Abstract

http://ssrn.com/abstract=2476453
 


 



'Competitiveness' Has Nothing to Do With It


Edward D. Kleinbard


USC Gould School of Law

September 10, 2014

144 Tax Notes 1055 (September 1, 2014)
USC Legal Studies Research Papers Series No. 14-34
USC CLASS Research Paper No. 14-26

Abstract:     
The recent wave of corporate tax inversions has triggered interest in what motivates these tax-driven transactions now. Corporate executives have argued that inversions are explained by an "anti-competitive" U.S. tax environment, as evidenced by the federal corporate tax statutory rate, which is high by international standards, and by its "worldwide" tax base. This paper explains why this competitiveness narrative is largely fact-free, in part by using one recent articulation of that narrative (by Emerson Electric Co.’s former vice-chairman) as a case study.

The recent surge in interest in inversion transactions is explained primarily by U.S. based multinational firms’ increasingly desperate efforts to find a use for their stockpiles of offshore cash (now totaling around $1 trillion), and by a desire to "strip" income from the U.S. domestic tax base through intragroup interest payments to a new parent company located in a lower-taxed foreign jurisdiction. These motives play out against a backdrop of corporate existential despair over the political prospects for tax reform, or for a second "repatriation tax holiday" of the sort offered by Congress in 2004.

Number of Pages in PDF File: 16

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Date posted: August 7, 2014 ; Last revised: September 11, 2014

Suggested Citation

Kleinbard, Edward D., 'Competitiveness' Has Nothing to Do With It (September 10, 2014). 144 Tax Notes 1055 (September 1, 2014); USC Legal Studies Research Papers Series No. 14-34; USC CLASS Research Paper No. 14-26. Available at SSRN: http://ssrn.com/abstract=2476453

Contact Information

Edward D. Kleinbard (Contact Author)
USC Gould School of Law ( email )
699 Exposition Boulevard
Los Angeles, CA 90089
United States

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