Strategizing International Tax Best Practices – by Keith Brockman

The Tax Foundation is a nonpartisan research organization that monitors U.S. fiscal policy.  “The Tax Foundation’s Center for Federal Tax Policy produces and promotes timely and high-quality data, research, and analysis on federal tax issues that influences the debate toward economically principled policies.”  There are interesting articles and publications available at their website.

In a report dated 21 May, 2013 entitled “Are Multinational Companies Dodging Their Taxes?” the Foundation found that U.S. multinational corporations paid more than $100 billion – an average effective rate of 25 percent – in foreign income taxes in 2009.  This information is especially relevant as the issue of international tax payments was addressed on Capitol Hill when Apple executives testified before a Senate subcommittee.

A paragraph at the bottom of the article focuses on the complexity of international taxation for U.S. multinational corporations that is often overlooked in today’s tax environment, stating that “People who criticize U.S. companies for ‘avoiding’ taxes on their foreign earnings need to be more careful with their language and acknowledge that our worldwide tax system requires U.S. firms to pay taxes twice on their foreign profits, before they can reinvest those profits back home.”

Another Tax Foundation publication entitled “U.S. Multinationals Paid More Than $100 Billion in Foreign Income Taxes” is also interesting, as it includes a table that lists 2009 country data in order of Taxable income, Foreign taxes paid/accrued/deemed paid, and Average Effective Tax Rate.  For example, the average effective tax rate is 62.7% for Nigeria, approx. 45% for Indonesia and Italy, while the effective tax rates for Norway and South Korea exceed 60%.

This resource is useful for U.S. multinational corporations, and other multinationals, as an information resource in today’s complex tax environment.

The statement that people need to be more careful with their language can also be correlated to the observation that terms used interchangeably by tax authorities and governments include: tax planning, aggressive tax planning, tax avoidance, evasion and fraud.  The absence of publicly stating important differences of such terms may lead to misleading statements and inappropriate conclusions.

I would encourage everyone to be familiar with this valuable resource.

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