Submission to Senate Committee on Finance International Corporate Tax Reform – Taxation of Accumulated Deferred Foreign Income

7 Pages Posted: 1 Feb 2014

See all articles by Jeffery M. Kadet

Jeffery M. Kadet

University of Washington - School of Law

Date Written: January 2, 2014

Abstract

The Baucus Discussion Draft on international tax reform includes a mechanism for taxing the accumulated foreign earnings of controlled foreign corporations as of the effective date that a new system for taxing foreign earnings is effective.

This letter suggests changes to make this aspect of the proposed tax reform both fairer for all taxpayers and more effective. As presently structured, new Code §965 applies a proposed 20% rate to those U.S.-based multinational corporations (MNCs) that have worked hard and aggressively to shift profits into zero and low-tax countries. We cannot be rewarding such behavior. We need new Code §965 to identify such MNCs and to apply to them the full 35% tax rate plus appropriate interest charges, allowing the lower favorable 20% rate to apply only to corporate taxpayers that have not been profit-shifters. The provisions of new Code §965, now applicable only to certain corporate shareholders, should also be extended to certain individual shareholders.

This is Submission 2 of 7 Comment Letters Provided to the Committee.

Keywords: unrepatriated earnings, foreign untaxed earnings, accumulated overseas earnings

JEL Classification: H21, H25, K34, E62

Suggested Citation

Kadet, Jeffery M., Submission to Senate Committee on Finance International Corporate Tax Reform – Taxation of Accumulated Deferred Foreign Income (January 2, 2014). Available at SSRN: https://ssrn.com/abstract=2388384 or http://dx.doi.org/10.2139/ssrn.2388384

Jeffery M. Kadet (Contact Author)

University of Washington - School of Law ( email )

William H. Gates Hall
Box 353020
Seattle, WA 98105-3020
United States

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