The document summarizes the President's framework for business tax reform, outlining the need to reform the current U.S. system. It discusses how the current system distorts business decisions and reduces economic growth through loopholes and a high corporate tax rate. The framework proposes eliminating loopholes to lower the rate, strengthening manufacturing and innovation, reforming international tax rules, simplifying taxes for small businesses, and paying for reforms without adding to the deficit.
Gao 08 566 Value Added Taxes Lessons Learned From Other Countries On Complia...Brian James
The GAO report examines lessons learned from the VAT systems of Australia, Canada, France, New Zealand, and the United Kingdom. It finds that even relatively simple VAT systems have compliance risks that generate administrative costs and burden for both governments and businesses. Adding exemptions and complexity increases these risks, costs, and burdens. Countries with federal systems also face increased complexity from multiple tax arrangements. Transitioning to a VAT requires significant resources for education and registration.
The document discusses issues around corporate tax reform and inversions in the US. It notes that while politicians call for action, comprehensive tax reform is unlikely before or just after the 2016 election. Temporary measures may not stop companies moving to lower tax countries. The IRS is seeking more data to enforce current laws and prepare for potential future reforms from studies on base erosion and profit shifting. Multinational companies should prepare to react to potential upcoming changes to tax laws.
EY Publication - A closer look at accounting for the effects of Tax Cuts and ...Azhar Qureshi
The Tax Cuts and Jobs Act significantly changes US income tax law. It reduces the corporate tax rate to 21% and requires companies to account for the effects of this change on deferred tax balances as of the enactment date of December 22, 2017. The SEC provided guidance to allow companies that cannot yet reasonably estimate the effects to continue using prior tax law. The Act also subjects some foreign earnings to a one-time transition tax and establishes a new territorial system.
Professionals in the tax community are tasked with developing planning strategies under existing statutory schemes that minimize or eliminate their clients’ global tax burden. It is these planning structures that draw the attention of tax authorities as causing the “erosion” of taxable income bases and consequently, the tax revenues for their respective countries.
Tax reduction for economic developmentM S Siddiqui
The policy makers in Bangladesh prefer higher both income tax and customs duty in order to finance the development work defying the advice of economists. The own experience of tax reduction and reform in tax law since 1990s has increases higher revenue collection. Bangladesh should listen to economist and learn from the experience of two economies and ignore own experiences.
This document summarizes Steven M. Mills' 6th Annual Tax Update presentation. It discusses the following key points:
1. The long-term fiscal challenges facing the US economy, including rising entitlement spending due to an aging population and slow economic growth.
2. The need for tax reform to broaden the tax base, lower rates, and make the system more competitive to spur economic growth.
3. An overview of proposed reforms to corporate, international, and individual tax systems, including lowering rates and eliminating certain tax expenditures.
An overview of current tax reform proposals and potential implications. Overview of business implications with Chairman Camp's 2014 discussion draft, Senator Hatch's 2014 report on tax reform, corporate integration, House tax reform task force, and The Trump Plan.
This document summarizes several major tax reform proposals in the United States, including Chairman Camp's 2014 proposal, Senator Hatch's 2014 report, the Ryan Plan, and proposals from Trump. Key elements discussed are lowering corporate tax rates, reducing individual tax brackets, eliminating certain deductions, moving to a territorial system, and replacing parts of the Affordable Care Act. Major disagreements between Republican plans are also outlined.
Gao 08 566 Value Added Taxes Lessons Learned From Other Countries On Complia...Brian James
The GAO report examines lessons learned from the VAT systems of Australia, Canada, France, New Zealand, and the United Kingdom. It finds that even relatively simple VAT systems have compliance risks that generate administrative costs and burden for both governments and businesses. Adding exemptions and complexity increases these risks, costs, and burdens. Countries with federal systems also face increased complexity from multiple tax arrangements. Transitioning to a VAT requires significant resources for education and registration.
The document discusses issues around corporate tax reform and inversions in the US. It notes that while politicians call for action, comprehensive tax reform is unlikely before or just after the 2016 election. Temporary measures may not stop companies moving to lower tax countries. The IRS is seeking more data to enforce current laws and prepare for potential future reforms from studies on base erosion and profit shifting. Multinational companies should prepare to react to potential upcoming changes to tax laws.
EY Publication - A closer look at accounting for the effects of Tax Cuts and ...Azhar Qureshi
The Tax Cuts and Jobs Act significantly changes US income tax law. It reduces the corporate tax rate to 21% and requires companies to account for the effects of this change on deferred tax balances as of the enactment date of December 22, 2017. The SEC provided guidance to allow companies that cannot yet reasonably estimate the effects to continue using prior tax law. The Act also subjects some foreign earnings to a one-time transition tax and establishes a new territorial system.
Professionals in the tax community are tasked with developing planning strategies under existing statutory schemes that minimize or eliminate their clients’ global tax burden. It is these planning structures that draw the attention of tax authorities as causing the “erosion” of taxable income bases and consequently, the tax revenues for their respective countries.
Tax reduction for economic developmentM S Siddiqui
The policy makers in Bangladesh prefer higher both income tax and customs duty in order to finance the development work defying the advice of economists. The own experience of tax reduction and reform in tax law since 1990s has increases higher revenue collection. Bangladesh should listen to economist and learn from the experience of two economies and ignore own experiences.
This document summarizes Steven M. Mills' 6th Annual Tax Update presentation. It discusses the following key points:
1. The long-term fiscal challenges facing the US economy, including rising entitlement spending due to an aging population and slow economic growth.
2. The need for tax reform to broaden the tax base, lower rates, and make the system more competitive to spur economic growth.
3. An overview of proposed reforms to corporate, international, and individual tax systems, including lowering rates and eliminating certain tax expenditures.
An overview of current tax reform proposals and potential implications. Overview of business implications with Chairman Camp's 2014 discussion draft, Senator Hatch's 2014 report on tax reform, corporate integration, House tax reform task force, and The Trump Plan.
This document summarizes several major tax reform proposals in the United States, including Chairman Camp's 2014 proposal, Senator Hatch's 2014 report, the Ryan Plan, and proposals from Trump. Key elements discussed are lowering corporate tax rates, reducing individual tax brackets, eliminating certain deductions, moving to a territorial system, and replacing parts of the Affordable Care Act. Major disagreements between Republican plans are also outlined.
Harper's fiscal record is criticized in the article. The author argues that Harper relied too heavily on spending cuts rather than tax increases to balance budgets, disproportionately impacting lower-income Canadians. While Harper implemented some tax cuts and targeted spending, critics like Ralph Goodale argue his policies mostly benefited large corporations, not families or small businesses. The document discusses different approaches to fiscal and economic policy taken by Harper, Martin, Trudeau and others.
1. The Financial Accounting Foundation conducted a post-implementation review of FASB Interpretation No. 48 (FIN 48) which provides guidance on accounting for uncertainty in income taxes.
2. The review found that FIN 48 has improved consistency and reporting of income tax uncertainties, but it also identified opportunities for improvement and disproportionate costs for private companies.
3. Changes being considered include more outreach to financial statement users during standard-setting, including more detailed cost-benefit analyses in future standards, and consistent re-exposure policies.
Permanent Establishment May Not Be So Permanent (Prepare for Change)Accounting_Whitepapers
The document summarizes the UK's new Diverted Profits Tax (DPT), which seeks to tax profits from UK economic activity that currently avoid UK corporate tax through arrangements deemed "contrived." The 25% DPT will apply to arrangements designed to avoid a UK permanent establishment or that create an "effective tax mismatch." Additionally, proposed changes to permanent establishment definitions in OECD's BEPS Action 7 may also expand the scope of countries' taxing rights. Multinational companies should review their structures and arrangements for potential DPT or BEPS Action 7 impacts and consider establishing a formal UK taxable presence to avoid the DPT.
Small Business is under Attack by Government: Canada - January 2019paul young cpa, cga
This presentation discusses many issues facing small businesses across Canada. The federal government has decided that small businesses do not pay enough taxes as such introduced reforms.
The small business sector across Canada have been hit hard by COVI19. All levels of govt have provided different programs to support small business.
Many small businesses may never re-open post COVID19
Tax Cuts and Jobs Act: Latest employer developments as of 3-21-2018Debera Salam, CPP
Following are the slides from the CIC Plus and Ernst & Young LLP webcast that aired on March 21, 2018 where we focused on the latest developments of employer interest in connection with the Tax Cuts and Jobs Act of 2017.
This document summarizes an event presented by Vincent Leo and Jennifer Martlew of Insero & Company on November 18, 2014. It covered various accounting topics, including FASB/IASB convergence efforts, private company financial reporting, and recent FASB accounting standards updates. The agenda included overviews of FASB/IASB convergence projects, private company reporting considerations, and summaries of new standards on topics such as goodwill accounting, interest rate swaps, and discontinued operations reporting.
This document provides an overview and analysis of issues facing small businesses in Canada from the perspective of Paul Young, a CPA and small business expert. It discusses several policy changes by the Liberal government that negatively impact small businesses, including increases to minimum wage, hydro rates, carbon taxation, CPP premiums, and proposed changes to small business taxation and income sprinkling rules. Young argues these changes have increased costs and regulatory burdens for small businesses. The document also examines declining business confidence in Canada and issues facing the government in trying to balance services and taxation.
- CIT reported record quarterly and annual results for Q4 2006 and full year 2006, with EPS growth of 16% and 15% respectively excluding noteworthy items.
- Key drivers were strong loan and lease origination volume of $11.6 billion in Q4 2006, up 20% from prior year, leading to higher other revenue from gains on receivable sales and syndications.
- Credit quality remained solid across segments despite some increases in consumer metrics, and full year net charge-offs declined.
- Expenses increased due to investments in sales force and origination platforms, but efficiency ratio improved slightly.
- As a result, CIT increased 2007 EPS guidance to $5.40
This report analyzes the relationship between top tax rates and economic growth in the United States since 1945. It finds that while the top marginal tax rate has decreased from over 90% to 35% over this period, there is no conclusive evidence of a clear relationship between the tax rate reductions and economic growth. The data suggest tax rate reductions have had little association with key factors like saving, investment and productivity growth. However, tax rates appear related to rising income inequality, with higher-income groups receiving a larger share of total income as rates have declined.
