European governments capitalising on trapped earnings of US corporations
A recent piece published in The Hill has highlighted further issues with the Obama administration in regards to the current US international taxation system. The author believes that policymakers should act fast within 2016 so as to avoid European countries and others around the globe from benefitting from tax revenues of Americas most innovative firms. The article highlights that the UK has been one of the most aggressive jurisdictions to try and capitalise on the $2 trillion of overseas earnings locked outside of the US. Here at International Tax Search, we envisage a potential new proposal being put forward by the next US government which allows trapped earnings to be reinstated to US soil with a deducted tax rate.
The article states:
"Europe is executing a concerted public, legal, and policy campaign to target American companies and direct more tax revenue into their coffers.
European authorities see the $2 trillion of overseas earnings locked out of the U.S., and they are going after it. Relying on principles established over American objections, OECD members are enacting laws and regulations to grab more taxes from American businesses operating around the world. As the OECD’s Secretary General made clear in February of this year, a number of countries have already adopted legislative changes to implement BEPS measures.
One of the most aggressive countries is the United Kingdom. The UK has approved a tax hike which allows the government to charge a 25 percent tax – a five percent surcharge above the standard U.K. corporate rate – on earnings that it believes have been inadequately taxed. Australia and other countries are considering similar measures.
Furthermore, as if to prove the point, the European Commission just last week called on 6,000 companies, including those based in America, to reveal confidential information about the taxes they pay to each of the European Union’s 28 member countries.
The net result of this campaign: an increase in taxation on American companies operating outside the United States. The impact is significant: every dollar an American company pays in foreign taxes results in a dollar credit against its U.S. taxes. This means that our tax base could shrink dramatically as Europe’s grows."
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