Recent actions by the Organization for Economic Cooperation and
Development (OECD) and the G-20 industrialized nations have
targeted tax haven countries, focusing primarily on evasion issues.
The HIRE Act (P.L. 111-147) included a number of anti-evasion
provisions, and P.L. 111-226 included foreign tax credit
provisions. Some of these proposals, and some not adopted, are in
the American Jobs and Closing Loopholes Act (H.R. 4213); the Stop
Tax Haven Abuse Act (S. 506, H.R. 1265); draft proposals by the
Senate Finance Committee; two other related bills, S. 386 and S.
569; the Bipartisan Tax Fairness and Simplification Act (S. 3018);
and proposals by President Obama. Multinational firms can
artificially shift profits from high-tax to low-tax jurisdictions
using a variety of techniques, such as shifting debt to high-tax
jurisdictions. Since tax on the income of foreign subsidiaries
(except for certain passive income) is deferred until repatriated,
this income can avoid current U.S. taxes and perhaps do so
indefinitely. The taxation of passive income (called Subpart F
income) has been reduced, perhaps significantly, through the use of
"hybrid entities" that are treated differently in different
jurisdictions. The use of hybrid entities was greatly expanded by a
new regulation (termed "check-the-box") introduced in the late
1990s that had unintended consequences for foreign firms. In
addition, earnings from income that is taxed can often be shielded
by foreign tax credits on other income. On average very little tax
is paid on the foreign source income of U.S. firms. Ample evidence
of a significant amount of profit shifting exists, but the revenue
cost estimates vary from about $10 billion to $60 billion per year.
Individuals can evade taxes on passive income, such as interest,
dividends, and capital gains, by not reporting income earned
abroad. In addition, since interest paid to foreign recipients is
not taxed, individuals can also evade taxes on U.S. source income
by setting up shell corporations and trusts in foreign haven
countries to channel funds. There is no general third party
reporting of income as is the case for ordinary passive income
earned domestically; the IRS relies on qualified intermediaries
(QIs) who certify nationality without revealing the beneficial
owners. Estimates of the cost of individual evasion have ranged
from $40 billion to $70 billion. Most provisions to address profit
shifting by multinational firms would involve changing the tax law:
repealing or limiting deferral, limiting the ability of the foreign
tax credit to offset income, addressing check-the-box, or even
formula apportionment. President Obama's proposals include a
proposal to disallow overall deductions and foreign tax credits for
deferred income and restrictions on the use of hybrid entities.
Provisions to address individual evasion include increased
information reporting and provisions to increase enforcement, such
as shifting the burden of proof to the taxpayer, increased
penalties, and increased resources. Individual tax evasion is the
main target of the HIRE Act, the proposed Stop Tax Haven Abuse Act,
and the Senate Finance Committee proposals; some revisions are also
included in President Obama's plan.
General
Is the information for this product incomplete, wrong or inappropriate?
Let us know about it.
Does this product have an incorrect or missing image?
Send us a new image.
Is this product missing categories?
Add more categories.
Review This Product
No reviews yet - be the first to create one!
Welcome to Loot.co.za!
Sign in / Register |Wishlists & Gift Vouchers |Help | Advanced search
