Taxation of Multinational Businesses

How Controlled Foreign Corporation Rules Look Around the World: Netherlands

The Dutch tax system is characterized by its simplicity and the attractiveness to investors. With the incorporation of CFC rules, the Dutch government protected its tax base from erosion and profit shifting. The Netherlands is facing a whole series of adjustments that would create a more complex system adapted to the international standards recommended by the OECD and adopted by the European Union Council. When revising the rules authorities must be mindful about not making the system more complex and to avoid increasing the compliance burden in the country.

How Controlled Foreign Corporation Rules Look Around the World: Japan

Japan is a country with a complex multilayer system to calculate the corporate income tax. As a consequence, the CFC income determination has evolved as a complex set of rules to complement the corporate income tax. It would be a great idea for the Japanese authorities to address a simplification of the rules to facilitate the entry of new capital investments into their economy.

The Economics Behind Thin-Cap Rules

Thin-Cap Rules in Europe

The Challenges of Consensus in the Digital Economy on the International Tax Treaty System

How Controlled Foreign Corporation Rules Look Around the World: United States of America

The United States was the first country to enact CFC rules, and it is probably the country with the most complex set of rules that will be presented in this blog series. The rules determine control using a combined ownership test: one for the corporation and the other at the shareholder level. The assessable income under the rules is generally passive income but the amount of foreign income subject to U.S. tax has expanded with the adoption of GILTI.

Summary and Analysis of the OECD’s Work Program for BEPS 2.0

From a broad standpoint, agreement at the OECD will require countries to give up some measure of their own tax sovereignty on policies they have designed to minimize the distortionary effects of the corporate income tax. Over the years tax competition has led to some countries adopting policies that are attractive to businesses because they have a more neutral rather than distortionary approach to taxing corporate income. This project could directly undermine that progress by introducing new levels of complexity and distortion that would ultimately have a negative impact on global trade and growth.

CFC Rules Around the World

Our paper undertakes a review of controlled foreign corporation (CFC) rules around the world as a contribution to the global discussion over the possible expansion of existing anti-base erosion CFC regimes or the potential adoption of a minimum tax.

Ripple Effects from Controlled Foreign Corporation Rules

Governments should recognize these trade-offs as they implement controlled foreign corporation (CFC) rules or change their tax policies in ways that increase taxes on foreign subsidiaries.

Putting the Pieces Together on BEPS

Taxes matter for decisions to be made by businesses, individuals, and families, and it is important for policymakers to understand that rules can be designed to be neutral rather than distortionary.

Anti-Base Erosion Provisions and Territorial Tax Systems in OECD Countries

The U.S. decision to adopt a territorial tax system is certainly an improvement over having a worldwide system. However, in moving to a territorial system some of the new features created with the TCJA increased the complexity of the system.

Tax Avoidance Rules Increase the Compliance Burden in EU Member Countries

Tax Foundation Response to OECD Public Consultation Document: Addressing the Tax Challenges of the Digitalization of the Economy

Though the challenges to international tax policy are many, the OECD has a chance to work toward a system that creates fewer distortions and negative economic effects than the current one. However, given the policies on the table, it will certainly take quite an effort to avoid further complexity of international tax rules that creates challenges to global trade and economic prosperity.

What Happens When Everyone is GILTI?

Secretary Mnuchin, Finance Minister Le Maire, and other tax policy leaders should encourage the OECD and their own research staff to perform serious economic analysis on the alternatives for changing international tax rules before moving forward. It would be quite unfortunate for the world to learn the wrong lessons from U.S. tax reform.

Ready to go on BEPS 2.0?

A Hybrid Approach: The Treatment of Foreign Profits under the Tax Cuts and Jobs Act

The Tax Cuts and Jobs Act moved the U.S. toward more of a territorial corporate tax system used by most other OECD countries. However, the U.S. law contains key differences in the treatment of foreign profits.

Competitiveness Impact of Tax Reform for the United States

U.S. taxes on new business investment are uncompetitive globally. While corporate tax rate reductions would have a significant impact on competitiveness, expensing proposals currently being considered would add much more grease to make the wheels turn in the U.S. economy.

How a Destination-Based Tax System Reduces Tax Avoidance

The House GOP’s Destination-Based Cash Flow Tax, Explained

Second Debate Marred by Protectionist Rhetoric