UM21-Q2: Expansion of Simplified Totalization Agreements



The United States has signed 30 bilateral social security agreements. Other partner countries, like the United Kingdom or Germany, have signed international agreements to eliminate double taxation for nationals working temporarily abroad in over 50 other countries. This project will analyze the potential impact of expanding the set of countries with international social security treaties by enacting new social security totalization agreements that are simpler than the standard totalization agreements enacted so far. The focus of this project will be to simulate the effect on international flows of capital of eliminating double social security taxation for temporary work (less than five years) through enacting limited treaties with additional countries beyond the current U.S. partners. For this, we will extend a theoretical model of foreign direct investment to incorporate social security international agreements with several countries. We will model limited totalization agreements that only eliminate double taxation. Previous work with this model (Prados et al., 2020), showed that this feature of totalization agreements can lead to increased flows of foreign direct investment. We will use the model to forecast the effects of new, more flexible totalization agreements.

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