Int'l Tax News

Treasury Secretary Jacob Lew said lastweek that the Obama administration is considering administrative options to curb inversions. The comments mark a significant shift from just a fewweeks earlier,when Lew said he didn't believe Treasury had the power to address inversionswithout legislation.
The announcement came just hours after Senate Democratswrote to Lew asking Treasury to take immediate administrative action to curtail the tax benefits U.S. companies receive for mergingwith offshore companies and reorganizing as foreign entities.
For the article, go here.

It seems as thoughwe can't go aweekwithout another report of an American company mergingwith a foreign business in order to relocate their headquarters and avoid the nominal U.S. tax rate of 40%. The latest is Burger King's mergerwith Canadian brand Tim Hortons in an $11 million deal thatwill move Burger King's business operations to Canada,where the corporate tax rate is only 26%.
Congressman Paul Ryan (R-Wis.), 2012 Vice Presidential candidate and author of "Theway Forward: Renewing The American Idea" joined Yahoo Global Correspondent Bianna Golodryga toweigh in. Congressman Ryan has long called for a comprehensive tax reform bill, butwith midterm elections coming up, any serious reform seems at least six-months off.with this in mind, many politicians have called for a temporary solution or ban on inversions all together.
"The problemwith those so-called solutions is that all theywould do is make it more likely that American companieswould be ripe for takeover by foreign corporations," says Ryan. "There's really no shortcut to the real answerwhich is tax reform."
For the story, go here.

The federal governmentwill collect less corporate income tax revenue over the coming decade, and inversions are one reasonwhy, Congressional Budget Office Director Douglas Elmendorf said August 27.
"Our projections of corporate tax receipts over the coming decade do incorporate some erosion of the corporate tax base through a variety of tax reduction strategies," Elmendorf said during a press briefing on the CBO's updated budget outlook. "One factor therewould be corporate inversions."
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As lawmakers return to Capitol Hill after the August recess, addressing corporate inversionswill be a top priority, and the person to follow may be the Senate Finance Committee's ranking member Orrin Hatch (R-Utah), a top practitioner and former Hill counsel said during awebcast.
"We'll have to bewatchingwhat reaction Hatchwill havewhen Congress comes back, to see if hewill introduce his own legislation," John Gimigliano, principal in charge of federal legislation and regulatory services for KPMG'swashington National Tax practice , said Aug. 27.
For the story, go here.

Last year the IRS finally collected more in tax receipts than it did before the crash in 2007. But dig a little deeper into the numbers and it is clearwe haven't returned to normal: Corporations paid nearly $100 billion less in federal income taxes last year than before the Great Recession – down nearly 40 percent as a share of GDP. In fact, corporate profits and corporate tax collections are now trending in opposite directions. Profitswere up $93 billion last year – to a high of $2.1 trillion, according to the Commerce Department. Yet corporate tax payments actually fell last year by more than $15 billion.
How is this possible?

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Rep. Sander Levin, the top Democrat on the Houseways and Means Committee, says the recent spate of tax inversions like Burger King's deal to buy Tim Hortons is a further impetus for comprehensive tax reform ÔøΩ but thatwashington shouldn'twait to head offwhat he calls unfair deals.
"The iron is really hot here, and Congress needs to essentially do something," Levin told MarketWatch in a telephone interview from his home district in Michigan. "Otherwise, companies are going to continue to try to [invert], thinking that they ought to get in under thewire here. That only makes itworse."
For the story, go here.

Corporate inversions have been the topic of the summer for taxwonks (beats jellyfish and beach traffic, I suppose), but the issue is a classic bit ofwashington misdirection. Instead of focusing on the real diseaseÔøΩan increasingly dysfunctional corporate income taxÔøΩwe are obsessing over a symptomÔøΩfirms such as Burger King engaging in self-help reform by relocating their legal residences overseas.
The good news is the tax inversion flap has generated some interesting ideas for broader changes in thewaywe tax multinational firms.
For the story, go here.

Policymakers from both parties cried foul Tuesday over Burger King's potential tax-shaving mergerwith Canadian coffee-and-doughnuts giant Tim Hortons, but they could not find common ground on how best to beat back the specter of corporate tax dodging.
Sen. Charles E. Schumer (D-N.Y.) said in a statement that he and other lawmakers are drafting a proposal thatwould combat the "egregious cost-cutting ploy" of tax inversion, inwhich the fast-food king could lower its taxes by shifting its headquarters to Canada.
That proposal,whichwould limit how companies use the interest-payment deduction, could emergewhen Congress returns next month, a spokesman said.
For the story, go here.

