Peter1469
09-15-2014, 06:22 PM
We talked about corporate inversion recently. Here is another article that offers easy solutions to this uniquely United States problem.
The U.S. is the only major country that levies corporate taxes on worldwide income. Everyone else taxes only the income earned in their country. Hence, other countries do not have to worry about their corporations following the American lead on tax inversions as in other countries the home country designation is meaningless. Any business earning money in the U.K., France, Germany, etc., owes that country the exact same tax bill regardless of where they claim to be incorporated.
Congress and the President should abandon any thought of legislation that stops tax inversions. My first rule of political economy is that people are always smarter than the government. There is zero chance that any law can be written that the lawyers and accountants working for major corporations, along with their investment bankers and legal advisors, cannot find a way around.
So if Congress and the President wish to stop tax inversions they have two options. First, they can pass corporate tax reform that changes our tax system to the same system the rest of the world uses: tax only earnings from American operations. That one simple change would stop the entire problem. Without an economic incentive, such mergers will only happen when they truly make business sense.
The U.S. is the only major country that levies corporate taxes on worldwide income. Everyone else taxes only the income earned in their country. Hence, other countries do not have to worry about their corporations following the American lead on tax inversions as in other countries the home country designation is meaningless. Any business earning money in the U.K., France, Germany, etc., owes that country the exact same tax bill regardless of where they claim to be incorporated.
Congress and the President should abandon any thought of legislation that stops tax inversions. My first rule of political economy is that people are always smarter than the government. There is zero chance that any law can be written that the lawyers and accountants working for major corporations, along with their investment bankers and legal advisors, cannot find a way around.
So if Congress and the President wish to stop tax inversions they have two options. First, they can pass corporate tax reform that changes our tax system to the same system the rest of the world uses: tax only earnings from American operations. That one simple change would stop the entire problem. Without an economic incentive, such mergers will only happen when they truly make business sense.