Document Type
Article
Publication Date
1-13-2019
Journal / Book Title
International Journal of Financial Studies
Abstract
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.
DOI
https://doi.org/10.3390/ijfs7010005
MSU Digital Commons Citation
Yang, James G.S.; Lauricella, Leonard J. Professor; and Aquilino, Frank J., "Abuses and Penalties of a Corporate Tax Inversion" (2019). Department of Accounting and Finance Faculty Scholarship and Creative Works. 147.
https://digitalcommons.montclair.edu/acctg-finance-facpubs/147
Published Citation
Yang, James GS, Leonard J. Lauricella, and Frank J. Aquilino. "Abuses and penalties of a corporate tax inversion." International Journal of Financial Studies 7, no. 1 (2019): 5.
Included in
Accounting Commons, Benefits and Compensation Commons, Business Administration, Management, and Operations Commons, Business Analytics Commons, Business Law, Public Responsibility, and Ethics Commons, Corporate Finance Commons, Finance and Financial Management Commons, Hospitality Administration and Management Commons, International Business Commons, Other Business Commons, Portfolio and Security Analysis Commons, Real Estate Commons, Recreation Business Commons, Strategic Management Policy Commons, Taxation Commons