This report analyzes the relationship between top tax rates and economic growth in the United States since 1945. It finds that while the top marginal tax rate has decreased from over 90% to 35% over this period, there is no conclusive evidence of a clear relationship between the tax rate reductions and economic growth. The data suggest tax rate reductions have had little association with key factors like saving, investment and productivity growth. However, tax rates appear related to rising income inequality, with higher-income groups receiving a larger share of total income as rates have declined.
The Canadian government released its first budget under Prime Minister Paul Martin which includes significant future spending commitments. However, some members of Canada's business community are worried that the budget does not do enough to maintain the country's competitiveness in the global economy through tax incentives and other measures. While the budget was received positively by some groups, others such as the Canadian Manufacturers & Exporters Association believe the government's competitiveness agenda is not being implemented quickly enough. There is debate around whether the tax reductions and other measures in the budget will be sufficient to attract investment and keep Canada competitive internationally over the long term.
The document provides a summary of UGI Corporation's fiscal third quarter results for 2018. Some key points:
1) Adjusted EPS for Q3 2018 was $0.09, nearly doubling the results from Q3 2017, excluding a $0.09 per share reserve related to a PA PUC order requiring utilities to establish a regulatory liability for tax benefits.
2) Business units like AmeriGas, UGI International, and Midstream & Marketing performed strongly in Q3 2018 compared to the prior year, benefiting from factors like warmer weather, acquisitions, and new investments.
3) However, earnings at UGI Utilities were negatively impacted by the $22.7 million revenue reduction required
The document discusses current issues in international accounting including differences between countries' accounting standards, efforts toward harmonization, and convergence of standards. It notes that historically accounting grew independently in different countries, resulting in considerable differences. Major factors influencing these differences include a country's legal system, taxation practices, capital providers, culture, and historical events. International organizations are working to reduce differences and increase comparability through harmonization and convergence. Critics argue convergence has limitations and may not suit all countries.
Altria reported its 2008 third-quarter results, with adjusted diluted EPS up 15% to $0.46. PM USA's adjusted OCI increased 6.3% due to lower promotional rates and costs. Marlboro gained retail share. Altria reaffirmed its full-year EPS guidance of $1.63 to $1.67, representing 9-11% growth. It also announced that its proposed acquisition of UST passed federal antitrust review.
With Republicans controlling both chambers of Congress and the Presidency, it is reasonable to expect that traditional Republican policy priorities will be enacted. One prominent priority is comprehensive tax reform that significantly lowers the corporate tax rate.
Although you can’t avoid taxes, you can take steps to minimize them. This requires proactive tax planning — estimating your tax liability, looking for ways to reduce it and taking timely action.
Presenters:
• Chuck Miller, CEO, NgenX Energy
• Martin Harski, Cost Segregation Principal, National Tax Service Group, Withum
• Cary Milstein, Early Entrepreneur, Medical Cannabis Sector
Join us to learn more about how tax reform impacts nonprofits across the industry. By Congress approving the H.R. 1 Tax Cuts and Jobs Act, it significantly alters the U.S. tax code.
Gao report - GMO Crops Oversight & Issues of Cross ContaminationDr Dev Kambhampati
The USDA, EPA, and FDA have taken steps to regulate genetically engineered crops, but the USDA has not updated its regulations to oversee crops developed through alternative technologies. The USDA has limited data on unintended mixing of GE and non-GE crops due to not surveying identity-preserved crop farmers. The three agencies provide varying levels of information to the public about their GE crop oversight.
End Stage Renal Disease- Medicare Coverage of Home DialysisDr Dev Kambhampati
This document summarizes a Government Accountability Office (GAO) report on Medicare payment policies related to home dialysis for patients with end-stage renal disease. The key points are:
1) The percentage of dialysis patients receiving home dialysis generally declined between 1988 and 2008 but increased slightly from 2008 to 2012. Stakeholders estimated that 15-25% of patients could realistically receive home dialysis, suggesting potential for further growth.
2) Medicare payment policies provide financial incentives for dialysis facilities to encourage home dialysis. However, in the short term facilities also have incentives to prioritize additional in-center patients over increasing home dialysis.
3) Medicare payment rates to physicians for managing home
Harper's fiscal record is criticized in the article. The author argues that Harper relied too heavily on spending cuts rather than tax increases to balance budgets, disproportionately impacting lower-income Canadians. While Harper implemented some tax cuts and targeted spending, critics like Ralph Goodale argue his policies mostly benefited large corporations, not families or small businesses. The document discusses different approaches to fiscal and economic policy taken by Harper, Martin, Trudeau and others.
1. The Financial Accounting Foundation conducted a post-implementation review of FASB Interpretation No. 48 (FIN 48) which provides guidance on accounting for uncertainty in income taxes.
2. The review found that FIN 48 has improved consistency and reporting of income tax uncertainties, but it also identified opportunities for improvement and disproportionate costs for private companies.
3. Changes being considered include more outreach to financial statement users during standard-setting, including more detailed cost-benefit analyses in future standards, and consistent re-exposure policies.
Permanent Establishment May Not Be So Permanent (Prepare for Change)Accounting_Whitepapers
The document summarizes the UK's new Diverted Profits Tax (DPT), which seeks to tax profits from UK economic activity that currently avoid UK corporate tax through arrangements deemed "contrived." The 25% DPT will apply to arrangements designed to avoid a UK permanent establishment or that create an "effective tax mismatch." Additionally, proposed changes to permanent establishment definitions in OECD's BEPS Action 7 may also expand the scope of countries' taxing rights. Multinational companies should review their structures and arrangements for potential DPT or BEPS Action 7 impacts and consider establishing a formal UK taxable presence to avoid the DPT.
Small Business is under Attack by Government: Canada - January 2019paul young cpa, cga
This presentation discusses many issues facing small businesses across Canada. The federal government has decided that small businesses do not pay enough taxes as such introduced reforms.
The small business sector across Canada have been hit hard by COVI19. All levels of govt have provided different programs to support small business.
Many small businesses may never re-open post COVID19
Tax Cuts and Jobs Act: Latest employer developments as of 3-21-2018Debera Salam, CPP
Following are the slides from the CIC Plus and Ernst & Young LLP webcast that aired on March 21, 2018 where we focused on the latest developments of employer interest in connection with the Tax Cuts and Jobs Act of 2017.
This document summarizes an event presented by Vincent Leo and Jennifer Martlew of Insero & Company on November 18, 2014. It covered various accounting topics, including FASB/IASB convergence efforts, private company financial reporting, and recent FASB accounting standards updates. The agenda included overviews of FASB/IASB convergence projects, private company reporting considerations, and summaries of new standards on topics such as goodwill accounting, interest rate swaps, and discontinued operations reporting.
This document provides an overview and analysis of issues facing small businesses in Canada from the perspective of Paul Young, a CPA and small business expert. It discusses several policy changes by the Liberal government that negatively impact small businesses, including increases to minimum wage, hydro rates, carbon taxation, CPP premiums, and proposed changes to small business taxation and income sprinkling rules. Young argues these changes have increased costs and regulatory burdens for small businesses. The document also examines declining business confidence in Canada and issues facing the government in trying to balance services and taxation.
- CIT reported record quarterly and annual results for Q4 2006 and full year 2006, with EPS growth of 16% and 15% respectively excluding noteworthy items.
- Key drivers were strong loan and lease origination volume of $11.6 billion in Q4 2006, up 20% from prior year, leading to higher other revenue from gains on receivable sales and syndications.
- Credit quality remained solid across segments despite some increases in consumer metrics, and full year net charge-offs declined.
- Expenses increased due to investments in sales force and origination platforms, but efficiency ratio improved slightly.
- As a result, CIT increased 2007 EPS guidance to $5.40
This report analyzes the relationship between top tax rates and economic growth in the United States since 1945. It finds that while the top marginal tax rate has decreased from over 90% to 35% over this period, there is no conclusive evidence of a clear relationship between the tax rate reductions and economic growth. The data suggest tax rate reductions have had little association with key factors like saving, investment and productivity growth. However, tax rates appear related to rising income inequality, with higher-income groups receiving a larger share of total income as rates have declined.
This report analyzes the relationship between top tax rates and economic growth in the United States since 1945. It finds that while the top marginal tax rate has decreased from over 90% to 35% over this period, there is no conclusive evidence of a clear relationship between the tax rate reductions and economic growth. The data suggest tax rate reductions have had little association with key factors like saving, investment and productivity growth. However, tax rates appear related to rising income inequality, with higher-income groups receiving a larger share of total income as rates have declined.
The Canadian government released its first budget under Prime Minister Paul Martin which includes significant future spending commitments. However, some members of Canada's business community are worried that the budget does not do enough to maintain the country's competitiveness in the global economy through tax incentives and other measures. While the budget was received positively by some groups, others such as the Canadian Manufacturers & Exporters Association believe the government's competitiveness agenda is not being implemented quickly enough. There is debate around whether the tax reductions and other measures in the budget will be sufficient to attract investment and keep Canada competitive internationally over the long term.
The document provides a summary of UGI Corporation's fiscal third quarter results for 2018. Some key points:
1) Adjusted EPS for Q3 2018 was $0.09, nearly doubling the results from Q3 2017, excluding a $0.09 per share reserve related to a PA PUC order requiring utilities to establish a regulatory liability for tax benefits.
2) Business units like AmeriGas, UGI International, and Midstream & Marketing performed strongly in Q3 2018 compared to the prior year, benefiting from factors like warmer weather, acquisitions, and new investments.
3) However, earnings at UGI Utilities were negatively impacted by the $22.7 million revenue reduction required
The document discusses current issues in international accounting including differences between countries' accounting standards, efforts toward harmonization, and convergence of standards. It notes that historically accounting grew independently in different countries, resulting in considerable differences. Major factors influencing these differences include a country's legal system, taxation practices, capital providers, culture, and historical events. International organizations are working to reduce differences and increase comparability through harmonization and convergence. Critics argue convergence has limitations and may not suit all countries.
Altria reported its 2008 third-quarter results, with adjusted diluted EPS up 15% to $0.46. PM USA's adjusted OCI increased 6.3% due to lower promotional rates and costs. Marlboro gained retail share. Altria reaffirmed its full-year EPS guidance of $1.63 to $1.67, representing 9-11% growth. It also announced that its proposed acquisition of UST passed federal antitrust review.
