Unintended Consequences: How U.S. Tax Law Encourages Investment in Offshore Tax Havens

71 Pages Posted: 1 Oct 2010 Last revised: 15 Jan 2011

David S. Miller

Proskauer; Proskauer Rose LLP

Date Written: October 4, 2010

Abstract

The Internal Revenue Code is riddled with features that allow U.S. taxpayers to reduce their federal tax liability by operating through tax haven companies. Some of these provisions are historic anomalies. Others are better understood as inadvertent loopholes than considered legislative grace. Some incentives are indeed intentional.

The paper catalogues the many ways that U.S. federal and state tax law encourages taxpayers to operate through foreign tax haven companies to reduce their tax liabilities, and attempts to explain the history and policy underlying the rules. The paper then offers a number of suggestions to eliminate the inadvertent incentives that encourage U.S. taxpayers to form foreign corporations and operate through them solely for tax purposes.

Keywords: income tax

JEL Classification: H20, H21, H23, H24, H25, H26

Suggested Citation

Miller, David S., Unintended Consequences: How U.S. Tax Law Encourages Investment in Offshore Tax Havens (October 4, 2010). Available at SSRN: https://ssrn.com/abstract=1684716 or http://dx.doi.org/10.2139/ssrn.1684716

David S. Miller (Contact Author)

Proskauer ( email )

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New York, NY 10036-8299
United States

Proskauer Rose LLP ( email )

11 Times Square
New York, NY 1036
United States
(212) 969-3006 (Phone)
(212) 969-3006 (Fax)

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