating tax evasion and ensuring fair taxation, the financial and administrative costs associated with compliance are notably high.

FATCA Compliance Costs

Under FATCA, foreign financial institutions (FFIs) are mandated to report information on accounts held by U.S. taxpayers or face penalties. This obligation results in substantial compliance expenses for FFIs, which include upgrading systems, training staff, and conducting enhanced due diligence measures. For individual taxpayers, FATCA introduces additional reporting requirements through Form 8938 (Statement of Specified Foreign Financial Assets). Filing this form correctly often necessitates professional tax assistance, especially given its complexity and the penalties for errors or omissions. These services can significantly increase annual tax preparation costs for Americans with foreign investments or bank accounts.

CBT Compliance Costs

Citizenship-Based Taxation requires U.S. citizens to file annual tax returns with the IRS, regardless of where they reside. This includes declaring worldwide income and adhering to a set of intricate provisions like foreign tax credits, exclusions such as the Foreign Earned Income Exclusion, and additional forms such as Form 1116 or Form 2555. Non-resident Americans often encounter challenges in reconciling double taxation concerns between U.S. and foreign tax codes, exacerbated by disparities in tax systems. Engaging the services of cross-border tax specialists becomes necessary for most taxpayers, contributing to higher expenses. Furthermore, the compliance effort is intensified for dual citizens or accidental Americans who may not realize they are subject to U.S. tax obligations.

Common Impacts and Challenges

Both FATCA and CBT create barriers for individuals and institutions through onerous documentation requirements, risks of inadvertent noncompliance, and significant out-of-pocket expenses related to professional assistance. Taxpayers may also face difficulty navigating constant regulatory changes, further elevating compliance burdens. Consequently, these costs often make U.S. citizenship or business ties less attractive, particularly for expatriates and international entities.

Renouncing U.S. Citizenship: An Escape from CBT and FATCA Obligations?

Renouncing U.S. citizenship is often viewed as an option to escape the obligations imposed by Citizenship-Based Taxation (CBT) and the Foreign Account Tax Compliance Act (FATCA). While it can potentially eliminate future U.S. tax responsibilities and reporting requirements, this process is neither simple nor devoid of consequences. Individuals considering this step are subject to a set of procedures, tax implications, and legal ramifications that require careful examination.

When a U.S. citizen renounces their citizenship, they relinquish their status as a taxpayer under the CBT system, which taxes citizens on their worldwide income regardless of residence. Similarly, such individuals are no longer obligated to comply with FATCA reporting requirements, which mandate the disclosure of foreign financial accounts exceeding specific thresholds. However, prior obligations do not end immediately upon renunciation.

The act of renunciation itself is governed by a formal process that must be completed through the Department of State. This includes an in-person interview at a U.S. embassy or consulate, along with the payment of a $2,350 processing fee. Moreover, there may be an “exit tax” for individuals classified as “covered expatriates” under Internal Revenue Code Section 877A. Covered expatriates generally encompass those with high net worth or those who fail to certify prior tax compliance for the five years leading up to renunciation.

It is vital to understand that renunciation has significant non-tax implications. Former citizens lose access to certain government benefits, face potential travel restrictions under visa requirements, and may encounter challenges establishing financial relationships abroad due to FATCA-compliant institutions that scrutinize former U.S. citizens.

While renunciation may simplify life for those burdened by CBT and FATCA, the decision is far-reaching and should involve professional legal and tax guidance to ensure compliance and awareness of all associated consequences.

International Responses to FATCA and the Concept of CBT

The Foreign Account Tax Compliance Act (FATCA) and the concept of Citizenship-Based Taxation (CBT) have elicited distinct reactions from governments, financial institutions, and expatriate communities worldwide. FATCA relies heavily on international cooperation to enforce its provisions. It requires foreign financial institutions (FFIs) in participating countries to report account information of U.S. taxpayers to the Internal Revenue Service (IRS). While some nations have embraced FATCA through Intergovernmental Agreements (IGAs), others have expressed concerns over its extraterritorial reach. As of 2023, over 100 countries have signed IGAs to facilitate FATCA compliance.

Countries with robust privacy laws have often grappled with the legal conflicts posed by FATCA. For example, the European Union has raised questions about whether FATCA violates local data protection regulations. Privacy advocates argue that such agreements undermine national sovereignty and expose personal financial data to vulnerabilities. Despite these concerns, many governments have acquiesced, largely due to the potential economic penalties for non-compliance, which include a 30% withholding on U.S.-sourced payments.

