The Problem Of Taxation Of International Businesses

However, the companies only have to pay the U.S. tax for foreign revenues once they bring the profits back to the United States. As a result of these current tax laws, U.S. companies that seek to avoid high corporate tax rates hold their foreign earned profits overseas. “It just makes no sense to pay a substantial tax on it,” said Joseph Kennedy, a senior fellow at the Information Technology and Innovation Foundation (Rubin, R.). It is far too easy for an IT corporation to create a patent in a foreign country and direct revenue to a corporation within that country, thus avoiding the much higher U.S. tax rates. According to Joint Committee on Taxation estimates, the lost revenue is increasing over time as corporations find even more creative ways to make their U.S. profits look like offshore income (Richards, K., & Craig, J.). As result, multinational American corporations have as much as $2 trillion held in overseas subsidiaries and if brought into the United States with the current tax laws, the federal government could benefit by nearly $50 billion per year.

The reason tax havens exist, is for the same reason why they existed 50 years ago; to attract money and investments from around the world. When multibillion dollar corporations put billions of dollars in the banking system, it gives the local economy of that country a little boost. That stored in the banks can now be lent out to people to buy homes, cars, or even start a

The International Regulatory Services (IRS), is charged with the responsibility of administering and governing the USA federal regulations related to taxation. However, the US tax regulatory board is presently facing several issues that undermine the effectiveness of the relevant tax laws. The main aim of this paper is to discuss the IRS ethical issues and explain how to avoid them from an ethical and government point of view.

Illegal money flows pose a massive challenge to all societies, rich and poor. Tax evasion undercuts the financing of public services and distorts the economy. Financial crime fuels and facilitates criminal activities from drug trafficking and human smuggling to theft and fraud. Corruption corrodes public institutions and warps decision-making. Terrorist finance sustains organisations that spread death and fear. The scale of such illicit money flows is staggering. Depending on the country, tax evasion robs the public sector of anywhere between 6% and 70% of what tax authorities estimate they should be collecting. Global financial crime flows are estimated to amount to over US$2tr per year. Corruption amounts to another US$1tr. Most of the effort

The U.S. Taxation of Foreign Corporations has set substantial guidelines for which dictate the regulations by which taxation is initiated. It is no secret that organization are constantly looking for new ways to ‘deduct’ their bottom line, reducing their tax liabilities. The U.S. has been diligent in ensuring that all considerations are covered, however from time to time issues arise that challenge the system in its current status. This papers will strive to answer the question can a foreign taxpayer argue substance over form? In many cases this is a taxpayers catch-22. The basis of the law allows for substance and form allows room for individual interpretation. There are

While taxing multinational corporations, the U.S. and other foreign governments have faced many problems. Treaties and laws were set up to avoid double taxation for these multinational corporations but instead of avoiding double taxation it delineated a way for tax avoidance. With the old laws, these multinational corporations were allowed to take a tax advantage. They were allowed to move their business revenues, which permitted them to go into a lower tax bracket and be taxed at a “tax haven”. This allowed them to claim less tax and be more profitable. For example, foreign-owned corporations pay less tax if operating in the U.S. rather than elsewhere and vice versa. This creates a tax advantage for these corporations because these companies try to “transfer” their prices. Their attempt is to shift income away from the U.S. and deduct expenses toward the U.S. This would create a lower taxable income for those companies that are foreign-owned. Though this was not the intention of the IRS. The IRS hoped to avoid double taxation for these multinational corporations, because then they would have to pay tax in the country they are subsiding and the country they are doing business in. However, it is important to note that the IRS has tried to analyze almost every transaction of multinational companies in order to see if these related party transactions are in arm’s length or not. However even with these attempts to analyze every transaction, some were still using the laws to