With Republicans controlling both chambers of Congress and the Presidency, it is reasonable to expect that traditional Republican policy priorities will be enacted. One prominent priority is comprehensive tax reform that significantly lowers the corporate tax rate.
Although you can’t avoid taxes, you can take steps to minimize them. This requires proactive tax planning — estimating your tax liability, looking for ways to reduce it and taking timely action.
Presenters:
• Chuck Miller, CEO, NgenX Energy
• Martin Harski, Cost Segregation Principal, National Tax Service Group, Withum
• Cary Milstein, Early Entrepreneur, Medical Cannabis Sector
Join us to learn more about how tax reform impacts nonprofits across the industry. By Congress approving the H.R. 1 Tax Cuts and Jobs Act, it significantly alters the U.S. tax code.
Gao report - GMO Crops Oversight & Issues of Cross ContaminationDr Dev Kambhampati
The USDA, EPA, and FDA have taken steps to regulate genetically engineered crops, but the USDA has not updated its regulations to oversee crops developed through alternative technologies. The USDA has limited data on unintended mixing of GE and non-GE crops due to not surveying identity-preserved crop farmers. The three agencies provide varying levels of information to the public about their GE crop oversight.
End Stage Renal Disease- Medicare Coverage of Home DialysisDr Dev Kambhampati
This document summarizes a Government Accountability Office (GAO) report on Medicare payment policies related to home dialysis for patients with end-stage renal disease. The key points are:
1) The percentage of dialysis patients receiving home dialysis generally declined between 1988 and 2008 but increased slightly from 2008 to 2012. Stakeholders estimated that 15-25% of patients could realistically receive home dialysis, suggesting potential for further growth.
2) Medicare payment policies provide financial incentives for dialysis facilities to encourage home dialysis. However, in the short term facilities also have incentives to prioritize additional in-center patients over increasing home dialysis.
3) Medicare payment rates to physicians for managing home
The document discusses the Department of Defense's (DOD) efforts to address counterfeit parts in its supply chain. It finds that while DOD agencies and contractors submitted over 500 suspect counterfeit part reports to the Government-Industry Data Exchange Program from 2011 to 2015, aspects of the reporting process have limited its effectiveness as an early warning system. Specifically, DOD does not oversee defense agency reporting, there is no standard for when to report parts as suspect counterfeits, and reports are often restricted to government access only. Additionally, while contractors have established counterfeit detection systems, DOD has yet to provide guidance on how these systems will be assessed to ensure effectiveness. The document makes recommendations to improve oversight,
Gao report - biodefense and biosurveillance challengesDr Dev Kambhampati
The biodefense enterprise faces multiple challenges in building and maintaining effective biodefense and biosurveillance systems. There is no strategic oversight or national strategy to coordinate the complex array of federal programs and agencies involved. While some high-level strategies exist, no integrated national strategy guides risk identification, resource assessment, and prioritization across the biodefense field. Biosurveillance also lacks a unified national strategy and faces challenges at all levels of government that no single agency can address alone. GAO reports over many years have highlighted these issues but key recommendations have not been fully implemented.
This document summarizes Medicare payments for outpatient dialysis services in 2015. It finds that payment adequacy indicators are generally positive, as access to care and quality of care have been maintained or improved in recent years while costs increased modestly. The aggregate Medicare margin for outpatient dialysis facilities in 2013 was 4.3%, and is projected to be 2.4% in 2015. Therefore, the Commission recommends eliminating the update to the outpatient dialysis payment rate for 2016, as payments appear adequate.
This document provides an overview of China's investment climate and policies toward foreign direct investment (FDI) according to a 2015 report by the U.S. Department of State. It notes that while China attracted large amounts of FDI, many sectors remain closed to foreign investors. The report discusses China's laws and regulations governing FDI, industrial policies promoting certain sectors, and recent reform announcements that could improve market access if implemented. However, foreign investors continue to face restrictions, lack of transparency, inconsistent enforcement, and discriminatory policies that favor domestic firms.
This document summarizes a report by the U.S. Government Accountability Office (GAO) on technologies that can reduce freshwater use in hydraulic fracturing and thermoelectric power generation. It finds that while some technologies exist to use less water in fracturing, such as using gases instead of water, they are not widely applicable and their main benefit is increased production. For power plants, dry and hybrid cooling systems use less water but are more expensive, and emerging technologies are still uncertain. The regional distribution of power plants reflects water stress to some degree, but switching technologies has limitations.
The USGS and industry report different tantalum supply data due to differences in what is included and how data is collected. The USGS reports mine production data it collects through country surveys, while industry data includes additional processed forms and is based on voluntary company reports. DOD assesses tantalum availability for emergency scenarios and takes steps to ensure supply data used is reliable, such as verifying sources and checking calculations before analyses. DOD has identified potential tantalum shortfalls and recommended stockpiling to address risks.
The Department of Defense (DOD) has purchased small amounts of alternative fuels for testing purposes but not yet for military operations. From 2007-2014, DOD purchased about 2.0 million gallons of alternative fuel for $58.6 million, compared to 32.0 billion gallons of petroleum fuel for $107.2 billion. DOD has approved two alternative fuel production processes and continues testing others. DOD has a standard process to purchase all fuels competitively based on technical requirements and price. DOD has used Defense Production Act incentives to support two biofuel production projects with $234.1 million in federal funding.
This document provides an overview of Mexico's investment climate and policies. Some key points:
- Mexico is generally open to foreign investment and has undertaken economic reforms in sectors like energy and telecommunications. However, some sectors are reserved for Mexican nationals or the state.
- Disputes can be resolved through domestic courts or international arbitration like ICSID. Real estate disputes often take years to resolve in domestic courts.
- The legal system is based on civil law and Mexico has specialized courts for fiscal, labor, and agrarian law issues. Judicial independence has been questioned.
- Economic reforms aim to increase competition, investment, and tax revenue through changes in sectors like energy, telecommunications, and financial regulations
Germany has an open and welcoming attitude towards foreign direct investment. The legal framework for investment is solid and enforcement is effective. While Germany has no specific industrial promotion policies, it does promote itself as a business and technology location through the Germany Trade & Invest agency. Foreign investors are treated equally under German law and are subject to the same regulations as domestic firms. Screening of foreign investment is only required for certain security-related sectors and transactions that could threaten national security.
Three Department of Defense offices have identified certain rare earth materials as critical for defense applications, but DOD has not taken a comprehensive approach to determining which rare earths are critical to national security. Additionally, DOD's current approach to identifying and mitigating risks associated with rare earths is fragmented, with different interpretations of which are critical. As a result, establishing risk priorities is difficult. DOD has not developed a comprehensive approach for ensuring sufficient rare earth supply for national security, such as establishing criticality, assessing supply risks, and identifying mitigation actions. Such an approach would better position DOD to ensure continued functionality in weapon systems if a disruption occurred.
Dr Dev Kambhampati | A Strategy for American InnovationDr Dev Kambhampati
This document provides an overview of the Obama Administration's Strategy for American Innovation. The strategy has six key elements: 1) investing in the building blocks of innovation, 2) fueling private sector innovation, 3) empowering innovators, 4) creating jobs and economic growth, 5) catalyzing breakthroughs in national priorities, and 6) delivering innovative government. It outlines various initiatives across government to strengthen the innovation ecosystem through funding research, education, infrastructure, and promoting public-private partnerships and commercialization of federally-funded research. The overall goals are to drive economic growth, address societal challenges, and ensure shared prosperity through a whole-of-government approach to innovation policy.
Additive manufacturing, also known as 3D printing, builds three-dimensional objects from a digital file in successive layers, unlike conventional manufacturing which cuts or shapes materials. The document discusses a forum convened by the Government Accountability Office to examine opportunities, challenges, and policy implications of using additive manufacturing to produce functional parts. Participants identified opportunities in industries like medicine and aerospace but also challenges regarding quality control, design tools, and developing an industrial infrastructure to support increased production of functional parts. Policy considerations included areas for potential government coordination or standards setting to address challenges and encourage increased use of the technology.
Gao- Offshore Oil & gas resources decommissioning liabilitiesDr Dev Kambhampati
The GAO report examines the Department of the Interior's (Interior) management of decommissioning liabilities from offshore oil and gas production in the Gulf of Mexico. It finds that Interior has procedures to oversee decommissioning and estimate costs, but its data system for cost estimates is inaccurate. Interior's procedures for obtaining financial assurances from companies pose risks to the federal government if companies do not fulfill decommissioning obligations. Interior faces challenges in obtaining accurate cost information from companies and managing potential decommissioning liabilities of billions of dollars if companies default.
US Tax Reform: The Potential Tax Implications for Brazilian TaxpayersRamon Tomazela
In this article, the author analyses the main corporate tax reform proposals under discussion in the United States
and their potential implications for Brazilian taxpayers.
This document provides a summary of the tax treatment of different types of businesses in the United States. C corporations are taxed twice, at the corporate level and then again when profits are distributed to shareholders. Other business types like sole proprietorships, partnerships, S corporations and LLCs have their income "pass through" to owners and taxed under individual income tax rates to avoid double taxation. The document discusses the defining features and tax implications of each major business type.
Politics and Treasury: How the New Administration May Impact Treasury in 2017Elena Oliveira
Last year’s US election campaign offered many promises that were expected to significantly affect corporate finance. As the new administration implements change, several impacts can be expected for CFOs and Treasurers. View our recorded webinar during which we discuss the potential effects on corporate treasury and how your team can be prepared.
CBIZ Commercial Real Estate Quarterly Newsletter – June 2021CBIZ, Inc.
This issue tackles two of the hottest topics for the CRE sector - what you can do to reduce the cost of property insurance and how to take advantage of the newly supercharged employee retention tax credit. Rounding out the issue is coverage of Biden’s tax plan and short takes on Q1 and Q2 CRE sector news. As an added bonus, links are provided to COVID-19 resources, on-demand webinars and additional content & business aids. Learn more.