A dramatic overhaul of the Chilean tax systemÔøΩincluding significant implications for foreign owners of companies in ChileÔøΩis one step closer to being finalized, after the Chilean Senate approved the legislation Aug. 19.
The bill, initially announced in July, has since been revised to include provisions that specifically target shareholders of Chilean companieswho reside in non-treaty partners, potentially saddling themwith a 44.45 percentwithholding tax on their dividends.
For the story, go here. (subscription required)

No matter how Congress responds to the latest flurry of corporate tax inversions, the most lawmakerswill manage in the short run is a temporary bandage, analysts say.
David Burton, a senior fellow at the Heritage FoundationÔøΩa conservative think tankÔøΩsaid the recent controversy over inversions illustrates how "broken" the U.S. tax code is and that only a comprehensive overhaulwill accomplish lawmakers' goal of curbing the practice.
For the story, go here. (subscription required)

Canada has become the latest frontier for U.S. companies fleeing the high cost of business, spurred by low corporate taxes and a policy that keeps international earnings out of the clutches of the Internal Revenue Service.
Burger Kingworldwide Inc., the second-largest U.S. burger chain, agreed to buy coffee-and-doughnut company Tim Hortons Inc. today for about C$12.5 billion ($11.4 billion) and move the headquarters of the combined company to Canada. It's "not fair" that companies can renounce their U.S. citizenship by filling out paperwork, awhite House spokesman said yesterday.
Burger King is unlikely to be the last U.S. company to consider moving north even as President Barack Obama and his aides try to curb the practice, tax experts say. In addition to avoiding U.S. taxes on global earnings, companies like Burger King can take advantage of Canadian tax rates that have been cut by about a quarter in the past eight years.

For the story, go here.

The group of investors that controls Burger Kingworldwide Inc. is using an unusual strategy to avoid the tax penalty that normally applies to shareholders of companies that shift their legal address out of the U.S.
The planwas disclosed Aug. 26 as part of Miami-based Burger King's $11 billion stock-and-cash deal to buy Tim Hortons Inc. and adopt that coffee chain's Canadian headquarters. The transaction is the first "inversion" announced since President Barack Obama called the strategy an "unpatriotic tax loophole" in late July and ordered regulatory changes to curb them.
Rather than take shares in the new combined Canadian company, 3G Capital, an investment fundwith offices in New York and Rio de Janeirowill swap its majority stake in Burger King for interests in a related Canadian partnership that can be converted into stock, the companies said in a statement.
For the story, go here.

Do you have responsibility,whether direct or dotted line, for the tax function in your company?
Does your company have, or plan to have, operations outside the United States? If so, you need to know about a significant global tax initiative.
The initiative is known as the "base erosion and profit shifting" project. BEPS "refers to tax planning strategies that exploit gaps and mismatches in tax rules to make profits 'disappear' for tax purposes or to shift profits to locationswhere there is little or no real activity but the taxes are low resulting in little or no overall corporate tax being paid," according the Centre for Tax Policy and Administration of the Organisation for Economic Co-operation and Development (OECD).
For the story, go here.

Several recent high profile deals have directed media and public attention to the topic of "tax inversion,"whereby a company moves its headquarters overseas (usually in an M&A deal) in order to reduce its tax burden. According to thewall Street Journal (citing Thomson Reuters) there have been 22 such deals since 2011,with the majority of them being in pharmaceuticals.
Butwhy is inversion even necessary? This has to dowith two elements of the American tax system.
For the story, go here.

The recent debate over corporate inversions (U.S. companies reincorporating themselves in nationswith lower tax rates) threatens to derail progress on comprehensive tax reform even further. The administration and some in Congress seem set on treating the symptom rather than the disease. This is unfortunate because broader reform is both necessary and doable. America's complex and outdated corporate tax code imposes significant costs on the incentives to invest here and on our competitiveness in overseas markets. Moreover, the broad outlines of a possible bipartisan deal are already visible and they center around four principles.
For the story, go here.