As stated in the law of the United States, which sets on a residence basis, all the profits from the foreign subsidiaries of American multinational firms have to be taxed at the corporate tax rate. As a result, the tax code creates a strong incentive for firms to retain these earnings in their subsidiaries aboard. Grubert and Mutti (2001) argue that the decisions on repatriations are highly sensitive to tax consideration. However, these income tax payments incurred can be deferred indefinitely until repatriated to the United States. In order to avoid international double taxation, U.S. multinational firms are entitled to get tax credits to only pay the difference between what they have paid at the tax rate in host country and the tax

In the analysis of the proposals put forward by UK Government (Department for Business, Innovation & Skills (BIS) paper on ‘Transparency & Trust) and other intergovernmental agencies such as the Financial Action Task Force (Guidance on Transparency and Beneficial Ownership Recommendations 24 and 25) , G20 (High-Level Principles on Beneficial Ownership) and the European Commission (Fourth Money Laundering Directive) to increase the transparency of beneficial ownership of legal structures, some core principles have been highlighted with a view to protecting the integrity of the financial system. These principles stressed the need to understand who ultimately own companies and other legal arrangements by mandating that countries maintain a

Voluntary disclosure is carried out by Ernst & young, Decembers 4th, 2014 where the Italian parliament introduced a new voluntary disclosure law. This new law simplifies the overall procedure for taxpayers therefore there is a decrease in the number of assets to disclose ‘’Two types of disclosures coincide, it is possible to economize on the process on setting mandatory disclosures’’ (Dye A., 1990). Further to this the ATO also announced a ‘Project DO IT Disclose Offshore Income Today’ which ‘provides taxpayers with the opportunity to voluntary disclose to voluntarily disclose unreported foreign income and assets before these are identified by ATO activity’’ (EY Tax alert, 2014). However, EY has been criticised for ‘’Ernst & Young taking no steps to question or challenge the non-disclosure by Lehman of its use of $50bn (€36.32bn, £32.99bn) of temporary, off-balance- sheet transactions that flattered its financial position’’

The degree to which tax evasion and money laundering have been investigated in recent years, the validity of having such secrecy has been questioned again. In 2003 the European Union reached an agreement to phase out banking secrecy, but in fears that the clients will withdraw funds and deposit them in Switzerland, “the three member nations that have secrecy laws, Belgium, Luxemburg, and Austria, would be permitted to keep those laws so long as Switzerland does” (Meller & Langley, 2003). The EU countries, banks will be held to withholding a 15% tax on the earnings of account holders.

(Labyle and Long 2009 as cited by Bures, Ten Years of EU’s Fight against Terrorist Financing: A Critical Assessment 2015)”

The actions of multinational corporations (MNCs), which derive from their morally dubious goals, may be completely legitimate within a capitalist society. One of these actions that will be examined in this essay is the use of tax havens, as a way of avoiding higher tax liability. This paper will utilise the case study of Apple’s tax avoidance, in examining the legitimation of a company’s goal of profit maximisation, a goal that is against the moral/social consensus

Moreover, there has been a concerted effort to converge countries’ reporting standards. But despite this effort substantial differences in countries’ reporting regulation and practices remain. This paper explores these differences and the reasons why they exist as well as why they are likely to persist in the foreseeable future. My analysis and comparison are conducted at a fairly high level to emphasise that reporting regulation is a part of a country’s broader institutional framework. Throughout the paper, I give special emphasis to enforcement issues because of two related reasons.

Offshore banking is the action of having a bank account outside of the country of residence. Typically it offers many advantages like greater privacy, low or no taxation, easy access to deposits and protection against local, political, or financial instability, but has also been popular for its use of illegal practices like money laundering and tax evasion. Those against offshore banking view its illegal reputation and predict that it will only cause further damage like providing fund for terrorism or holding underground economies. However other experts believe that offshore banking is a safe haven for depositors and has had a substantial impact on the international economy in today’s world.

Tax compliance has been a topic of great interest to Revenue authorities especially in the developed countries. Hostility towards tax compliance is an age old problem. “Taxes are considered a problem by everyone. Not surprising, taxation problems date back to the earliest recorded history” (Taxworld Organization, 1999).