The FASB met Wednesday, Jan. 10, 2018, and discussed how companies should account for the effects of the new tax law, introduced as H.R. 1 (Tax Cuts and Jobs Act). The discussion addressed six different financial reporting issues related to the new tax law and has already resulted in the issuance of a FASB Staff Q&A.
President Obama introduced several new tax increases and incentives in a 2011 budget proposal that includes over a trillion dollars in tax changes. Most of the tax proposals are unchanged from those in last year’s budget proposal, but several important provisions were added that involve international taxes, worker classification, job creation and energy incentives.
The document discusses the debate around taxing carried interest at ordinary income tax rates versus capital gains tax rates. Currently, carried interest is taxed as capital gains. Proponents of change argue this is unfair, as fund managers provide services, and their income should be taxed like other service providers at higher ordinary rates. However, opponents note that fund managers also take on investment risk like other investors. The document outlines the various perspectives in the debate and considers alternative proposals but does not take a definitive position.
Both with significant changes of interest to technology business
> Higher cash refunds as Provinces match increase in federal SR&ED expenditure limits
> Multi-Media and e-business get increased tax credits
> Ontario Tax Holiday for companies that commercialize University R&D
soluiton manual for South-Western Federal Taxation 2022 Corporations, Partner...ssuserf63bd7
https://qidiantiku.com/soluiton-manual-for-south-western-federal-taxation-2022-corporations-partnerships-estates-and-trusts-45th-edition.shtml
Full download please contact u84757@protonmail.com or qidiantiku.com
This document summarizes a report by the American Legislative Exchange Council (ALEC) on the costs of tax cronyism. It defines tax cronyism as using tax policy to benefit specific firms or industries rather than having broadly applicable, neutral tax rules. The report argues that tax cronyism stifles competition and economic growth. It suggests eliminating tax cronyism through revenue-neutral tax reforms or increased transparency and analysis of such policies to ensure they create economic growth beyond their costs. The report estimates that tax carve-outs in the US total around $488 billion annually but notes tax cronyism is difficult to quantify fully due to lack of transparency.
Steven Rattner testified before the Senate Finance Committee on the need for tax reform. He argued that the tax code has deteriorated without reform in over 30 years, allowing lawyers and accountants to legally ease tax burdens for their wealthy clients. For example, the 400 highest income Americans saw their tax rate drop from 30% to 17% from 1995 to 2012 due largely to low capital gains and dividend rates. Rattner advocated achieving greater fairness and revenue by reducing the number of tax rates, eliminating special treatment of capital gains and dividends, and reducing loopholes that disproportionately benefit the wealthy.
The document outlines key components of President Obama's American Jobs Act, including tax cuts and incentives to help small businesses hire and grow. It proposes halving the payroll tax for businesses on the first $5 million in wages, providing a payroll tax holiday for new hiring or wage increases, and extending full business expensing. It also discusses regulatory reforms and improved access to capital to support small business growth and job creation. The overall goals are to put people back to work and put more money in the pockets of working Americans without adding to the deficit.
The document outlines key components of President Obama's American Jobs Act, including providing tax cuts to help small businesses hire and grow. It proposes a payroll tax cut for all businesses on the first $5 million of payroll. It also proposes a complete payroll tax holiday for new jobs or wage increases up to $50 million in new wages. The plan aims to put more people back to work and more money in the pockets of working Americans without adding to the federal deficit.
This document provides an overview and goals of the Trump Administration's unified framework for tax reform. The framework aims to simplify the tax code, provide tax relief for middle-class families and small businesses, and make the United States more competitive globally. It proposes consolidating the current seven tax brackets into three brackets of 12%, 25%, and 35%. It also roughly doubles the standard deduction and increases the child tax credit to benefit middle-class families. The framework seeks to lower the corporate tax rate to 20% and allow businesses to immediately write off capital investments to spur business investment and growth.
Global companies investing in the United States face unique opportunities and challenges. Doing business in the US reviews the key tax issues and provides insights to help investors navigate the US business environment.
This document summarizes a tax discussion paper released by the Australian government. It outlines the government's commitment to having an open conversation about tax reform to create a tax system that delivers lower, simpler, and fairer taxes. Key points include: (1) tax reform is needed to support ongoing economic growth and changes to encourage workforce participation, (2) the current tax system is too reliant on income taxes and complex, and (3) the government wants broad community input as it considers options to improve the tax system.
The document discusses recent trends in taxation around the world including economic underperformance, pressure on governments and corporations to mobilize resources, and strengthening of tax monitoring systems. It notes challenges for corporations from increased tax reforms, compliance requirements, and uncertainty. However, it also discusses opportunities for corporations to review business models, improve governance, and focus on fundamentals rather than tax arbitrage. Specific Indian tax reforms like GAAR, GST, and dispute resolution processes are analyzed, and recommendations are provided around standardized tax models, reducing tax rates, widening the tax base, and improving corporate compliance.
Five broad principles guide AARP’s evaluation of tax options. Propos.pdfaswrd
Five broad principles guide AARP’s evaluation of tax options. Proposals to reform the tax code,
stimulate the economy, raise additional revenue for any purpose, or modify specific tax
provisions should take into account these principles. Equity—Revenue-raising methods should
consider people’s ability to pay and should, to the extent possible, achieve vertical and horizontal
equity. Taxation should be progressive, and people with comparable incomes should be taxed at
comparable rates. Taxes may also be related to benefits derived from government services.
Economic neutrality—Taxes should be as neutral as possible in their treatment of economic
activity and should not unduly encourage behavior undertaken simply to avoid taxation. Often
this can be achieved by a combination of a broad taxable base and a low tax rate. In addition
taxes should not unduly hinder economic growth, induce inflation, or discourage savings. Taxes
may be used to mitigate economic costs imposed on society that were not fully captured through
market prices. Administrative efficiency—Taxes should be simple for taxpayers to understand
and comply with, and as easy as possible to administer. The need to collect data on taxpayers and
enforce tax laws should be balanced against the protection of individual liberties and privacy.
Revenue—The tax system must produce sufficient revenue to pay for important national, state,
and local priorities and maintain fiscal stability. Stable and reliable public policies and programs
require adequate and consistent sources of revenue. Social and other policy goals—A balance
must be struck between using the tax system to address social policy goals (through such
measures as tax expenditures or earmarking revenue) and raising adequate revenues simply and
equitably. Sometimes the above principles conflict with each other. In these cases AARP may
weigh the relative importance of each of the key principles. AARP’s position on tax policies take
into account the net fiscal impact of a given policy proposal, not only its tax component.
Economic neutrality—Typically taxes create some inefficiencies by distorting economic choices
and thus people’s behavior in the market. One major goal of most tax reform proposals is to
reduce these distortions and encourage stronger economic growth. Proponents of consumption
taxes note that income taxes encourage consumption over saving. Integrating the individual and
corporate income taxes would reduce distortions that influence how businesses are organized and
how income is transferred from corporations to shareholders. By eliminating certain tax
deductions and other preferences, fundamental restructuring of the current income tax would also
improve the neutrality and efficiency of the tax system. Administrative efficiency—The degree
of administrative complexity depends greatly on the form of the tax. A VAT can have high
administrative costs because it increases the number of taxpayers and requires detailed record
ke.
Cbizmhm special report_fiscal-year-2016-budget-proposalsCBIZ, Inc.
President Obama released his $3.99 trillion FY 2016 budget proposal calling for tax increases on higher-income individuals and businesses, expanded tax credits for families and education, and making some business tax breaks like research credit permanent. The budget also proposed international tax reforms including a one-time 14% tax on foreign earnings and a 19% minimum tax on foreign profits. Congressional Republicans and Democrats have indicated willingness to discuss tax reform but differ on key issues like rates and which deductions to eliminate.
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This document summarizes the history and current state of China's economic rise over the past 40 years since implementing market reforms in 1979. It describes how China has transitioned from a poor, centrally planned economy to become the world's largest economy based on purchasing power parity. However, China still faces major economic challenges including transitioning to a free market system, rebalancing its economy away from exports and investment towards domestic consumption, reducing debt and overcapacity, and addressing environmental and corruption issues. The rapid growth of the Chinese economy has significant implications for the US and is an important issue for Congress.
Specialty drugs are one of the fastest growing areas of health care spending in the United States. There is no single definition but they are generally expensive drugs that treat complex conditions like cancer and hepatitis C and often require special administration. Spending on specialty drugs increased 26.5% in 2014 and they now account for about one-third of total US prescription drug spending. This growth raises issues for private insurers and government programs who are trying to control costs while still providing access to important treatments. Insurers use strategies like higher copays, prior authorization requirements, and limiting coverage to the sickest patients to manage specialty drug utilization.
The document summarizes the process by which the FDA approves new drugs for use and regulates drugs post-approval. It discusses how drugs are tested in clinical trials through an investigational new drug application and new drug application. It then outlines the FDA's role in reviewing applications and ensuring safety and effectiveness. Finally, it describes the FDA's ongoing role in regulating approved drugs, including product quality, labeling, adverse event reporting, and risk management. The House passed legislation that would reauthorize FDA drug user fee programs and make changes to the drug approval process.
The document summarizes FDA regulation of medical devices in the United States. It discusses that many medical devices must undergo premarket review by the FDA to be legally marketed. Devices are classified based on risk, and moderate and high-risk devices must receive FDA clearance or approval prior to marketing, usually via the 510(k) or premarket approval (PMA) processes. Concerns have been raised about FDA's device review processes and oversight of marketed devices based on reports of device problems causing injuries.
This document provides an overview of frequently asked questions about prescription drug pricing and policy in the United States. It discusses key topics such as how much the US spends on prescription drugs annually, factors contributing to increases in drug spending, the role of government programs in drug coverage, and policies around pharmaceutical research and marketing. The document contains data on US drug spending trends, the share of spending from different sources, international comparisons, and the impact of publicly funded research. It aims to give Congress a broad understanding of issues related to prescription drug costs and availability.
This document provides an overview of carbon capture and sequestration (CCS) projects in the United States. It summarizes three large CCS power plants: the Petra Nova plant in Texas, which began operations in 2017 and captures 1.4-1.6 million tons of CO2 annually; the Kemper County plant in Mississippi, which suspended its CCS operations in 2017 due to cost overruns and delays; and the Boundary Dam plant in Canada, which captures around 1 million tons of CO2 annually. It also discusses legislation and funding for CCS, and provides a primer on the CCS process.