From an individual perspective, the concept of CBT amplifies international tensions. CBT, wherein the U.S. taxes its citizens and green card holders on their worldwide income irrespective of residence, is regarded as an anomaly in global tax systems. Most countries follow residency-based taxation (RBT). Expat communities, particularly those in high-tax jurisdictions, frequently report challenges over dual compliance costs, double taxation risks, and the complexity of reconciling differing tax systems. Dual Tax Treaties (DTTs) mitigate some issues but cannot fully resolve CBT-related disparities.

Many financial institutions deem U.S. clients as high-risk due to FATCA’s compliance burdens. This phenomenon, known as “de-risking,” has led to the denial of financial services for some U.S. expatriates. Additionally, foreign governments have cited CBT as a key factor complicating international mobility and business activities for American nationals. These concerns continue to fuel global debates about the fairness and practicality of combining FATCA enforcement with CBT principles.

Key Differences: FATCA vs. Citizenship-Based Taxation

FATCA and Citizenship-Based Taxation (CBT) are both components of the United States tax framework but serve distinct purposes and operate under different mechanisms. Examining their key differences helps clarify their respective roles and impact.

1. Definition and Scope

• FATCA (Foreign Account Tax Compliance Act): FATCA is U.S. legislation designed to prevent tax evasion by requiring foreign financial institutions (FFIs) to report information about financial accounts held by U.S. taxpayers. It focuses specifically on international asset reporting.
• Citizenship-Based Taxation: CBT is the policy under which the U.S. taxes its citizens on their worldwide income, regardless of where they live. This approach applies solely based on citizenship or residency status.

2. Purpose and Objective

• FATCA aims to uncover undisclosed offshore accounts and enforce tax collection internationally. It primarily targets foreign institutions and their compliance with U.S. reporting obligations.
• CBT ensures that U.S. citizens and green card holders fulfill their tax obligations, whether they reside domestically or abroad. It is a cornerstone of the U.S. tax philosophy emphasizing fiscal equity.

3. Target Group

• FATCA affects foreign financial institutions, U.S. taxpayers with overseas accounts, and businesses holding specific assets abroad.
• CBT applies directly to U.S. citizens, dual citizens, and permanent residents, regardless of their physical location.

4. Enforcement Mechanisms

• FATCA relies on intergovernmental agreements (IGAs), penalties, and withholding taxes to compel foreign institutions to report.
• CBT enforces compliance domestically through mandatory tax filings, penalties, and audits.

5. Criticism and Controversy

• FATCA has been criticized for its administrative burden on banks and privacy concerns for individuals.
• CBT receives backlash for being one of the few worldwide systems taxing nonresident citizens, complicating expatriates’ financial obligations.

By understanding these distinctions, stakeholders can better navigate their respective tax implications.

Future Outlook for FATCA and CBT: Possible Changes to Expect

The landscape of FATCA and Citizenship-Based Taxation (CBT) has been the subject of debate and discussion in recent years, with many advocating for changes to ease burdens on taxpayers while maintaining compliance goals. Given evolving global economic and political dynamics, several potential developments may shape the future of these policies.

Potential Adjustments to FATCA

1. Increased International Flexibility: Governments and financial institutions may push for modifications to FATCA requirements to reduce compliance costs and administrative challenges. This could involve streamlining reporting obligations or introducing greater exemptions for foreign banks catering to low-risk accounts.
2. Data Privacy Considerations: International concerns about data-sharing and privacy protection may lead to revisions in how financial institutions collect and transmit sensitive taxpayer information to the Internal Revenue Service (IRS).
3. Bilateral Agreements: Expanding reciprocal agreements between the U.S. and other nations could become a focal point, aiming to create a more balanced system of financial information exchange, potentially easing tensions with partner countries.

Reforms to CBT Policies

1. Residency-Based Taxation (RBT): Advocacy groups and lawmakers have called for a shift from citizenship-based taxation to residency-based taxation, aligning the U.S. with global norms. Such a change would exempt American expatriates living abroad from U.S. income tax obligations if they are non-residents.
2. Simplification of Compliance: There is potential for streamlined compliance measures, including higher income exclusions, simplified filing processes, or less intrusive reporting requirements under the Foreign Earned Income Exclusion (FEIE).
3. Renunciation Reforms: Addressing the increasing rate of citizenship renunciations, policymakers might consider revising CBT to be less punitive or exploring avenues to reduce the associated complexity and costs.

Political and Global Impacts

Global tax reforms, shifting diplomatic priorities, and evolving public sentiment may influence the pace and scale of changes to FATCA and CBT. As international tax compliance continues to garner attention, discussions surrounding these frameworks are expected to remain at the forefront of tax policy debates.