Submission to Senate Finance Committee - Taxation of Accumulated Deferred Foreign Income

Abstract

International tax reform proposals all suggest some transition from the present deferral system to some other system. As an integral part of that transition, it is expected as well that there will be some taxation on all “accumulated deferred foreign income” existing as of the transition date.

This submission suggests two administratively workable mechanisms by which a favorable lower-then-35% tax rate can be appropriately applied to accumulated deferred foreign income that was earned through real business activities conducted outside the U.S., consistent with the Congressional intent of the current deferral tax system. On the other hand, any such accumulated deferred foreign income that has resulted from profit shifting activities should be taxed at the full 35%, including an interest charge.

Keywords: International Tax, Corporate Tax Reform, Tax Reform

JEL Classification: H21, H25, K34, E62