Italy's prime minister vowed to avoid raising taxes to reduce the country's growing deficit through spending cuts, a move analysts saidwill give businesses a boost despite the country's slowing economy.
Prime Minister Matteo Renzi said Aug. 21 "therewill be no new taxes" for businesses and individuals, and he said some tax ratesÔøΩmostly for small businesses and individualsÔøΩwill be reduced in the coming months.
Renzi,who became Italy's youngest post-Worldwar II prime ministerwhen he took office in February, didn't provide details aboutwhich taxes could be reduced going forward. But analysts said the promise that taxeswon't rise is a positive signal for businesses.
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A new report from a United Nations panel on Asia and the Pacific recommends the creation of a "regional tax forum" to address issues such as double taxation and tax competition. The forum,whichwould be part of the UN Economic and Social Commission for Asia and the Pacific,would aim to increase revenue collection for Asia/Pacific-area governments, creating "fiscal space" to allow for development.
For the report, go here.

There's more than oneway for a U.S. company to avoid taxes by claiming a foreign address.
Consider the business founded in 1916 as General Plate Co., a maker of sensors and controls for everything from Fords and Frigidaires to the spaceship that first carried Americans to the moon.while its top executives are still based in Attleboro, Massachusetts, it's now known as Sensata Technologies Holding NV (ST) of the Netherlands.
Sensata didn't become Dutch by using the strategy known as "inversion" that has alarmed President Barack Obama and that the U.S. Treasury Department and some Democrats in Congress are trying to curb.
Instead, Sensata is one of at least 14 firms that have left the U.S. tax system through a sale to an investment fund, according to a tally by Bloomberg News.
For the story, go here.

Voltairewrote "The perfect is the enemy of the good."
Nowhere is this more evident today than in American politics. Tax policy is the epitome and epicenter of this bipolar conflict. Advocates on the Left and Right recite their litany of dogmas, each side smugly assured that God is on their side.
Each side not only has its own opinions, but its own "facts" that inevitably support their views. An outside observer trying to be objective is left bewildered.
For the article, go here.

Tax inversions. Double Irishwith a Dutch sandwich. Spinning off tangible assets into real estate investment trusts. Son-of-BOSS shelters.

These are among the array of eye-glazingly complicated tax avoidance strategies adopted by America's biggest companies. Each gets a moment in the sunwhen some enterprising journalist stumbles upon a particularly egregious example of its use; the public expresses outrage; policymakers denounce the behavior,which they themselves have incentivized; and then maybe Congress playswhack-a-mole trying to close the loophole. Then the public forgets, firms come upwith inventively aggressive new strategies, and the pattern repeats.

Here's a proposal to try to curb this cycle: Require all publicly traded companies to make their tax returns public. Period.

For the article, go here.

Several proposals have been offered to address the crisis of American corporations
"inverting." These companies reincorporate as offshore companies to avoid U.S. taxes
even as they continue to operate and be managed in the U.S. and benefit from the
public investments that American taxpayers support.

For the report, go here.

Patrick Driessen is a consultant after having been a government economist for three decades.
This article explores the staying power of a 5.25 percent tax rate on foreign deferred earnings. As a revenue estimator for the Joint Committee on Taxation, Driessen multiplied a lot of numbers by 5.25 percent during the 10 years preceding 2012.
For the article, go here. (subscription required)

Treasury Secretary Jacob Lew has flip-flopped in recentweeks on the subject of corporate inversions. After putting the burden on Congress to preserve the corporate tax base and insisting that therewas nothing Treasury could do to prevent more inversions from taking place, the Obama administration has done a complete reversal.
Recent Treasury announcements have said the administration is looking carefully at all possible alternatives that may be available under executive and regulatory authority to curtail inversions.
For the story, go here. (subscription required)

The current debate over corporate inversions, inwhich American companies like Burger King consider renouncing their citizenship for tax-reduction purposes, is only the latest reminder that the United States corporate tax code has deep problems.
Ideas for reforming the business side of the tax code abound, but there are those on both the left and the rightwho argue that it cannot be salvaged and should simply be abolished.
For the post, go here.

President Barack Obama's full-throated denunciation of overseas mergers that lower U.S. companies' taxes is throwing coldwater on potential deals.

On July 24 Obama referred to companies looking to shift their domicile as "corporate deserters" and aides pledged to curtail the practicewith orwithout Congressional approval.

Since then, no companies have announced any of these deals -- known as inversions -- and it's no coincidence, according to lawyers and investment bankers.

For the story, go here.

