Abuses and Penalties of a Corporate Tax Inversion
There is a serious problem in international taxation today. Many United States (U.S.) multinational corporations have moved abroad to take advantage of a lower tax rate in a foreign country. As a consequence, the tax base in the U.S. has been seriously eroded. This practice is known as “corporate ta...
| Main Authors: | , , |
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| Format: | Article |
| Language: | English |
| Published: |
MDPI AG
2019-01-01
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| Series: | International Journal of Financial Studies |
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| Online Access: | http://www.mdpi.com/2227-7072/7/1/5 |
| _version_ | 1818584660810137600 |
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| author | James G. S. Yang Leonard J. Lauricella Frank J. Aquilino |
| author_facet | James G. S. Yang Leonard J. Lauricella Frank J. Aquilino |
| author_sort | James G. S. Yang |
| collection | DOAJ |
| description | There is a serious problem in international taxation today. Many United States (U.S.) multinational corporations have moved abroad to take advantage of a lower tax rate in a foreign country. As a consequence, the tax base in the U.S. has been seriously eroded. This practice is known as “corporate tax inversion”. This paper discusses the abuses and penalties of this phenomenon. It is rooted in some deficiencies in the U.S. tax law. This paper points out that the U.S. has the highest corporate tax rate in the world. It imposes tax on worldwide income. It permits deferral of tax on foreign-sourced income until dividends are repatriated back to the U.S. As a result, it creates tax loopholes. This paper reveals six actual cases of corporate tax inversion. This practice has triggered the Congress to enact §7874, the Internal Revenue Service (IRS) to issue Notices IR 2014-52 and IR 2015-79, and the U.S. Treasury Department to promulgate TD 9761. This paper investigates some details of these penalties. This paper further demonstrates an example in determining the amount of tax savings by engaging in a corporate tax inversion. It also offers many strategies. |
| first_indexed | 2024-12-16T08:24:43Z |
| format | Article |
| id | doaj.art-565c36430b9a40758af08fc5186b5600 |
| institution | Directory Open Access Journal |
| issn | 2227-7072 |
| language | English |
| last_indexed | 2024-12-16T08:24:43Z |
| publishDate | 2019-01-01 |
| publisher | MDPI AG |
| record_format | Article |
| series | International Journal of Financial Studies |
| spelling | doaj.art-565c36430b9a40758af08fc5186b56002022-12-21T22:38:01ZengMDPI AGInternational Journal of Financial Studies2227-70722019-01-0171510.3390/ijfs7010005ijfs7010005Abuses and Penalties of a Corporate Tax InversionJames G. S. Yang0Leonard J. Lauricella1Frank J. Aquilino2Department of Accounting & Finance Montclair, Montclair State University, Montclair, NJ 07043, USADepartment of Accounting & Finance Montclair, Montclair State University, Montclair, NJ 07043, USADepartment of Accounting & Finance Montclair, Montclair State University, Montclair, NJ 07043, USAThere is a serious problem in international taxation today. Many United States (U.S.) multinational corporations have moved abroad to take advantage of a lower tax rate in a foreign country. As a consequence, the tax base in the U.S. has been seriously eroded. This practice is known as “corporate tax inversion”. This paper discusses the abuses and penalties of this phenomenon. It is rooted in some deficiencies in the U.S. tax law. This paper points out that the U.S. has the highest corporate tax rate in the world. It imposes tax on worldwide income. It permits deferral of tax on foreign-sourced income until dividends are repatriated back to the U.S. As a result, it creates tax loopholes. This paper reveals six actual cases of corporate tax inversion. This practice has triggered the Congress to enact §7874, the Internal Revenue Service (IRS) to issue Notices IR 2014-52 and IR 2015-79, and the U.S. Treasury Department to promulgate TD 9761. This paper investigates some details of these penalties. This paper further demonstrates an example in determining the amount of tax savings by engaging in a corporate tax inversion. It also offers many strategies.http://www.mdpi.com/2227-7072/7/1/5corporate inversioncontrolled foreign corporationinternational taxationU.S.-sourced incomeforeign-sourced incomemergerworldwide incometerritorial income |
| spellingShingle | James G. S. Yang Leonard J. Lauricella Frank J. Aquilino Abuses and Penalties of a Corporate Tax Inversion International Journal of Financial Studies corporate inversion controlled foreign corporation international taxation U.S.-sourced income foreign-sourced income merger worldwide income territorial income |
| title | Abuses and Penalties of a Corporate Tax Inversion |
| title_full | Abuses and Penalties of a Corporate Tax Inversion |
| title_fullStr | Abuses and Penalties of a Corporate Tax Inversion |
| title_full_unstemmed | Abuses and Penalties of a Corporate Tax Inversion |
| title_short | Abuses and Penalties of a Corporate Tax Inversion |
| title_sort | abuses and penalties of a corporate tax inversion |
| topic | corporate inversion controlled foreign corporation international taxation U.S.-sourced income foreign-sourced income merger worldwide income territorial income |
| url | http://www.mdpi.com/2227-7072/7/1/5 |
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