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Jens 'n' Frens
Idle thoughts of a relatively libertarian Republican in Cambridge, MA, and whomever he invites. Mostly political.
"A strong conviction that something must be done is the parent of many bad measures."
-- Daniel Webster
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Thursday, April 15, 2004 :::
Recent scholarly research on international taxation has explored the impact of the tax code on the competitiveness of U.S. firms. Two factors that significantly undermine our competitiveness have been identified. The first is that we tax corporate income on a "worldwide" basis. If a company makes a profit in France, it will have to pay U.S. tax on that profit when it mails the money home, after receiving a credit for foreign taxes paid. Most other countries do not tax foreign profits at all. Any multinational firm that earns money in France, after all, pays French tax immediately. Why should we add a second tax on top of that?The other factor that harms U.S. competitiveness is the very high rate of U.S. corporate tax. Most other countries have reduced their corporate tax rates sharply in recent years. The U.S. has not, and the result is that we are now one of the highest tax countries on earth. ... So how do U.S. multinational firms stay competitive despite these disadvantages? Under current law, they can locate production and profits abroad and avoid paying the very high U.S. taxes by letting profits sit in bank accounts overseas. This strategy does not avoid foreign taxes, but since those are much lower than ours, the playing field is leveled somewhat.... Senator Kerry plans to end this. If a multinational makes money abroad, it must pay U.S. taxes immediately... The Kerry team clearly recognized the possibility that they were causing significant harm, because they added a loophole. If a U.S. multinational produces a product in a foreign country for consumption in that country, then they will continue to allow the firm to avoid U.S. tax until the money is mailed back home.... So why would anyone propose such a thing? Some industries, like food production, already operate that way. Because of local food regulations, and concerns about spoilage, it is often the case that food companies locate a separate plant in each country that they serve. Chief among these is Heinz Read it.
::: posted by dWj at 9:58 PM
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