Microsoft Corp. is currently sitting on almost $29.6 billion itwould owe in U.S. taxes if it repatriated the $92.9 billion of earnings it is keeping offshore, according to disclosures in the company's most recent annual filingswith the Securities and Exchange Commission. The amount of money that Microsoft is keeping offshore represents a significant spike from prior years, and the levies the companywould owe amount to almost the entire two-year operating budget of the company's home state ofwashington.

The company says it has "not provided deferred U.S. income taxes" because it says the earningswere generated from its "non-U.S. subsidiaries" and then "reinvested outside the U.S." Tax experts, however, say that details of the filing suggest the company is using tax shelters to dodge the taxes it owes as a company domiciled in the United States.

For the story, go here.

Far from representing the lack of economic patriotism of US companies, the trend of inversions out of the US is indicative of just how antiquated the US tax code is.

For the story, go here.

ITR's special report looks at the knock-on impacts of the currentwave of inversions by US companies, including shareholder pressure to consider an option they see their rivals pursuing and the possible inflammation of the tax morality debate.
For the report, go here.

Treasury Secretary Jacob J. Lew said the bestway to dealwith the issue of corporate inversionswould be through a comprehensive revamp of business taxation, according to a statement from the department.
Lew's comments came during an Aug. 21 meetingwith policy specialists, including Alice Rivlin of the Brookings Institution, Maya MacGuineas of the Committee for a Responsible Federal Budget and Jared Bernstein of the Center on Budget and Policy Priorities, the Treasury Department said.
Lew's comments echoed his previous statements on the issue,which emphasized reducing tax rates and making it harder for U.S. companies to shift profits overseas. Treasury is alsoworking on options for regulatory steps to curb inversions or make them less attractive.
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In the current hysteria over corporate inversions, many point to their cost to the U.S. Treasury. In awashington Post article, BusinessWeek's Allan Sloanwrites about corporate inversions saying: "All of this threatens to undermine our tax base,with projected losses in the billions."
While corporate inversions point to fundamental problemswith our corporate tax system, corporate inversions are not a significant threat to the corporate tax base.
For the story, go here.

To some, US companies switching their tax residency to gain a tax advantage are economic "traitors." To others, they are victims of a United States tax code that effectively punishes them for investing at home and encourages them to look for opportunities overseas. In this Tax-News Topical Focus,we try to make sense of the corporate inversion debate in a "frequently-asked questions" style.
For the FAQ, go here.

Politicians can debatewhether corporate tax inversions are"unpatriotic"or simply a legitimate technique to reduce taxes–and commentators can argue overwhether anything should be done to stop them. Experts also disagree aboutwhether President Obama and his Treasury Secretary have the legal authority towrite new rules to discourage inversions. In my view, on this last question, the law clearly provides Treasury that authority.
Treasury Secretary Jack Lew can use many different tools to stop this game.
For the blog post, go here.

Can President Obama dealwith corporate inversions-which occurwhen a U.S. company mergeswith a foreign competitor in order to create a parent organizationwith a tax residency abroad--on his own?
After pressure from his fellow Democrats , Obama and the Department of Treasury have said they're looking into it. Some former officials--including Stephen Shay, a professor of law at Harvard University and a former deputy assistant secretary at Treasury-- have suggested that Obama can use his executive authority to dealwith earnings stripping , one of the chief incentives for inversion deals.
For the article, go here.

The Obama administrationwill need more than a fewweeks toweigh potential administrative actions to discourage U.S. companies from reducing their tax bills by moving to other countries, a Treasury Department official said on Monday.
Staff at the U.S. Treasury has been assembling a list of options for Treasury Secretary Jack Lew.
For the story, go here.

Like most governors, I focus every day on how my state can successfully compete in a globalwar for jobs. Delaware is not just competing for jobswith Maryland, Pennsylvania, or even California.we compete for jobswith economies from Bangalore to Berlin.
Thewar for economic growth and prosperity is not a fair fight. And one major source of unfairness, one major hindrance to our growth here in America, is our own U.S. Tax Code.
For the blog post, go here.

"Stop tax inversion by American corporations" is the latestwar cry of American socialists. Obama is infuriated that U.S. corporationswant to be American no more and is going to stop it.
Tax inversion is a methodwhereby a U.S.-multinational company takes over a foreign company and creates a new corporate entity that the U.S. "tax inversion" uses to leave U.S. tax jurisdiction (the newly created company re-incorporates overseas).with a single takeover the U.S. corporation is no longer American–it might be British or Irish and subsequently pay a much lower rate of tax.
On the surface,why should stinking corporations get awaywith not paying taxes? The U.S. government needs more money and corporations have got it.
For the article, go here.

