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REFORMING U.S. INTERNATIONAL CORPORATE TAXATION Michael D. Williamson ITRN 603 Prof. Malawer April 14, 2015.

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Presentation on theme: "REFORMING U.S. INTERNATIONAL CORPORATE TAXATION Michael D. Williamson ITRN 603 Prof. Malawer April 14, 2015."— Presentation transcript:

1 REFORMING U.S. INTERNATIONAL CORPORATE TAXATION Michael D. Williamson ITRN 603 Prof. Malawer April 14, 2015

2 Executive Summary -Problem: Currently, the U.S. taxes its firms on a worldwide bases. -Consequence: Taxing firms on income earned abroad discourages U.S. firms to invest in the U.S. -Remedy: The U.S. should adopt legislation that implements a territorial tax system. Tax Foundation Video on the basics of foreign taxes for U.S. firms.Video

3 Problems & Consequences 2012 J.P Morgan Study: U.S. multinational firms have over $1.7 trillion in non-repatriated foreign earnings, which may remain offshore permanently.Study Not repatriating foreign earnings: -lowers U.S tax revenues; -rewards foreign investment over U.S. investment.; and -increases compliance costs Taken together, these factors hinder employment and innovation in the U.S.

4 Policy Proposal: Move the U.S. to a territorial tax system BenefitsBenefits, according to the Senate Republic Policy Committee: -Allow U.S. firms to repatriate bring foreign income back to the U.S. without being taxed -Remove the tax disincentive for domestic investment with foreign income -Decrease the influence that tax considerations have on business decisions -Lower compliance costs, make it more likely that global businesses are located in the U.S. Taken together, these benefits may increase employment in the U.S.

5 Potential Criticisms of Territorial Tax Systems -According to the CBO, territorial tax systems lower U.S. revenueCBO -Broader U.S. corporate tax base Rebuttal: Employment gains, and its effects, may compensate -The Center on Budget and Policy Priorities says territorial tax system may facilitates tax evasion and shifting income to tax havensThe Center on Budget and Policy Priorities Rebuttal: Legislation could make it illegal to park income in tax havens

6 Works Consulted Chye-Ching Huang, et. al., “The Fiscal and Economic Risks of Territorial Taxation,” Center on Budget and Policy Priorities, Jan. 31, 2013, 13tax.pdfhttp://www.cbpp.org/files/ tax.pdf “Corporate Taxes: Advantages of a Territorial System,” Tax Foundation, Jan. 3, 2012, https://youtu.be/19dg7L5Zdsg https://youtu.be/19dg7L5Zdsg Emily Chasan, “At Big U.S. Companies, 60% of Cash Sits Offshore: J.P. Morgan,” Wall Street Journal, May 17, 2012: companies-60-of-cash-sits-offshore-j-p-morgan/http://blogs.wsj.com/cfo/2012/05/17/at-big-u-s- companies-60-of-cash-sits-offshore-j-p-morgan/ “Options for Taxing US Multinational Corporations,” Congressional Budget Office, January 2013, https://www.cbo.gov/sites/default/files/43764_MultinationalTaxes_rev pdf https://www.cbo.gov/sites/default/files/43764_MultinationalTaxes_rev pdf “Territorial vs. Worldwide Taxation,” Senate Republican Policy Committee, Sept. 19, 2012, Images:


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