The document provides an overview of the Arctic National Wildlife Refuge (ANWR) and the ongoing debate over whether to allow energy development in the refuge. It discusses the history and establishment of ANWR, the potential energy resources within the refuge including oil and natural gas, the biological resources and native interests, and the options for both protecting and developing the refuge. Key points of contention have been over whether to allow drilling in the 1.57 million acre Coastal Plain area, which supporters view as promising for oil but others want to protect for its wildlife and subsistence values.
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This document is a draft of a NIST special publication providing guidance on situational awareness solutions for electric utilities. It includes an executive summary, approach, architecture, and security characteristics for implementing situational awareness. The publication describes a NCCoE project that developed an example solution to converge monitoring across IT, operational technology, and physical access systems in order to improve utilities' ability to detect cyberattacks and security incidents. The solution is presented as a modular guide to help utilities implement standards-based technologies in a risk-based manner to gain efficiencies in monitoring, identification, and response to cyber incidents.
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Dr Dev Kambhampati | USA Cybersecurity R&D Strategic PlanDr Dev Kambhampati
This document presents the Federal Cybersecurity Research and Development Strategic Plan, which was developed in response to a requirement in the Cybersecurity Enhancement Act of 2014. The plan outlines the US government's strategic approach to guide Federal investments in cybersecurity research over the next 5 years, with the goals of deterring cyber attacks, protecting systems and data, detecting threats, and helping systems adapt. It emphasizes critical areas like the scientific foundations of security, risk management, human aspects, workforce development and transitioning research into practice. The plan aims to establish a position of assurance, strength and trust in cyber systems through advances in cybersecurity science and engineering.
Dr Dev Kambhampati | USA Artificial Intelligence (AI) R&D Strategic PlanDr Dev Kambhampati
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This document presents the Federal Big Data Research and Development Strategic Plan, which outlines seven strategies to guide federal agencies in developing and expanding mission-driven Big Data programs and investments. The strategies address: 1) leveraging emerging Big Data technologies and techniques, 2) exploring trustworthiness of data and knowledge, 3) building research cyberinfrastructure, 4) promoting data sharing and management policies, 5) understanding privacy, security and ethics regarding Big Data, 6) improving national Big Data education and training, and 7) enhancing cross-sector collaboration in the Big Data innovation ecosystem. The overarching goal is to maximize the benefits of Big Data for scientific discovery, research, and informed decision-making.
DARPA has had some success transitioning technologies since 2010, but inconsistently defines and assesses transitions. GAO's analysis identified four key factors for successful transition: military/commercial demand for the technology, sustained DARPA interest in the research area, technology maturity, and partnerships. However, DARPA prioritizes innovation over transition and provides limited transition training and assessment. GAO recommends DARPA regularly assess transition strategies, refine training, and increase sharing of technical data to improve transition success.
NASA Technology Roadmaps- Materials, Structures & ManufacturingDr Dev Kambhampati
This document is NASA's 2015 Technology Roadmap for Materials, Structures, Mechanical Systems, and Manufacturing (TA 12). It identifies technologies needed over the next 20 years to address challenges for deep space exploration, including radiation protection, mass reduction, reliability, and affordability. The roadmap focuses on applied research and development for materials, structures, mechanisms, and manufacturing methods. Advances in these areas are critical to enable future NASA missions and strengthen the US economy through commercial applications. The roadmap was developed in collaboration with industry and academia to identify cutting-edge technologies.
Dr Dev Kambhampati | Tennessee Exports, Jobs & Foreign InvestmentDr Dev Kambhampati
This document summarizes Tennessee's exports, jobs supported by exports, and foreign investment. It finds that in 2015, Tennessee exports supported over 158,000 jobs, up 35,000 since 2009. Tennessee's top export markets are Canada, Mexico, China, and Japan, and its top exported products are transportation equipment, computer and electronic products, chemicals, and machinery. The document also notes that over 7,300 Tennessee companies export goods, with small and medium enterprises accounting for 83% of exporters and 16% of export value. Finally, it states that in 2014 over 139,000 Tennessee workers were employed by foreign-owned companies, most from Japan, the UK, Germany, France and the Netherlands.
The document analyzes the impact of NAFTA on state-level exports in the United States from 1993 to 2003. It finds that exports to NAFTA partners (Canada and Mexico) grew faster than total US exports over this period, increasing their share. By 2003, NAFTA markets accounted for 37% of US merchandise exports, up from 31% in 1993. Texas was the top exporting state to NAFTA partners in 2003, sending $52.4 billion worth of goods, followed by California at $26.1 billion. Six of the top ten state exporters to NAFTA were traditional manufacturing states in the North.
The document discusses the impact of NAFTA on the US chemicals industry over the past 10 years. It finds that US chemical firm exports to Canada increased 38% and exports to Mexico increased 97% from 1992 to 2002. In 2002, US firms captured 71% of Mexico's chemicals import market and 70% of Canada's. NAFTA eliminated tariffs on US chemical imports to Mexico and Canada, providing a competitive advantage. Some US chemical companies have benefited from expanding sales and investment opportunities in Mexico under NAFTA.
This document summarizes a hearing held by the U.S.-China Economic and Security Review Commission on China's 13th Five-Year Plan. The hearing examined:
1) How China will finance its ambitious reform agenda under the 13th Five-Year Plan. Local governments face debt burdens and limited ability to raise funds for reforms.
2) The impact of China's industrial policies on U.S. automotive, aerospace, and semiconductor industries. China supports its domestic firms through subsidies and restrictions to acquire foreign technology.
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The hearing discussed financing China's reforms, challenges
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Explore the world of investments with an in-depth comparison of the stock market and real estate. Understand their fundamentals, risks, returns, and diversification strategies to make informed financial decisions that align with your goals.
The Rise and Fall of Ponzi Schemes in America.pptxDiana Rose
Ponzi schemes, a notorious form of financial fraud, have plagued America’s investment landscape for decades. Named after Charles Ponzi, who orchestrated one of the most infamous schemes in the early 20th century, these fraudulent operations promise high returns with little or no risk, only to collapse and leave investors with significant losses. This article explores the nature of Ponzi schemes, notable cases in American history, their impact on victims, and measures to prevent falling prey to such scams.
Understanding Ponzi Schemes
A Ponzi scheme is an investment scam where returns are paid to earlier investors using the capital from newer investors, rather than from legitimate profit earned. The scheme relies on a constant influx of new investments to continue paying the promised returns. Eventually, when the flow of new money slows down or stops, the scheme collapses, leaving the majority of investors with substantial financial losses.
Historical Context: Charles Ponzi and His Legacy
Charles Ponzi is the namesake of this deceptive practice. In the 1920s, Ponzi promised investors in Boston a 50% return within 45 days or 100% return in 90 days through arbitrage of international reply coupons. Initially, he paid returns as promised, not from profits, but from the investments of new participants. When his scheme unraveled, it resulted in losses exceeding $20 million (equivalent to about $270 million today).
Notable American Ponzi Schemes
1. Bernie Madoff: Perhaps the most notorious Ponzi scheme in recent history, Bernie Madoff’s fraud involved $65 billion. Madoff, a well-respected figure in the financial industry, promised steady, high returns through a secretive investment strategy. His scheme lasted for decades before collapsing in 2008, devastating thousands of investors, including individuals, charities, and institutional clients.
2. Allen Stanford: Through his company, Stanford Financial Group, Allen Stanford orchestrated a $7 billion Ponzi scheme, luring investors with fraudulent certificates of deposit issued by his offshore bank. Stanford promised high returns and lavish lifestyle benefits to his investors, which ultimately led to a 110-year prison sentence for the financier in 2012.
3. Tom Petters: In a scheme that lasted more than a decade, Tom Petters ran a $3.65 billion Ponzi scheme, using his company, Petters Group Worldwide. He claimed to buy and sell consumer electronics, but in reality, he used new investments to pay off old debts and fund his extravagant lifestyle. Petters was convicted in 2009 and sentenced to 50 years in prison.
4. Eric Dalius and Saivian: Eric Dalius, a prominent figure behind Saivian, a cashback program promising high returns, is under scrutiny for allegedly orchestrating a Ponzi scheme. Saivian enticed investors with promises of up to 20% cash back on everyday purchases. However, investigations suggest that the returns were paid using new investments rather than legitimate profits. The collapse of Saivian l
13 Jun 24 ILC Retirement Income Summit - slides.pptxILC- UK
ILC's Retirement Income Summit was hosted by M&G and supported by Canada Life. The event brought together key policymakers, influencers and experts to help identify policy priorities for the next Government and ensure more of us have access to a decent income in retirement.
Contributors included:
Jo Blanden, Professor in Economics, University of Surrey
Clive Bolton, CEO, Life Insurance M&G Plc
Jim Boyd, CEO, Equity Release Council
Molly Broome, Economist, Resolution Foundation
Nida Broughton, Co-Director of Economic Policy, Behavioural Insights Team
Jonathan Cribb, Associate Director and Head of Retirement, Savings, and Ageing, Institute for Fiscal Studies
Joanna Elson CBE, Chief Executive Officer, Independent Age
Tom Evans, Managing Director of Retirement, Canada Life
Steve Groves, Chair, Key Retirement Group
Tish Hanifan, Founder and Joint Chair of the Society of Later life Advisers
Sue Lewis, ILC Trustee
Siobhan Lough, Senior Consultant, Hymans Robertson
Mick McAteer, Co-Director, The Financial Inclusion Centre
Stuart McDonald MBE, Head of Longevity and Democratic Insights, LCP
Anusha Mittal, Managing Director, Individual Life and Pensions, M&G Life
Shelley Morris, Senior Project Manager, Living Pension, Living Wage Foundation
Sarah O'Grady, Journalist
Will Sherlock, Head of External Relations, M&G Plc
Daniela Silcock, Head of Policy Research, Pensions Policy Institute
David Sinclair, Chief Executive, ILC
Jordi Skilbeck, Senior Policy Advisor, Pensions and Lifetime Savings Association
Rt Hon Sir Stephen Timms, former Chair, Work & Pensions Committee
Nigel Waterson, ILC Trustee
Jackie Wells, Strategy and Policy Consultant, ILC Strategic Advisory Board
In World Expo 2010 Shanghai – the most visited Expo in the World History
https://www.britannica.com/event/Expo-Shanghai-2010
China’s official organizer of the Expo, CCPIT (China Council for the Promotion of International Trade https://en.ccpit.org/) has chosen Dr. Alyce Su as the Cover Person with Cover Story, in the Expo’s official magazine distributed throughout the Expo, showcasing China’s New Generation of Leaders to the World.
