U.S. Moves to Thwart Use of Foreign Acquisitions to Dodge Taxes

This is happening because unlike almost every other developed nation the US has a worldwide tax system. Almost every other nation has a territorial tax system. The rest of the world with their territorial system taxes income earned within that country, the US rather taxes income worldwide, regardless of where it is earned.

For example, if a British company earns income in Germany, its pays German taxes on its German income. But if a US company earns income in Germany it pays both German taxes and US taxes.

This is not about avoiding tax on profit earned in the US, after the inversion companies continue to pay US taxes, they just don’t pay taxes on income earned outside of the US.

Re: U.S. Moves to Thwart Use of Foreign Acquisitions to Dodge Taxes

#6

Post by [deleted] » Tue, Apr 05, 2016, 1:45 PM UTC

[deleted]

Re: U.S. Moves to Thwart Use of Foreign Acquisitions to Dodge Taxes

#7

Post by jessaustin » Tue, Apr 05, 2016, 1:45 PM UTC

themartorana wrote: post #2

About time, nothing to see here?

There would be something to see, if we could come up with a "solution" to this problem that actually had a chance of working. So, no.

Re: U.S. Moves to Thwart Use of Foreign Acquisitions to Dodge Taxes

#8

Post by peteretep » Tue, Apr 05, 2016, 1:50 PM UTC

benjaminl wrote: post #5

This is happening because unlike almost every other developed nation the US has a worldwide tax system. Almost every other nation has a territorial tax system. The rest of the world with their territorial system taxes income earned within that country, the US rather taxes income worldwide, regardless of where it is earned. For example, if a British company earns income in Germany, its pays German taxes on its German…

You've over simplified and misunderstood. If a UK company bills a German company for goods, tax is paid wherever the profit is made, which would be in the UK. If a British company sends a consultant to a German company for a month, the tax is paid where the profit is made, which again is in the UK.

If a UK has a German subsidiary, that's different.

Re: U.S. Moves to Thwart Use of Foreign Acquisitions to Dodge Taxes

#9

Post by josefresco » Tue, Apr 05, 2016, 1:53 PM UTC

benjaminl wrote: post #5

This is happening because unlike almost every other developed nation the US has a worldwide tax system. Almost every other nation has a territorial tax system. The rest of the world with their territorial system taxes income earned within that country, the US rather taxes income worldwide, regardless of where it is earned. For example, if a British company earns income in Germany, its pays German taxes on its German…

Are countries with a territorial tax system hurt by businesses leaving in order to seek out a lower tax rate? That seems to be the argument the US government is making - although I haven't seen any data - anyone have a link?

Re: U.S. Moves to Thwart Use of Foreign Acquisitions to Dodge Taxes

#10

Post by merpnderp » Tue, Apr 05, 2016, 1:56 PM UTC

Another attempt to close the loop holes in the US's byzantine corporate tax system doomed to failure. The Treasury Department says as much in the article.

A flat corporate rate on income earned, in the US, minus income lost, in the US, equals taxable income, done and fair. If a corporation can't compete in the US without support of its international shell games, then it probably wasn't competitive enough to matter anyways.