A little more than a decade ago, a company called Stanleyworkswas considering moving to Bermuda in order to save some money. Stanley, a tool-manufacturing company, had done some calculations, and figured out that it could save about $30 million per year in U.S. taxes by ditching its Connecticut headquarters. The decision seemed fairly clear-cut, as they'd be lowering their costs. But Stanleywas also eyeing Bermuda because two of their biggest rivalsÔøΩCooper and Ingersoll-RandÔøΩhad just gone foreign, and itwas getting harder to competewith them.
Certain members of the governmentwere outraged at the idea. "They escape from millions of dollars of federal taxes. That'swrong," said Senator Chuck Grassley, as he proposed legislation thatwould prevent Stanley from leaving Connecticut. "Our bill requires the IRS to look atwhere a company has its heart and soul, notwhere it has a filing cabinet and a mailbox."
Facing pressure from Grassley and others, Stanley peered into its heart and soul, or at least into the eyes of its public-relations team, and decided to step back. Inwhat appeared to be awin for Congress and U.S. taxpayers, Stanleywould keep doing business in Connecticut. The company said that it decided to stick around because Congress had shown that itwas ready to start a tax-reform process thatwould make a move to Bermuda unnecessary.
But now, 12 years later, it appears that only the nouns have changed.
For the story, go here.

For years, chief executives have complained bitterly about the United States corporate tax code, arguing that it is too complicated and that rates are too high. The issue has reached a near boiling point this summer as many large American companies have sought to buy smaller foreign rivals so they can renounce their United States corporate citizenship and reincorporate overseas to lower their tax bills.
Again and again,we hear that these deals are being driven by an effort to make our companies more competitive globally and that unlesswe "reform" our tax system ÔøΩwhich is code for "lower our corporate tax rate" ÔøΩwewill lose business to foreign rivals.
It is a compelling narrative. But it may bewrong.
For the story, go here.

The U.S. government has grappled for more than 30 yearswith corporate deals known as inversions inwhich U.S. companies shift their tax domiciles abroad to avoid U.S. taxes.
Fifty-two substantial deals like this have occurred since 1983, about half of them since the 2008-2009 credit crisis, according to a Reuters analysis.
Here is a summary of U.S. government efforts to manage them.
For the story, go here.

The Treasury Department put out theword that Secretary Jack Lew is consideringregulatory curbs on corporate tax inversions, a step that may be intended to increase pressure on Congress to act once it returns from its summer recess in September.
The matter of how much authority Treasury has to limit inversions has generated its own controversy.
For the story, go here.

The top U.S. marginal corporate tax rate of 39.1 percent -- the highest rate among OECD countries and the third highest in theworld -- harms U.S. global competitiveness, given that theworldwide average top rate has declined over the past 10 years from 29.5 percent to 22.6 percent, the Tax Foundation said in an August report.

For the report, go here.

Lawmakers should consider prompt, targeted legislation to prevent tax base erosion from corporate inversions,which may be surging because of growth of unrepatriated earnings and pessimism about a U.S. shift to a territorial tax system, Kimberly Clausing of the Tax Policy Center said in an August 20 report.

For the report, go here.

Participants in an August 20 American Bar Association Section of Taxationwebinar discussed EU proposals corresponding to action items of the OECD's base erosion and profit-shifting initiative, reviewed the state of the law and reaction to BEPS in Europe, and examined the underlying reasons for the United States' apparent blasé response.
Olivier Dauchez of the Paris office of Gide Loyrette Nouel said thatwhile responsibility for direct taxation fallswithin the competence of EU member states, each state must exercise that competence in a manner consistentwith EU laws. EU laws governing fundamental freedoms preclude a member state from discriminating against foreign nationals and companies. Consequently, taking advantage of tax benefits explicitly provided by a member state cannot be deemed abusive in itself. A restriction of a fundamental freedom is permissible onlywhen justified by overriding reasons of public interest.
For the story, go here. (subscription required)