Confirmation of Payee (CoP) is a vital security measure adopted by financial institutions and payment service providers. Its core purpose is to confirm that the recipient’s name matches the information provided by the sender during a banking transaction, ensuring that funds are transferred to the correct payment account.
Confirmation of Payee was built to tackle the increasing numbers of APP Fraud and in the landscape of UK banking, the spectre of APP fraud looms large. In 2022, over £1.2 billion was stolen by fraudsters through authorised and unauthorised fraud, equivalent to more than £2,300 every minute. This statistic emphasises the urgent need for robust security measures like CoP. While over £1.2 billion was stolen through fraud in 2022, there was an eight per cent reduction compared to 2021 which highlights the positive outcomes obtained from the implementation of Confirmation of Payee. The number of fraud cases across the UK also decreased by four per cent to nearly three million cases during the same period; latest statistics from UK Finance.
In essence, Confirmation of Payee plays a pivotal role in digital banking, guaranteeing the flawless execution of banking transactions. It stands as a guardian against fraud and misallocation, demonstrating the commitment of financial institutions to safeguard their clients’ assets. The next time you engage in a banking transaction, remember the invaluable role of CoP in ensuring the security of your financial interests.
For more details, you can visit https://technoxander.com.
Discover the Future of Dogecoin with Our Comprehensive Guidance36 Crypto
Learn in-depth about Dogecoin's trajectory and stay informed with 36crypto's essential and up-to-date information about the crypto space.
Our presentation delves into Dogecoin's potential future, exploring whether it's destined to skyrocket to the moon or face a downward spiral. In addition, it highlights invaluable insights. Don't miss out on this opportunity to enhance your crypto understanding!
https://36crypto.com/the-future-of-dogecoin-how-high-can-this-cryptocurrency-reach/
How to Identify the Best Crypto to Buy Now in 2024.pdfKezex (KZX)
To identify the best crypto to buy in 2024, analyze market trends, assess the project's fundamentals, review the development team and community, monitor adoption rates, and evaluate risk tolerance. Stay updated with news, regulatory changes, and expert opinions to make informed decisions.
University of North Carolina at Charlotte degree offer diploma Transcripttscdzuip
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Every business, big or small, deals with outgoing payments. Whether it’s to suppliers for inventory, to employees for salaries, or to vendors for services rendered, keeping track of these expenses is crucial. This is where payment vouchers come in – the unsung heroes of the accounting world.
The presidents-framework-for-business-tax-reform-an-update-04-04-2016
1.
THE PRESIDENT’S FRAMEWORK FOR
BUSINESS TAX REFORM:
AN UPDATE
A Joint Report by
The White House and the Department of the Treasury
April 2016
2. 1
The President’s Framework for Business
Tax Reform: An Update
Contents
Introduction..................................................................................................................................................2
I. The Need for Reform............................................................................................................................4
Distortions in the Form of Investment by Industry and Asset...................................................................... 6
Distortions in the Financing of Investment................................................................................................... 8
Distortions in the Organizational Form of Businesses.................................................................................. 9
Distortions in the Location of Production and Allocation of Profits........................................................... 11
Positive and Negative Externalities of Business Behavior .......................................................................... 16
II. The President’s Framework for Business Tax Reform ......................................................................17
Eliminate Loopholes and Subsidies, Broaden the Base, and Cut the Corporate Tax Rate ......................... 17
Strengthen American Innovation, Clean Energy, and Manufacturing........................................................ 21
Strengthen the International Tax System to Encourage Domestic Investment ......................................... 23
Simplify and Cut Taxes for America’s Small Businesses.............................................................................. 26
Restore Fiscal Responsibility....................................................................................................................... 27
Conclusion ..................................................................................................................................................29
3. 2
Introduction
America’s system of business taxation is in need of reform. The United States has a relatively narrow
corporate tax base compared to other countries—a tax base reduced by loopholes, tax expenditures, and
tax planning. The resulting system distorts choices, such as where to produce, what to invest in, how to
finance a business, and what business form to use. And it does too little to encourage job creation and
investment in the United States while allowing firms to benefit from incentives to locate production and
shift profits overseas. The system is also too complicated—especially for America’s small businesses.
In 2012, the White House and the Treasury Department released The President’s Framework for Business
Tax Reform, outlining the need for reform of the business tax system and presenting the five elements of
reform as envisioned by the President: eliminating loopholes and subsidies to broaden the base and lower
the rate, strengthening American manufacturing and innovation, strengthening the international tax
system, simplifying and cutting taxes for America’s small businesses, and restoring fiscal responsibility
without adding to the deficit. Since then, Members of Congress from both parties have put forward
thoughtful tax reform proposals, including former House Ways and Means Committee Chairman Dave
Camp and former Senate Finance Committee Chairman Max Baucus. Last year, a number of Senate
Finance Committee working groups continued the reform effort, releasing a set of reports on different
topics in tax reform. While the Administration does not agree with every component of these proposals,
all of these efforts have underscored the need for and the urgency of business tax reform and advanced
the discussion in meaningful ways.
The urgency of closing loopholes and reforming the tax system more broadly has grown since the
Framework was released in 2012. Particularly notable is the recent wave of corporate inversions,
transactions in which a U.S. corporation shifts its legal residence abroad to be deemed a foreign company
for U.S. tax purposes, even as it frequently keeps management and business operations here. The
Congressional Research Service identified 23 inversions since 2012, compared to only three in total in
2010 and 2011. In September 2014, the Treasury took action to limit companies’ ability to undertake these
transactions and reduce the economic benefits of inversions, a step that observers have credited with
slowing the pace of inversions, and followed up with further steps in November 2015 and April 2016.
However, a complete solution to the problem requires Congressional action. The President’s Budget has
proposed to stop corporate inversions and shut down a key strategy inverted firms use to shift taxable
income outside the United States, but Congress has failed to act on these proposals. As a result, inversions
continue to erode the U.S. tax base unnecessarily.
While inversions are a particularly prominent symptom of a broken tax system, and one that should be
addressed immediately even absent broader business tax reform, the issues run much deeper. Even
without changing the address on their tax returns, corporations can shift profits to low-tax countries in
order to reduce their worldwide tax liability. Academic research suggests that the cost of profit shifting
has increased substantially in recent years and may now cost the United States more than $100 billion per
year in foregone tax revenue. The global importance of this issue is highlighted by the successful
development of comprehensive recommendations to address base erosion and profit shifting (BEPS) by
the OECD BEPS Project, which were approved by the G-20 nations in November.
In the face of these challenges, inaction is not an option. The combination of the relatively high U.S.
corporate rate and our complicated system for taxing multinational businesses has encouraged and
4. 3
facilitated the erosion of the tax base. It also has made America a less attractive place to start and grow
an international business, and complicated and distorted business decisions. Unwarranted tax
preferences continue to narrow the tax base, requiring higher tax rates than would otherwise be
necessary and encouraging investments in less-productive activities. Our high corporate tax rate,
combined with other structural features of the tax code, penalizes traditional “C corporations” relative to
other business forms and results in a significant tax advantage for financing investments using debt rather
than equity, which, in turn, imposes broader economic costs from bankruptcy and financial fragility. Tax
expenditures that benefit one industry over another, or one type of investment over another, encourage
firms to seek out investments that receive preferential tax treatment but do not necessarily result in
higher economic or social returns.
Reform should not only eliminate undesirable incentives; it should also provide incentives to support
economic activities that benefit the broader economy. For this reason, policies to strengthen innovation,
clean energy, and manufacturing, in addition to supporting America’s small businesses, are important
components of the President’s approach to business tax reform. This agenda includes an expanded and
simplified tax credit for research activities, enhanced provisions allowing small firms to write off more of
the cost of new investments, and tax credits to support investments in clean energy. In December 2015,
Congress enacted several important pieces of this agenda, including making permanent the Research and
Experimentation (R&E) tax credit for the first time since its initial enactment in the early 1980s, enhancing
incentives for small business investment, and extending tax credits for renewable energy production and
investments in clean energy technology. However, while these steps reflect significant improvements in
the law, the hard work of tax reform remains to be done. Moreover, in enacting these policies Congress
did not offset their cost as it should have, increasing the importance of restoring fiscal responsibility to
the tax reform effort. Consistent with the President’s long-standing principle that business tax reform
must be revenue neutral in the long run, reform should be fully paid for, including paying for those
provisions that have already been enacted.
This update reviews the need for reform of the U.S. business tax system and the key elements of the
President’s Framework. In addition, it details the specific proposals the President has put forward,
including a comprehensive approach to reforming the international tax system.
5. 4
I. The Need for Reform
The U.S. corporate income tax combines the highest statutory rate among advanced economies with a
base narrowed by loopholes, tax expenditures, and tax planning strategies. In addition to the corporate
income tax, the United States operates a second, parallel system of business taxation for pass-through
entities—businesses whose earnings are taxed on the owners’ income tax returns rather than a separate
entity-level return. The U.S. business tax system allows some companies to avoid significant tax liability,
while others pay tax at a high rate. It distorts important economic decisions about where to produce, how
to finance investments, and what industries and assets to invest in. The system also is too complicated,
and that complexity hurts America’s small businesses and allows large corporations to reduce their tax
liability by shifting profits around the globe.
The current business tax system reduces productivity, output, and wages through its impact on the
location of production and allocation of profits, the means of financing new investments, and the
PRESIDENT OBAMA’S FIVE ELEMENTS OF BUSINESS TAX REFORM
I. Eliminate dozens of tax loopholes and subsidies, broaden the base, and cut the corporate
tax rate to spur growth in America: The Framework would eliminate dozens of different tax
expenditures and fundamentally reform the business tax base to reduce distortions that hurt
productivity and growth. It would reinvest these savings to lower the corporate tax rate to
28 percent, putting the United States in line with major competitor countries and
encouraging greater investment in America.
