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Transforming the USA into the USSA is only going to happen if walls are erected to keep capitalists in and smaller states are roped into a global union with America calling the shots.
Because anyone who works in tax, or knows tax, knows that the rules won't actually work as a minimum tax; they will just be an extra tax.
For example, the Trump rule called "GILTI", which was actually not a tax cut but a payfor for some of the other cuts, was billed as a 10.5% minimum tax. They said "as long as you pay more than 13.125% in foreign taxes, you won't have an extra tax". However, when the accountants sat down to apply it you had companies with very high tax rates still paying up to an additional 10.5% tax on their foreign income.
It's insane- I work at a company that has a very high foreign tax rate because it does business in high tax jurisdictions like France, yet because of this obscure area in the code called "expense apportionment", it is still subject to additional tax. So 32% tax in France is not enough to satisfy the "minimum tax"; the IRS takes another couple percent.
And that's a republican rule! The scary thing is that the democrats are saying that this isn't enough for them, they want higher US taxes on our already heavily-taxed French income. They call GILTI a "gift" to businesses. We paid no additional US tax on our French income before GILTI- if this were a gift, we'd politely decline.
So this 15% global minimum tax is just going to be a disaster. Even really abusive companies often have effective rates higher than 15%, so they wouldn't be pushing it unless they knew that it would result in additional tax revenue.
Lastly, it's a jerk move. The Americans come to the world stage and say "our tax rate is roughly the same as the average developed nation (21% plus approx 4% state = 25%), but we want to raise our tax rate and we don't want other countries to look better than us, so let's all raise our taxes". And "hey Ireland and Singapore- we don't like that your economy is growing due to your business-friendly, competitive tax environment, so we're going to band together and make sure that you aren't as attractive as you once were."
Most companies blend high and low tax jurisdictions to get their rate down. The new GILTI proposals are even more harsh, which want to double the rate to 21% from 10.5% by getting rid of the section 250 deduction. They also want to calculate country by country rather than on a consolidated basis to prevent netting. However, are you sure that your company isn’t getting U.S foreign tax credits for the section 902 taxes paid in France? Your company should be getting an 80% Reduction with the FTC. Also, there’s certain elections under GILTI for the “high tax exemption”. Ie controlled foreign corporations that are within 90% of the 21% rate or 18.9%.
Transforming the USA into the USSA is only going to happen if walls are erected to keep capitalists in and smaller states are roped into a global union with America calling the shots.
Don’t worry, that’s in the Biden proposal too. The BEAT tax would be replaced with SHIELD. “Stopping harmful inversions and ending low-taxed developments”. With a global minimum to trap any companies trying to run.
The goal of this is to discourage companies from moving their nominal country of business to places that have low, or no, taxes. For example, Microsoft, Apple, and other tech companies have transferred ownership of much of their intellectual property to companies incorporated in Ireland, which has a much lower tax rate than the US, UK, etc. Those Irish companies charge huge dollars for other subsidiaries to use the IP, lowering the taxes paid to the US, with a resulting windfall to the companies, even though nothing actually changes in the business.
How does this plan actually prevent that, though? If not Ireland, it'll be another country. And Ireland has fair taxes.
How does this plan actually prevent that, though? If not Ireland, it'll be another country. And Ireland has fair taxes.
Many of the traditional havens are coming under fire with look thru provisions and being black or grey listed. The shelf life on Bermuda, Cayman , Luxembourg structures are coming under strain. Ireland is a popular IP stronghold, but again they’re already at 12.5% so the 15% minimum tax would only be a slight increase in tax compared to the actual low or no tax jurisdictions. And that’s the point of a minimum. If you move to a no or low tax jurisdiction with profits, they’ll be hit at the 15% rate anyways by the U.S or who ever.
Ie the potential for OECD pillar 1 and 2, and the DAC 6 regulations make it harder and harder to plan out of cross border taxes.
It’s amazing that so many people are against the US attempting to stop firms from taking advantage of global tax structures and attempting create a level playing field. You guys understand that these firms are selling products in the US, then recognizing the revenue overseas to avoid paying taxes in the US. Why are we against this?
Because it is pure idiocy. Makes products more expensive.
Also encourages companies to relocate to countries that won't go along with this - such as China or most of the world.
It does not encourage companies to relocate. It literally gets rid of the relocation tax advantage. It’s the opposite of what you describe above. Where did you study corporate tax strategy?
Most companies blend high and low tax jurisdictions to get their rate down. The new GILTI proposals are even more harsh, which want to double the rate to 21% from 10.5% by getting rid of the section 250 deduction. They also want to calculate country by country rather than on a consolidated basis to prevent netting. However, are you sure that your company isn’t getting U.S foreign tax credits for the section 902 taxes paid in France? Your company should be getting an 80% Reduction with the FTC. Also, there’s certain elections under GILTI for the “high tax exemption”. Ie controlled foreign corporations that are within 90% of the 21% rate or 18.9%.
Yep, after 861 our FTC is so low that we are hurt more by the inclusion from the gross-up than helped by what little FTC is leftover. We end up deducting so that we can have at least a little benefit from our branch taxes. We are in a high revenue but low margin business and we have lots of headquarters costs and interest expense. We employ tens of thousands of Americans and have an effective rate above the US statutory rate yet we get hit hardest by the "anti-abuse" rules because of how poorly they are designed. Every attempt to take down the software companies fails and hits us back harder, because we have physical assets that can't move easily (contrary to Biden's condemnation of QBAI in GILTI), unlike software companies.
High tax exemption was the only saving grace for us, but now the democrats have locked on to that one as "abusive" (even though the abusers elect not to use it since they like their high tax FTCs to offset their low tax income) and plan to remove it, hopefully not before 2022 but they can if they want to since it's a reg and not in the code.
Last edited by NYCresident2014; 06-09-2021 at 11:58 AM..
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If not Ireland, it'll be another country. And Ireland has fair taxes.