Increased tax revenue should flow from an improved U.S. intellectual property regime, a coalition representing high-technology companies said.
Policies to discourage relocating intellectual property abroadwould boost U.S. taxable income, the Silicon Valley Tax Directors Group said in a letter to Senate Finance Committee Chairman Ronwyden (D-Ore.) and ranking member Orrin Hatch (R-Utah). Tax revenue on IP,which currently goes to foreign governments orwould in the future,would instead remain in the U.S.
The letter, signed by the tax directors from 78 high-tech U.S. companies such as Apple Inc., Microsoft Corp. and Adobe Systems Inc., made a number of suggestions to make that happen.
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"The need of the hour" among transfer pricing issues is for countries to formulate uniform regulations to reduce controversies over related-party outsourcing fees and restructuring costs, the International Fiscal Association said in a new report.
Such regulations also ought to address the attribution of location savings between associated enterprises participating in outsourcing arrangements and provide for corresponding transfer pricing adjustments, the report said.
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Multinationals may have to overhaul their business structures if the OECD's final anti-treaty-shopping proposals don't deviate significantly from their original form, according to Leonard Khaw of Deloitte Shanghai.
Khaw spoke on an August 13 Deloittewebcast on action 6 of the OECD's base erosion and profit-shifting initiative,which calls for measures to prevent the granting of treaty benefits in inappropriate circumstances.
For the story, go here. (subscription required)

Not contentwith the highest corporate tax rate in the industrializedworld, President Obama and Sen. Chuck Schumer (D., N.Y.) seem determined to make the U.S. even less hospitable to business. Both are developing plans to make it more expensive for multinational companies to invest in America.
You read that correctly. Their policy answer to the problem of too-few jobs is to raise costs on employerswhowant to move money from overseas and spend it in the U.S. The President's rhetoric is about targeting "corporate deserters"who have moved their legal address out of the U.S., but his proposalswould discourage investment from overseas.
For the story, go here.

Treasury Department officials are assembling a list of administrative options for Secretary Jacob Lew to consider forways to deter or prevent U.S. companies from reorganizing overseas primarily to avoid paying federal taxes, an agency official said Monday.
For the article, go here.

The OECD has released a discussion draft of proposals to eliminate mismatches of income and deduction arising from hybrid instruments and hybrid entities. Under the proposals, substantive tax laws in each jurisdictionwould depend on the tax laws in other jurisdictions. Public comments have been received, and a public hearing has been held. A final version of the proposals is expected to be considered in November of this year.
This report comments on the proposals relating to hybrid instruments. It is presented in two parts. Part 1, published in the August 11 issue of Tax Notes, provided historical background and discussed policy issues raised by the proposals, aswell as some of the technical questions and unexpected results. Part 2 in this issue discusses additional technical concerns, the scope of hybrid instruments thatwould be covered by the proposals, effective date issues, and conclusions. This issue beginswith Section III.B.5.h of the report.
For the report, go here. (subscription required)

Barack Obama, presiding over an unusually dismal post-recession economy, might make mattersworsewith a distracting crusade against the minor and sensible business practice called "inversion," more aboutwhich anon. So, consider his credentials as an economic thinker.

Obama,who thinks ATMs and airport ticket kiosks cost America jobs, gave a speech last year regretting that Maytagworkers in Illinois lost their jobswhen the plant moved to Mexico, but rejoicing that more Honda cars "are made in America than anyplace else" and that Airbuswas "building new planes in Alabama." Maytag moved partly because in Illinois,which is not a right-to-work state, the price of unionizedworkers made Mexico a sensible choice. And Airbus is in right-to-work Alabama because capital, being mobile, goeswhere it iswanted and stayswhere it is treatedwell.

Alabama, and the Honda manufacturing states (Alabama, Georgia, North Carolina, South Carolina, Indiana and Ohio; all but Ohio are right-to-work), attracted these jobs by practicing "entrepreneurial federalism" - tailoring tax and regulatory policies to gain competitive advantages against other states. Progressives deplore this as a "race to the bottom." Conservatives call it a rationality competition.

Which brings us to "inversions,"whereby in the past decade approximately 50 U.S. companies have mergedwith foreign firms and located their headquarters overseas, becoming subject to that country's lower corporate taxation. The U.S. system, unlike those of most major nations, taxes the profits that domestic corporations earn overseas, even though these profits are also taxed overseas. This double taxation is one reason that approximately $2 trillion in U.S. corporate earnings is being kept abroad rather than brought home for domestic investment.

For the article, go here.