II. Strengthen American innovation, clean energy, and manufacturing: The Framework would
expand incentives for research and development and clean energy while also refocusing the
manufacturing deduction.
III. Strengthen the international tax system, including establishing a new minimum tax on
foreign earnings to encourage domestic investment: Our tax system should not give
companies an incentive to locate production overseas or engage in accounting games to
shift profits abroad, eroding the U.S. tax base. Introducing a 19 percent minimum tax on
foreign earnings would help address profit shifting and discourage a global race to the
bottom in tax rates.
IV. Simplify and cut taxes for America’s small businesses: Tax reform should make tax filing
simpler for small businesses and entrepreneurs so that they can focus on growing their
businesses rather than filling out tax returns.
V. Restore fiscal responsibility and not add a dime to the deficit: Business tax reform should
be fully paid for, which includes paying for provisions Congress has already enacted without
offsets.
6. 5
allocation of investment across assets and industries.1
The high statutory rate and complicated rules for
taxing income in different countries can discourage firms from locating highly profitable investments in
the United States. Reduced investment in turn reduces U.S. productivity and output. Loopholes that allow
multinational firms to shift profits to low-tax jurisdictions abroad require higher taxes on domestic
businesses and families to make up for the lost revenue. The significant tax preference for debt
encourages excessive borrowing, which in turn increases bankruptcy costs and financial fragility, and thus
reduces macroeconomic stability. Tax expenditures that privilege certain industries and assets encourage
investment in low-return, lightly-taxed projects while high-return, but more heavily-taxed, projects are
ignored.
The distortions caused by the U.S. corporate tax system are magnified by the relatively high statutory tax
rate. The higher the tax rate, the more a firm benefits by claiming a special deduction, reducing its taxable
income by increasing borrowing, or using aggressive strategies to shift profits offshore. Income shifting
has also grown worse as the wedge between the U.S. statutory rate and rates in other countries has
widened, and the absence of reform has left strategies used to shift income untouched.
Focusing exclusively on the U.S. statutory corporate tax rate, however, does not give a complete picture
of how the tax code affects decision-making and the competitiveness of the U.S. economy and U.S. firms
in world markets. Other indicators tell a more complete story. For example, the effective marginal tax rate
on corporate investment in the United States—the expected tax rate on a hypothetical new investment—
is slightly below the average for the G-7 (see Table 1).2
1
For more discussion of the economic case for business tax reform, see: Council of Economic Advisers. “Economic
Report of the President.” 2015. Chapter 5.
https://www.whitehouse.gov/sites/default/files/docs/cea_2015_erp_complete.pdf
2
The effective marginal tax rates (EMTRs) reported in Table 1 take into account temporary incentives in place in
2015, including 50 percent bonus depreciation in the United States. EMTRs reported elsewhere in this update do
not take these temporary incentives into account.
Statutory Corporate Tax Rate Effective Marginal Tax Rate
Country (including subnational taxes) (including subnational taxes)a
Canada 26.3 12.5
France 34.4 24.0
Germany 30.2 21.2
Italyb
31.3 5.2
Japan 32.1 24.5
United Kingdom 20.0 19.0
United States 39.0 18.1
G-7 Average Excluding the U.S.c
29.6 19.4
Table 1: G-7 Statutory Corporate Tax Rates (in Percent), 2015
a.
EMTRs reported in this table include temporary incentives for investment, including 50% bonus depreciation in the United States.
b.
The statutory rate for Italy includes the 3.9 percent IRAP regional production tax not in the reported OECD rate.
c.
The G-7 average is calculated using 2014 gross domestic product (in current US dollars) as weights.
Source: OECD and U.S. Department ofthe Treasury, Office ofTax Analysis.
7. 6
Business tax reform must consider and balance different measures. The fact that U.S. firms face a
relatively high statutory rate but do not pay similarly high rates on marginal investments suggests the
need for a reform of the corporate tax system that lowers the statutory rate while broadening the tax
base to maintain at least the same level of revenue. A broader tax base with fewer unjustified loopholes
and subsidies would level the effective marginal tax rates, regardless of the type and location of
investments. As a result, decisions would more likely be made for business reasons and not for tax
reasons, thus improving the overall quality of investment.
Reducing the number of tax expenditures and loopholes would reduce the complexity of the tax system
and lessen the tax compliance burden for large corporations and small businesses alike. The proliferation
of tax preferences has created the need for additional rules and regulations to ensure that incentives are
limited to their intended beneficiaries. Small business owners have to spend time and money learning
about tax incentives and often rely on third parties to help them navigate the thicket of complex tax
rules, while large corporations employ lawyers and accountants to structure transactions to minimize
taxes. The IRS has to spend resources monitoring and enforcing the rules. Disputes invariably arise
between the IRS and taxpayers, and society expends resources adjudicating these disputes.
In sum, the tax expenditures and loopholes in the U.S. tax system, together with the structure of the
corporate tax system, produce significant distortions that can result in a less efficient allocation of capital,
reducing the productive capacity of the economy and U.S. living standards. The distortions created by the
tax system are explored further below.
Distortions in the Form of Investment by Industry and Asset
Tax expenditures vary dramatically by industry. These differences manifest themselves in disparate
average tax rates across industries. Table 2 shows effective actual federal corporate tax rates by industry
for the period 2007-2010. The overall average federal tax rate for U.S. corporations was 23 percent—well
below the federal statutory rate of 35 percent. Within that average, there was considerable variation by
industry—from a low of a 14.5 percent average tax rate for utilities to a 30.3 percent average tax rate for
construction. Tax preferences also lead to different effective marginal tax rates across types of assets, as
Figure 1 illustrates.
8. 7
Industry Effective Actual Corporate Tax Rate
Utilities 14.5
Leasing 17.7
Transport and Warehouse 18.6
Mining 21.6
Agriculture, Forestry, Fishing 22.0
Real Estate 22.4
Manufacturing 22.4
Insurance 23.1
Finance 23.1
Information 24.2
Wholesale-Retail 27.9
All Services 29.4
Construction 30.3
Average Effective Actual Tax Rate 23.3
Source: U.S. Department ofthe Treasury, Office ofTax Analysis.
Table 2: Effective Actual Federal Corporate Tax Rates by Industry, 2007-2010
9. 8
The result is a tax system that distorts investment decisions. By allocating capital inefficiently, this system
lowers living standards now and also could impede technological innovation.3
The pace of innovation is a
key determinant of economic growth, and innovation tends to be directly related to those areas in which
we make capital investments. Firms do not reap the benefits of technological advances until new capital
is brought into production. Given this interplay between innovation and capital accumulation, the
distortions created by the current corporate income tax may slow economic growth over the long term.
These challenges are particularly notable because subsidies in the current tax code contribute to low
effective tax rates on fossil fuel and other extractive industries, even as we face long-term challenges
requiring us to create a sustainable energy future. Income from an investment in structures for oil
petroleum and natural gas faced an effective total marginal tax rate (including corporate and investor
level taxes) in 2014 of about 19 percent as compared to a 36 percent rate for manufacturing buildings.4
Distortions in the Financing of Investment
The current corporate tax code encourages corporations to finance themselves with debt rather than
with equity. Specifically, under the current tax code, corporate dividends are not deductible in computing
corporate taxable income, but interest payments are. This disparity creates a sizable wedge in the
effective tax rates applied to returns from investments financed with equity versus debt. Profits
generated by an equity-financed investment will be taxed at the 35 percent corporate rate, leaving 65
percent of the profits for dividend payments to shareholders. In contrast, profits from the same
investment funded by debt will only be taxed to the extent they exceed the associated interest payments.
Once the deductibility of interest is combined with accelerated depreciation, the cost of investments
financed by debt capital declines even further. In fact, on average, debt-financed investments are
subsidized (i.e., their effective marginal tax rate is negative), as income generated by such investments is
more than offset by deductions for interest and accelerated depreciation.
For example, the effective corporate marginal tax rate on new equity-financed investment in equipment
is 27 percent in the United States. At the same time, the effective marginal tax rate on the same
investment made with debt financing is negative 39 percent. Accounting for both corporate and
individual income taxes, the rates are 36 percent for equity-financed investment and close to zero percent
for debt-financed investment (see Figure 2).
3
See, e.g., Alan J. Auerbach and Kevin Hassett. “Tax Policy and Business Fixed Investment in the United States.”
1992. 47 J. Pub. Econ. 141; Dale W. Jorgenson and Kun-Young Yun, “Tax Policy and Capital Allocation.” 1986. 88
Scandinavian J. Econ. 355.
4
Congressional Budget Office. “Taxing Capital Income: Effective Marginal Tax Rates Under 2014 Law and Selected
Policy Options.” 2014. https://www.cbo.gov/sites/default/files/113th-congress-2013-2014/reports/49817-
Taxing_Capital_Income_0.pdf
10. 9
This tax preference for debt financing has important macroeconomic consequences. First and foremost,
outsized reliance on debt financing can increase the risk of financial distress and thus raise the likelihood
of bankruptcy. Unlike equity financing, which can flexibly absorb losses, debt requires fixed payments of
interest and principal and allows creditors to force a firm into bankruptcy. A solvent firm with limited
liquidity that is struggling to make its debt payments may experience losses of customers, suppliers, and
employees. It may engage in destructive asset “fire sales” and forgo economically profitable investments.
In an attempt to avoid bankruptcy, levered firms faced with financial distress may resort to high‐risk
investments. In the broader context, a large bias towards debt financing in the tax code may lead to
greater aggregate leverage, making the broader economy less resilient and more susceptible to severe
downturns.5
Distortions in the Organizational Form of Businesses
Businesses may be organized under a variety of different forms, including C-corporations, S-corporations,
partnerships, and sole-proprietorships. These organizational forms offer varying legal, regulatory, and tax
treatments. The primary difference in tax treatment lies between C-corporations, on the one hand, and
S-corporations, partnerships, and sole-proprietorships, on the other. C-corporations are subject to the
corporate tax, while pass-through entities are not. (These businesses are known as “pass-through”
entities because profits pass through to owners and owners pay tax on their individual tax returns.)
