President Obama Proposes Sweeping International Tax Reforms
In an effort to remove the tax advantages from operating in a low-tax jurisdiction, the Obama Administration will propose a minimum rate of corporate tax on foreign earnings, regardless of where the income is earned. This could be offset by local taxes (presumably through a jurisdiction-based foreign tax credit). Thus, in low-tax countries, a net U.S. corporate tax would be paid on earnings therefrom. Furman stated, “The concept is that if you are investing in a country with a robust tax system, you wouldn’t necessarily face any U.S. taxes. But if operating in a country with a less robust tax system, you would have to pay U.S. taxes. Part of the idea is that this would lead, instead of a race to the bottom on corporate tax rates, to a more robust system around the world for corporate taxes.”
The stated goal is to allow companies to expand internationally in search of access to markets and talented workers to locate where it is most productive – not where a company can simply pay the lowest taxes. Additionally, the proposals are aimed at reducing “stateless companies,” which use tax loopholes to avoid paying any tax at all.
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If you have any questions about this World Business & Tax Update, please contact your WithumSmith+Brown professional, a member of WS+B’s International Services Group or email us at [email protected].
Kimberlee Phelan, CPA, MBA
Practice Leader, International Services Group
609.520.1188
[email protected]
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Author: Kimberlee Phelan | [email protected]
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