Corporate tax as % of USA tax revenue

32% (1952) 9.9% (2013)

Corporate Tax Rate Switzerland 17.9%

USA 35%

Amount US MNCs avoid paying in taxes through tax havens

90 billion/year

Oksana Korotka

Subpart F (Internal Revenue

Code)1962

U.S. MNCs are taxed on their

worldwide earnings… when

earnings are brought back

(“repatriated”) to the United States

(IRC)

FATCA (Foreign

Account Tax Compliance Act) 2010deals with the

U.S. taxation on amounts earned

by controlled foreign

corporations; provides that

certain types of income of CFCs

must be included in the gross

income of the U.S. shareholder in the year the

income is earned by the CFC.

FATCA targets tax non-

compliance by U.S. taxpayers

with foreign accounts and

obliges foreign banks to report to IRS (break

secrecy) information on

American account holders

or face 30% payment

withhold from US sources.

“Check the Box Rule” (IRS form 8832)

Active Financing Exceptions (1997)

IRC § 954

“Look-through Rules” (2006) exceptions to

Subpart F-permits MNCs to transform their foreign subsidiary into hybrid entity recognized as corporation in only one tax

jurisdiction (“haven”) -US parent can become DRE -

branch of CFC

-makes exception by excluding rents and royalties earned by offshore CFC from

taxable passive income

-allows “deferral” of taxation on income

earned abroad- enables creation of “stateless income”

Expansion of corporate tax base

Reduction of corporate tax

rate

Closing the loopholes in legislation

Elimination of numerous deductions (tax expenditures) applicable to corporate taxable profits (depreciation, interest payment, special credits )

Incentivizing corporations to pay lower tax at home and attract foreign MNCs

Repeal of “check the box”, “look through” exceptions to Subpart F and tax Code

Slide 1:•http://www.tradingeconomics.com/switzerland/corporate-tax-rate Corporate Tax Rates Statistics•https://www.fas.org/sgp/crs/misc/R42726.pdf Congressional Research Services on Corporate Tax Reform Options •http://www.taxjusticeblog.org/archive/2015/01/congress_should_pass_the_stop.php#.VScE3BM-9Zk Bill proposed by Congress to combat Tax Havens abuse•http://www.irs.gov/Businesses/Small-Businesses-&-Self-Employed/Bank-Secrecy-Act IRS Bank Secrecy ActSlide 2:•https://www.law.cornell.edu/uscode/text/26/subtitle-A/chapter-1/subchapter-N/part-III/subpart-F Subpart F text (Cornell University)•http://www.irs.gov/irm/part4/irm_04-061-007.html#d0e10 Tax Code Subpart F CFCs•http://www.irs.gov/Businesses/Corporations/Foreign-Account-Tax-Compliance-Act-FATCA IRS FATCA TextSlide 3:•http://s3.epi.org/files/2014/how-to-tax-multinational-corporations.pdf Economic Policy Institute- Proposal of Corporate Tax Policy •https://www.law.cornell.edu/uscode/text/26/954 Tax Code Foreign Based Companies (Cornell University)•https://www.youtube.com/watch?v=NxezUBlBE-w “60 Minutes Tax Havens”

Slide 4:•http://s3.epi.org/files/2014/how-to-tax-multinational-corporations.pdf Economic Policy Institute- Taxing International Corporations•http://ctj.org/ctjreports/2014/05/ Citizen for tax Justice- 12 ax havens •http://www.dollarsandsense.org/archives/2015/0115miller.html Dollar&Sence- Lower Tax Rates•http://data.worldbank.org/indicator/GC.TAX.TOTL.GD.ZS World Bank -Tax Revenue Statistics•http://www.kpmg.com/global/en/services/tax/tax-tools-and-resources/pages/corporate-tax-rates-table.aspx Corporate Tax rates Statistics•https://stats.oecd.org/Index.aspx?DataSetCode=REV# OECD official revenue statistics compared by country•https://www.reit.com/sites/default/files/media/Files/Policy/Corporate-Tax-Reform-9-13-12.pdf Congressional research Services “Corporate Tax System…”Slide 5:•http://taxfoundation.org/blog/canadas-lower-corporate-tax-rate-raises-more-tax-revenue Canada’s Lower Corporate Tax Rate raises more revenue- Tax Foundation•https://www.fas.org/sgp/crs/misc/R42726.pdf Congressional research Services “Corporate Tax System…”•http://www.americansfortaxfairness.org/files/ATF-Offshore-Corporate-Tax-Loopholes-Fact-Sheet.pdf Offshore Corporate Tax Loopholes http://ctj.org/ctjreports/2012/08/dont_renew_the_offshore_tax_loopholes.php#.VShHBRM-9Zk CTJ- Don’t Renew Corporate Offshore Tax Loopholes