151. Rules Against Earnings Stripping: Wrong Answer to Corporate Inversions
- Author:
- Gary Hufbauer and Ariel Assa
- Publication Date:
- 05-2003
- Content Type:
- Policy Brief
- Institution:
- Peterson Institute for International Economics
- Abstract:
- The tax-driven expatriation of US corporations is a troubling phenomenon. In a “corporate inversion,” a new foreign corporation, typically located in a low-tax or no-tax country, replaces the existing US parent corporation of a multinational enterprise (MNE). The US corporation then becomes a subsidiary of the new foreign parent. Since the US tax treatment of an MNE operating in the United States is significantly less favorable when the top-tier parent corporation is a domestic rather than a foreign corporation, the inversion transaction averts a substantial amount of US tax. Inversions have attracted adverse attention from tax specialists, media, the US Treasury Department, and Congress. In the wake of September 11, it seemed downright unpatriotic for US firms to invert as a way of skimping on their tax payments.
- Topic:
- Economics, Government, and International Trade and Finance
- Political Geography:
- United States