Tax Bills and Offshore Money

The biggest US companies made a big bet for multiple decades. They stashed billions of dollars earned from company profits away from the US. This arrangement reduced the taxes. Profits were bolstered. If the Republican Party has its way with the tax bills making their way through the Senate and House, companies would be permitted to bring back almost three trillion dollars in profits back to the United States. They can do so at much-reduced rates of tax.

Present tax and the proposed package

As per present US tax laws, the US companies pay their taxes on worldwide profits at 35 percent. This percentage is the highest statutory rate among all countries in the world. This law, however, has a glaring exception: companies can defer taxes indefinitely on profits earned beyond the company borders. This is valid as long as such profits are not brought back into the United States.

Among the total tax overhaul package, the colloquially named repatriation provision is the most noticeable. Companies would be provided a permanent tax break amounting to half a trillion dollars. This will benefit companies like Google, General Electric, Apple, and Pfizer. Corporate America has claimed that approximately three trillion in total profits were generated in a number of places including Luxembourg, Bermuda, and Grand Canyon.

Safeguards

The proposed legislation installs a few terms and conditions against any future efforts to shift the profits away from the United States. A minimum tax abroad will be established on certain kinds of income. This will be about a minimum of 10 percent for the first many years in the version marketed by the Senate. This will result in the raising of taxes for many companies who have stashed their profits in other countries. It must also be said that the European regulators, along with their counterparts in other parts of the world, have sharpened their efforts when it comes to whipping down on profits being shifted out of their respective countries.

The Congressional Republicans and President Trump have provided the argument that it is much important to get the companies to bring back their money as it would be utilized to generate jobs. This outcome, however, did not happen during the previous tax break. President Trump was confident about the scheme, claiming that trillions of American dollars would come back to the United States. He said that this will be money which the companies currently cannot bring back.

Leave a Comment