I recently pondered whether the widely anticipated federal tax reform effort would include a corporate integration proposal from the Senate Finance Committee. That post presented the rationale for eliminating – or at least minimizing – the double taxation of corporate profits. It also outlined how a hypothetical partial dividends paid deduction might be structured.
Tax Analysts Blog
Robert Goulder is senior tax policy counsel with Tax Analysts. He previously served as editor in chief of Tax Analysts’ international publications. He coordinated coverage of international tax issues for Tax Analysts' Tax Notes International, Worldwide Tax Daily, and Worldwide Tax Treaties publications. Goulder practiced law in Virginia and the District of Columbia before joining Tax Analysts in 1999. During that time, he worked at the law firms Jones Day and Bayh Connaughton & Malone. He holds a BBA from the University of Michigan and a JD from George Washington University. He also worked at the U.S. Tax Court and did postgraduate course work in the tax LLM program at Georgetown University Law Center.
There’s no shortage of lofty ambitions when it comes to tax reform. Among the list of aspirational goals is the concept of corporate integration—that is, rationalizing the treatment of corporations and their shareholders in a way that mitigates the double taxation of business profits. Doing so would make our tax code more neutral and reduce distortions such as the bias in favor of debt financing.
In case you missed it, the border-adjustable tax officially got the boot. Don’t feel bad if you were among those intrigued by the House GOP blueprint for tax reform. The proposal enjoyed a good run, and served as a useful tutorial on foreign currency adjustments.
Will tax reform necessarily contribute to economic growth? It’s tempting to answer with a resounding yes, but the better response is more cautious. The outcome depends on the details, suggesting that stakeholders would do well to manage their expectations.
The typical U.S. citizen is rightfully concerned about how much tax they pay, but their interest in the details of the tax code extends only so far. Broach the intricacies of transfer pricing and most people’s eyes immediately glaze over. This presents a challenge to proponents of tax reform legislation.
Election-year pandering is conducive to myopic tax proposals. That’s evident right now in France, which will hold its first round of national elections on April 23. Three of the tax ideas being put forward are worthy of further discussion. Spoiler alert: I don’t care for any of them.
Some mysteries are better left unresolved. Did FDR know in advance about Pearl Harbor? Did Lee Harvey Oswald act alone? Was Tony Soprano bumped off in that Jersey diner? We’ll never know. The tax community is fixated on a mystery of its own, and it’s a genuine cliffhanger.
I’ve previously opined that Treasury Secretary Steven Mnuchin, whatever his other talents, is not a tax guy. That was in the context of his bizarre utterance on reciprocal taxation. (The jury is still out as to whether he was referring to an origin-based VAT or a retaliatory tariff regime disguised as a corporate tax. Neither is good policy.) The latest statement from Mnuchin, that he thinks tax reform will be easier than healthcare, is equally dubious. He made the comment March 24 at a policy forum in Washington hosted by Axios Media :
Another week gone by and we’re still no closer to knowing whether President Trump will throw his support behind the tax reform blueprint offered by House Republicans. Trump’s address to a joint session of Congress failed to shed any new light on the matter. Likewise, Treasury Secretary Steven Mnuchin didn’t clarify things when the topic came up during a recent television interview.
There’s a school of thought in Washington that if something as complicated as tax reform is going to pass the House and the Senate, it must be rammed through the legislative process with great haste. Otherwise the opposition forces will have time to gather and strategize. “Delay means death,” the saying goes. One gets the sense that the destination-based cash flow tax (DBCFT) could fall victim to this adage.
Valentine’s day notwithstanding, this week was short on any love for tax reform. It began with visitors from the Great White North. Canadian Prime Minister Justin Trudeau had a sit down with President Trump at the White House. The two leaders talked about cross-border trade and Trump’s desire to “tweak” NAFTA. They didn’t specifically discuss tax reform, but members of Trudeau’s cabinet held meetings with their U.S. counterparts and voiced displeasure with the House GOP tax reform blueprint, specifically the border adjustment. Not a surprise considering much of Canada’s economy depends on trade with the United States.
To say that House Speaker Paul Ryan is jazzed about tax reform legislation is an understatement. During his recent television interview on the PBS NewsHour, Ryan’s expression changed markedly once the subject matter shifted from President Trump’s tweeting habits to rewriting the Internal Revenue Code. The mention of the House’s “Better Way” tax reform blueprint produced a smile reminiscent of a kid in a candy store.
Does Donald Trump secretly covet a VAT? This is a reasonable question, judging from Trump’s Twitter activity and other public statements. On multiple occasions the president-elect has asserted that other countries’ VAT regimes function as a trade barrier that favors our foreign competitors and punishes U.S. businesses that export into overseas markets.
If you are friends with any corporate tax attorneys, kindly forgive them their grumpiness. They get a pass right now. That’s because the government recently dropped an abnormally dense set of income tax regulations on their desks – the ones dealing with debt recharacterization under Internal Revenue Code section 385
The European Union has ordered the government of Ireland to collect €13 billion in corporate taxes from Apple Inc. That’s roughly $14.5 billion given current exchange rates; one of the largest tax bills in human history. The determination comes as part of Brussels’ ongoing investigation of state subsidies that take the form of advance tax rulings.There are several aspects to this story that leave Americans scratching their head. Let’s review them.
You can feel it in the air. The college football season is just around the corner and we are plenty excited. But there’s another high-stakes drama that is almost as captivating to aficionados of tax policy. In case you missed it, the U.S. Chamber of Commerce has filed suit in federal court challenging the Treasury Department and the IRS over their latest anti-inversion regulations.
That Donald Trump revised his tax reform plan came as no surprise. His campaign had been hinting for several weeks that a partial rewrite was in the works. The presumed objectives of the revision were threefold, and it’s useful to keep these goals in mind when evaluating the details of his plan.
People often ask me the same question: When will Congress get serious about fundamental tax reform? My response is predictable You’ll know that we’re making genuine progress when lawmakers get over their knee-jerk opposition to discussing a broad-based federal consumption tax.
Evolutionary changes typically occur at a glacial place. In the tax world, however, we are witnessing a paradigm shift that’s occurring far more rapidly. I’m referring to the rise of automatic information exchange between national revenue bodies. This was unthinkable just a few short years ago.
Certain tenets of tax policy are so thoroughly ingrained in our thinking that to question them seems almost sacrilegious. Among these is the doctrine that corporate income should be taxed once and only once. Typically that singular occurrence of corporate tax is imposed by the country with the strongest jurisdictional claim over the relevant corporate entity (residence-based taxation) or the economic activity that gave rise to the income (source-based taxation). It naturally follows that double taxation is an abomination that must be eliminated at all costs. This reflexive aversion to double taxation heavily influences our nation’s tax laws. It also features prominently in the international norms set by multilateral bodies such as the OECD.