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
Restoring expensing for R&D, machinery, and equipment; extending better cost recovery to structures investment; and avoiding raising the corporate tax rate would create a stronger, pro-investment policy environment for the US economy.
44 min read
Bob Stack, an international tax expert, explores the implications of the EU’s adoption of Pillar Two and the potential for streamlining overlapping policies. He also addresses the issues that the US faces in global tax policy with the upcoming elections.
Supernormal profits are an important concept, but we should be wary of analysis that both defines supernormal profits very broadly and equates all supernormal profits with monopoly profits that can be easily taxed without negative economic effects.
23 min read
The flawed design of these windfall profits taxes has created problems in countries that implemented them.
4 min read
Rather than pursuing temporary policies, policymakers should implement long-term, pro-growth tax reforms that stimulate economic activity and incentivize energy diversification by supporting private investment through full expensing.
19 min read
Lawmakers should consider compliance costs—not just tax liabilities—when evaluating reforms to business income taxation.
22 min read
Pillar Two risks creating a more complex and unfair international tax system. It is inadvertently fostering new, opaque, and complex forms of competition, and policymakers should consider alternative approaches to creating a fairer international tax environment.
4 min read
How does living abroad impact the taxes an American has to pay? Unlike most countries that tax based on residency, the US employs citizenship-based taxation, meaning Americans are taxed on their global income regardless of where they reside.
Not every change in the Tax Cuts and Jobs Act simplified the tax code. However, the TCJA reduced compliance costs overall for individual filers, and allowing fundamental structural improvements to expire would make the tax code worse.
5 min read
The global tax deal and Pillar Two are shaking up the tax landscape worldwide, introducing a web of complexity and confusion.
While both President Biden and Vice President Harris aim their proposed tax hikes on businesses and high earners, key differences between their tax ideas in the past reveal where Harris may take her tax policy platform in the 2024 campaign.
6 min read
Puerto Rico, a US territory with a limited ability to set its own tax policies, will be the first part of the US to be substantially affected by Pillar Two, the global tax agreement that seeks to establish a 15 percent minimum tax rate on corporate income.
17 min read
As Hungary takes over the six-month rotating presidency of the Council of the European Union in the aftermath of the European elections, the relationship between tax policy and Europe’s competitiveness will be closely linked.
6 min read
The National Foreign Trade Council’s survey shows that the private sector recognizes the economic value of treaties as an instrument to increase tax certainty and decrease distortions.
3 min read
President Biden is proposing extraordinarily large tax hikes on businesses and the top 1 percent of earners that would put the US in a distinctly uncompetitive international position and threaten the health of the US economy.
19 min read
The government won in Moore. However, given the narrow opinion of the court and the reasoning in the Barrett concurrence and the Thomas dissent, it seems likely that future rulings under other facts and circumstances could favor taxpayers instead.
7 min read
23 European countries have implemented carbon taxes, ranging from less than €1 per metric ton of carbon emissions in Ukraine to more than €100 in Sweden, Liechtenstein, and Switzerland.
3 min read
Lawmakers should see 2025 as an opportunity to consider more fundamental tax reforms. While the TCJA addressed some of the deficiencies of the tax code, it by no means addressed them all.
8 min read
Get ready to hit the autobahn and explore the world of German taxes! We’ll navigate the complexities of Germany’s tax structure.
European Union Member States are in the process of implementing the global minimum tax in line with a directive unanimously agreed to at the end of 2022.
3 min read