Saturday, July 30, 2011

Big Corp Tax Loophole Closer #32: Foreign Tax Havens

There are so many low-income-taxed foreign tax havens that many Big US Multinational Corps and Foreign Corps use. Among these are:

Cayman Islands
Netherlands Antilles
British Virgin Islands

By shifting a huge amount of their worldwide earnings into low-tax foreign tax havens, these multinational corps can substantially increase their worldwide consolidated after-tax net income.

In addition, by using foreign tax havens, these multinational corps are also able to increase their ability to use their foreign tax credits on a worldwide basis.

My proposal here is that the US Government "Economic Substance Doctrine" (economic substance over legal form) should apply to situations where, even though a corporation is legally incorporated in one of the foreign tax havens, if its management and control is located predominately in the US, then this corporation cannot claim foreign corporation status for US federal income tax purposes.

All of the tax proceeds from closing this substantial Big Corp Tax Loophole should be used to reduce the US Deficit.