Repatriation Tax: Are We Churchill or Chamberlain?
8 Pages Posted: 10 Oct 2014
Date Written: September 22, 2014
Under current law, earnings of a foreign subsidiary are not subject to tax until they are repatriated. At repatriation, the U.S. parent pays 35 percent corporate tax, less foreign tax credits. A tax on repatriation has no effect on repatriations, by mathematical law, if the tax remains. If the United States reduces or forgives the tax in the foreseeable future, U.S. corporations will delay repatriation to take advantage of the reduction. This project proposes an increase in tax on repatriation after a short window during which the 35 percent tax, less foreign tax credits, will remain. The increase will induce corporations to repatriate their foreign earnings within the window to take advantage of the relatively generous 35 percent rate.
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