The Tax Cuts and Jobs Act (TCJA) in 2017 took a new direction for the treatment of U.S. multinationals. Six significant reforms departed from the old system:
The U.S. no longer has a worldwide tax system for taxing corporate income. But it does not have a truly territorial system either. Instead, the U.S. now has a hybrid system with some worldwide taxation, without deferral, for certain foreign income because of GILTI and Subpart F and a tax on certain cross-border transactions.
Countries participating in the OECD Inclusive Framework’s negotiations on cross-border tax rules hope to reach an agreement by mid-2021. After negotiations stalled somewhat in 2020, there is hope that US Treasury Secretary Janet Yellen’s commitment to reaching an agreement will allow progress to be made this year.
The posts below include our research and analysis of policies related to cross-border tax rules, including Global Intangible Low Tax Income (GILTI), Foreign Derived Intangible Income (FDII), Base Erosion and Anti-abuse Tax (BEAT), and the Global Anti-base Erosion (GloBE) rules in the context of the OECD’s Inclusive Framework on Base Erosion and Profit Shifting (BEPS).
International Tax Rules Primer U.S. Tax Competitiveness Primer GILTI Primer FDII Primer Learn more with TaxEDU
Over the course of the last year, it has become clear that Democratic lawmakers want to change U.S. international tax rules. However, as proposals have been debated in recent months, there are clear divides between U.S. proposals and the global minimum tax rules.
5 min read
Leaders around the world are quickly moving to finalize an agreement on a global minimum tax in 2021, based on the so-called “Pillar Two” proposal from the OECD.
25 min read
The Biden administration’s international tax proposals would impose a 7.7 percent surtax on the foreign profits of U.S. multinationals, resulting in a net increase in profit shifting out of the U.S.
60 min read
The international corporate tax changes in President Biden’s tax plan would increase tax rates on domestic income more than on foreign income, resulting in a net increase in profit shifting out of the US, according to our Multinational Tax Model.
33 min read
Since only U.S. businesses pay the GILTI tax, not foreign businesses, it makes U.S.-based brands less competitive abroad. Whatever its intentions, GILTI is a flawed policy, and doubling down on it will hurt us abroad, and at home.
The Biden campaign and Senate Democrats identified changes to GILTI that would increase the taxes U.S. companies pay on their foreign earnings. Rather than tacking on changes to a system that is currently neither fully territorial nor worldwide, policymakers should evaluate the structure of the current system with a goal of it becoming more, not less, coherent.
51 min read
As lawmakers today look for ways to boost American industry and reduce costs for consumers, they should pay attention to the mountains of evidence that the Trump-Biden tariffs have harmed American consumers and businesses.
6 min read
More often than not, by looking at Germany’s tax code as an example, G7 countries can improve the stability of their revenues and the lives of those they represent.
5 min read
The legislation put forward by Democratic members of the House of Representatives would reverse many of the 2017 reforms while increasing burdens on businesses and workers.
2 min read
The Index provides lessons for policymakers when they are thinking of ways to remove distortions from their tax systems and remain competitive against their peers. The further up a country moves on the Index, the more likely it is to have broader tax bases, relatively lower rates, and policies that are less distortionary to individual or business decisions. Going the other way reveals a policy preference for narrow tax bases, special tax policy tools, and rules that make it difficult for compliance.
5 min read
A well-structured tax code (that’s both competitive and neutral) is easy for taxpayers to comply with and can promote economic development while raising sufficient revenue for a government’s priorities.
40 min read
If Congress wants to reduce profit shifting, the proposal from the Ways and Means Committee is not an effective tool for this.
7 min read
In general, the effective tax rates on the foreign profits of U.S. multinationals are not that low relative to the U.S. tax rate, contrary to popular rhetoric.
7 min read
Over the course of the last year, it has become clear that Democratic lawmakers want to change U.S. international tax rules. However, as proposals have surfaced in recent weeks, there are clear divides among various proposals.
5 min read
As Congress prepares to rewrite some portion of the current international tax rules, it’s hoped that they are able to achieve a more principled approach and one that is not so subject to obfuscation and misinterpretation.
7 min read
As lawmakers are reviewing international tax rules and determining what to change and update, they should pay attention to the way GILTI interacts with profitable and loss-making companies.
5 min read
What is the OECD Global Tax Deal and what impact will it have on U.S. and foreign multinationals? Learn about the OECD’s efforts to prevent companies from shifting profits—including Pillar 1, which is focused on changing where companies pay taxes, and Pillar 2, which would establish a global minimum tax.
While arcane, expense allocation rules are relevant to current debates because they result in a heavier tax burden for U.S. companies under current law than the recently negotiated global minimum tax proposal.
10 min read
There are many ways the U.S.’s international tax rules could be changed, reformed, improved, or worsened. Reflexively jacking up taxes on U.S. multinationals does not necessarily accomplish the goal of reducing or eliminating profit shifting, and it would in fact worsen it.
6 min read
This interaction between the U.S. proposals and those that may be put into law in foreign jurisdictions should give lawmakers caution when evaluating the revenue potential of changes to GILTI.
7 min read
Changes to international tax rules are likely on the way, and it is therefore important for lawmakers to understand how various reform options would impact U.S. tax burdens on multinational companies. Moreover, policymakers should also recognize the need for prudent policies that do not put U.S.-based multinationals at a competitive disadvantage or severely curtail investment and hiring.
9 min read
The Biden administration’s international tax proposals would impose a 7.7 percent surtax on the foreign profits of U.S. multinationals, resulting in a net increase in profit shifting out of the U.S.
60 min read
While the Biden administration has certainly proposed to remove FDII, it is not clear that Congress is on board with that approach.
5 min read
The Biden administration has proposed to significantly increase the tax burden on foreign income through a policy known as Global Intangible Low-Tax Income (GILTI). While the administration’s rhetoric focuses on doubling the tax rate on GILTI from 10.5 percent to 21 percent, this is less than half the story.
5 min read
The United Nations (UN) recently released its annual “World Investment Report,” which shows the dramatic fall in global foreign direct investment (FDI) caused by the COVID-19 crisis.
3 min read