Daily Deduction

from the Tax Policy Center

Repatriation, Havens, and Tax Reform Abroad

By :: June 10th, 2014

A repatriation tax holiday? It’s expensive. The Joint Committee on Taxation estimates that such a holiday would cost $95.8 billion in revenue over the next decade,  though it would bring in about $19.6 billion over the first two years. Some lawmakers raised the idea of temporarily reducing US corporate income taxes on repatriated offshore profits to replenish the Highway Trust Fund. Bloomberg reports that as of earlier this year, 307 large US-based companies held a total of $1.95 trillion in profits outside the US, though some firms may not be waiting to bring funds back to finance US acquisitions.

When it comes to tax havens, the Union Jack is the new black. Reuters reports that while the Caribbean Islands or Switzerland used to be a favored home to reincorporated US companies seeking lower tax bills, legal changes in Britain have made the UK more attractive. The UK for the most part does not attempt to tax corporate profits earned in other countries. Seven US corporations have changed their corporate addresses to Britain and 12 others have tried over the past year.

India’s new Prime Minister wants to find and tax “black money.” Fresh off his victory in the world’s largest democratic vote, Narendra Modi has set up a team to find an estimated $2 trillion in hidden assets, or “black money.” That could translate into tax revenue of over $600 billion, according to an analysis by economics professor Arun Kumar of New Delhi’s Jawaharlal Nehru University.

Angola is updating a decades-old tax system. The southwestern African nation, recovering from a 27-year civil war that ended in 2002, wants to broaden and streamline tax collection and increase revenue. The Christian Michelson Institute’s new report suggests that fewer tax brackets and higher income tax rates on the nation’s wealthiest could increase Angola’s revenue and simplify  collection. Angola raised $1.4 billion last year in personal income taxes.

On the Hill today: House action on three extenders and ACA credits is scheduled for today. This afternoon the House is scheduled to begin its consideration of the Permanent S Corporation Built-in Gains Recognition Period Act of 2014 and America's Small Business Tax Relief Act of 2014. Also today, the House Ways and Means Subcommittee on Oversight will review the government’s ability to verify income and insurance information necessary for tax credits and subsidies under the Affordable Care Act.

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  1. Michael Bindner  ::  11:03 am on June 10th, 2014:

    The way to make repatriation holidays affordable is to increase the tax rate on dividends and capital gains so that the money that is passed through to investors is taxed appropriately.

    The British PM is a capitalist darling. Someone always is. The only way out of this problem is to force the business home on the nation where the CEO works. No more declaring it elsewhere.

    India’s PM is the oppossite of a capitalist darling. Let’s hope he finds the money without forcing business out of India – although the low wages make the latter unlikely.

    Let us hope Angola reforms in such a way to keep the capitalists around, but with a more socialist tax system.

    The debate and vote on the extenders in the House should be interesting. They are, to some extent, killing the goose that lays the golden eggs every year by making some of these permanent.

    It will be interesting to see what happens at the ACA hearing on using tax information to verify subsidies. Technically, it should not be hard to do. The turf is the question. Of course, having a household based system does not cover those of us who are not on our spouse’s insurance – or any other. Sometimes households need more than one subsidy.

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