Corporate Tax Havens Received A Crackdown in TCJA

The New York Times' recent investigation on the effects of the corporate tax cutes in TCJA “Tax Havens Blunt Impact of Corporate Tax Cut, Economists Say” should have focused more sharply on new facts, not old assumptions.  The recent U.S. law strongly curtails the ability of businesses to create tax-free “stateless income,” thanks to an alphabet soup of provisions like BEAT, FDII, and GILTI  (the latter of which levies a global minimum tax on multinationals based here). These, combined with the OECD’s anti-“base erosion” measures and greater transparency among jurisdictions that have offered safe harbors from double-taxation, address many complaints about a “crisis” in multinational taxes. The true motive behind revenue-raising schemes like the EU’s “digital services tax” on primarily U.S. firms is protectionism. 

If anything, officials should avoid overreaching, and refine some of these rules. For example, firms might move overseas instead of hassling with GILTI, while BEAT could impede important cross-border financial flows that build assets worldwide to cover mega-disasters. Overall, however, U.S. tax policy is evolving, not regressing. Failure to recognize this trend betrays an anti-competition, anti-innovation agenda that undermines global progress and prosperity.