Abstract

http://ssrn.com/abstract=2390357
 


 



Back to the Drawing Board: The Structural and Accounting Consequences of a Switch to a Territorial Tax System


Michael P. Donohoe


University of Illinois at Urbana-Champaign - Department of Accountancy

Gary A. McGill


University of Florida - Fisher School of Accounting

Edmund Outslay


Michigan State University - Department of Accounting & Information Systems

February 3, 2014

National Tax Journal, Vol. 66, No. 3, 2013

Abstract:     
We review the basics of international tax planning by U.S. multinational corporations (MNCs) and the organizational structures that facilitate such planning. We then discuss the potential impacts that adopting a participation exemption regime (i.e., a territorial tax system) along the lines proposed by Representative Camp could have on a U.S. MNC’s worldwide supply chain structure and financing arrangements. We compare the change in a corporation’s global accounting effective tax rate under the current U.S. worldwide tax system and four participation exemption options proposed by Representative Camp. Using a hypothetical set of facts representative of a U.S. multinational with highly mobile intellectual property income, we show that the options produce very different accounting effective tax rates and tax revenues received by the U.S. Treasury. We also point out potential tax planning strategies that could be employed pre- and post-effective date of the implementation of a participation exemption system that would change the expected revenue to be received during the transition to such a system.

Number of Pages in PDF File: 43

Keywords: international taxation, tax reform, territorial tax system

JEL Classification: H25, H26, M41, M48

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Date posted: February 5, 2014  

Suggested Citation

Donohoe, Michael P. and McGill, Gary A. and Outslay, Edmund, Back to the Drawing Board: The Structural and Accounting Consequences of a Switch to a Territorial Tax System (February 3, 2014). National Tax Journal, Vol. 66, No. 3, 2013. Available at SSRN: http://ssrn.com/abstract=2390357

Contact Information

Michael P. Donohoe (Contact Author)
University of Illinois at Urbana-Champaign - Department of Accountancy ( email )
1206 South Sixth Street
Champaign, IL 61820
United States
Gary A. McGill
University of Florida - Fisher School of Accounting ( email )
Warrington College of Business
PO Box 117166
Gainesville, FL 32611-7166
United States
352-273-0219 (Phone)
352-392-7962 (Fax)
HOME PAGE: http://warrington.ufl.edu/fsoa/faculty/facultyinfo.asp?WEBID=1132
Edmund Outslay
Michigan State University - Department of Accounting & Information Systems ( email )
270 North Business Complex
East Lansing, MI 48824-1034
United States
(517) 432-2912 (Phone)
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