The combined effect of the differences in tax treatment is a lower effective tax rate for pass-through
entities relative to C-corporations. As shown in Figure 3, the effective marginal tax rate on new
5
See, e.g., Ruud A. De Mooij. “Tax Biases to Debt Finance: Assessing the Problem, Finding Solutions.” 2011. 33
Fiscal Studies 489.
11. 10
investment by C-corporations is now 30 percent, while the effective marginal tax rate on new investment
by pass-through businesses is 25 percent.6
As a result, companies are increasingly choosing to organize themselves as pass-through businesses in
order to avoid corporate tax liability. Pass-through businesses represented less than one quarter of net
business income in 1980 but about 60 percent of net business income in 2012, the most recent year with
data available (see Figure 4).7
While nearly all pass-through income in 1980 accrued to sole
proprietorships, the share of income attributable to these entities has decreased over the last three
decades. In their place, partnerships and S corporations have grown from a negligible share of business
income to roughly half.
6
Calculations of the Treasury Office of Tax Analysis.
7
Internal Revenue Service (IRS). “Statistics of Income.” www.irs.gov/taxstats.
12. 11
The ability of pass-through entities to take advantage of preferential tax treatment has placed businesses
organizing as C-corporations at a disadvantage. By allowing pass-through entities preferential treatment,
the tax code distorts choices of organizational form, which can lead to losses in economic efficiency. 8
Distortions in the Location of Production and Allocation of Profits
The U.S. system for taxing multinational corporations rewards U.S. companies that shift their reported
profits abroad to lower-tax jurisdictions and encourages inversions—transactions in which U.S.-based
corporations relocate their tax residence to low-tax countries by merging with a foreign corporation.
These incentives to manipulate tax rules in order to shift profits actually earned in the United States to
low-tax jurisdictions erode the corporate tax base, requiring higher rates elsewhere to achieve the same
revenue. They also impose significant costs on the U.S. economy by creating economic distortions that
sometimes encourage firms to invest and grow business activities abroad rather than at home and by
causing firms to devote resources to tax planning instead of productive investment. At the same time, the
current tax system can impose a relatively heavy tax burden on the income from some investments that
companies must make overseas and that compete with foreign-owned operations which can be taxed at
lower rates, limiting the opportunities of U.S.-based firms and workers.
Several of these problems arise because the current U.S. tax system taxes foreign subsidiaries of U.S.-
based multinationals on their overseas income (net of a tax credit for foreign taxes paid), but only when
that income is repatriated to the United States, a rule called deferral (since it defers taxation of the
8
See, e.g., Austan Goolsbee. “The Impact of the Corporate Income Tax: Evidence from State Organizational Form
Data.” 2004. 88 J. Pub. Econ. 2283; Jeffrey K. Mackie-Mason and Roger H. Gordon. “How Much Do Taxes
Discourage Incorporation?” 1997. 52 J. Fin. 477; Roger H. Gordon and Jeffrey K. Mackie-Mason. “Tax Distortions to
the Choice of Organizational Form.” 1994. 55 J. Pub. Econ. 279.
13. 12
income). Because that income may be retained abroad indefinitely, the result is that firms may never face
U.S. taxes on much of their foreign income, making the system much more like a territorial system—a
system in which taxes are never paid on foreign income—for many companies. Because of deferral, U.S.
corporations have a significant opportunity to reduce overall taxes paid by shifting profits to low-tax
jurisdictions, either by moving their operations and jobs there or by relying on accounting tools and
current transfer pricing practices to shift profits there.
Indeed, because of deferral and other complex rules for the taxation of U.S. multinationals, the U.S. tax
system can create greater incentives to manipulate the location of foreign income than would arise under
either a pure territorial system or a pure worldwide tax system in which all foreign income was taxed
when earned. In particular, simulations by Rosanne Altshuler and Harry Grubert, which assume a statutory
corporate rate of 30 percent but otherwise match the features of current U.S. law, show that the effective
marginal tax rate on investments by a hypothetical U.S. multinational in a low-tax country is -24 percent
after accounting for shifting of intangibles, and the effective marginal tax rate on investments in a high-
tax country is 13 percent after accounting for earnings stripping (Figure 5).9
These simulations suggest
that, though the United States ostensibly imposes a worldwide tax, the difference in effective marginal
tax rates between high-and low-tax jurisdictions abroad can look more like a territorial system. Moreover,
the tax rates in both high-and low-tax countries can be well below the rates that would apply under either
a true worldwide system or even a theoretically ideal territorial system unaffected by base erosion or
profit shifting.
9
Harry Grubert and Rosanne Altshuler. "Fixing the system: an analysis of alternative proposals for the reform of
international tax.” 2012. 66 Nat. Tax J. 671. For these computations, the low-tax country is assumed to have a
statutory rate of 5 percent and the high-tax country a rate of 25 percent. The activities in each country and the
associated tax planning strategies correspond to common behavior of U.S. companies in such countries.
14. 13
Evidence shows that U.S. multinationals’ decisions about where to invest are sensitive to effective tax
rates in foreign jurisdictions.10
There also is strong evidence that corporations use accounting mechanisms
to shift profits from where they are actually earned to tax havens and other low-tax jurisdictions. Table 3
shows profits of U.S. corporations reported in select, small countries with very low tax rates. In a number
of cases, the amount of profits far exceeds the country’s actual output, suggesting the degree to which
companies use these countries to shelter profits that were quite obviously earned elsewhere. In 2010, for
example, subsidiaries of U.S. companies (“controlled foreign corporations”) reported profits in the
Cayman Islands totaling more than 20 times that country’s entire economic output. Even in the
Netherlands, which has a much larger economy, U.S. controlled foreign corporation profits amounted to
17 percent of GDP. It is implausible that the high concentration of U.S. profits for the countries shown in
Table 3 reflects the actual business activity of these firms rather than tax planning.
The U.S. tax system also provides incentives and opportunities for corporations to reduce their tax
burdens by relocating their tax residence to a lower-tax country through a corporate inversion. A
corporate inversion is a transaction in which a U.S.-based multinational firm merges with a foreign
corporation and the U.S. parent of the group is replaced by the foreign corporation, typically located in a
low-tax country. These transactions can substantially reduce the U.S. tax liability of the multinational
group with only minimal changes to its operation. There is nothing illegal about corporate inversions, but
these transactions point to a basic unfairness where corporations take advantage of the many benefits of
operating in the United States—including reliable rule of law, intellectual property protection,
government support for basic research, an educated workforce, and publicly-provided infrastructure—
and then avoid paying their fair share of taxes.
One reason corporations pursue inversions is to remove the earnings of their foreign subsidiaries from
the U.S. tax base. But another key incentive for inverting is to allow the corporation to reduce the taxes it
pays on its domestic (U.S. source) income through base erosion (or income shifting) techniques such as
earnings stripping and aggressive transfer pricing. For example, one common way for an inverted (or
foreign-parented) corporation to move, or “strip” earnings from the U.S. corporate tax base to a low- tax
10
See, e.g., Rosanne Altshuler and Harry Grubert. “Taxpayer Responses to Competitive Tax Policies and Tax Policy
Responses to Competitive Taxpayers: Recent Evidence.” 2004. Tax Notes Int’l: Special Reports; Harry Grubert and
John Mutti. “Taxes, Tariffs and Transfer Pricing in Multinational Corporation Decision Making.” 1991. 73 Rev. Econ.
And Stats. 285.
Country
Profits of U.S. Controlled Foreign
Corporations as a Share of GDP
Bahamas 71%
Bermuda 1,614%
British Virgin Islands 1,804%
Cayman Islands 2,066%
Cyprus 14%
Ireland 42%
Luxembourg 127%
Netherlands 17%
Source: Jane G. Gravelle, Cong. Res. Service, Tax Havens International Tax Avoidance and Evasion (2015).
Table 3: U.S. Controlled Foreign Company Profits Relative to GDP, 2010
15. 14
jurisdiction, is for the company to borrow from a related foreign company in the low-tax jurisdiction, and
pay interest that is tax deductible in the United States. Earnings stripping not only reduces corporate tax
revenues, it also imposes competitive disadvantages on purely domestic U.S. firms and multinational firms
that have maintained their U.S. residence.
In the last major tax reform in 1986, the United States cut its corporate rate to well below average for
the advanced economies that comprise the Organization for Economic Cooperation and Development
(OECD). Other countries followed suit by reducing their statutory corporate rates to the point where the
U.S. statutory rate is now 11.5 percentage points above the OECD average (see Figure 6). The reduction
in tax rates abroad has increased the incentive to shift income offshore. At the same time, the United
States has failed to adequately protect its tax base by curbing income shifting and inversions directly.
The empirical evidence suggests that income-shifting behavior by multinational corporations is a
significant and growing concern that should be addressed through tax reform.11
The pre-tax profitability
of controlled foreign corporations is negatively correlated with local country statutory tax rates, taking
into account real economic factors such as financial structure, capital employed, and other non-transfer
pricing operational aspects of multinational groups.12
In addition to the evidence that companies
generally shift income from high-tax foreign countries to low-tax foreign countries, there also is evidence
11
See, e.g., Eric J. Bartelsman and Roel M.W.J. Beetsma. “Why Pay More? Corporate Tax Avoidance Through
Transfer Pricing in OECD Countries.” 2003. 87 J. Pub. Econ. 2225; Edward D. Kleinbard. “Stateless Income.” 2011.
65 Tax Law Rev. 99.
12
See, e.g., review of the literature, Department of the Treasury. “Ch. III: Study of Transfer Pricing.” November
2007. Report to the Congress on Earnings Stripping, Transfer Pricing and U.S. Income Tax Treaties.
https://www.treasury.gov/resource-center/tax-policy/Documents/ajca2007.pdf; Jane Gravelle. “Tax Havens:
International Tax Avoidance and Evasion” 2009. 62 Nat’l Tax J. 727.
16. 15
of income shifting specifically from the United States to other countries.13
Income shifting from the
United States to other countries significantly erodes the U.S. tax base and leads to lower corporate tax
receipts, draining as much as $100 billion in corporate revenue from the United States every year,
according to one analysis.14
Evidence suggests that high statutory tax rates also may affect a company’s
willingness to locate in the United States following mergers and acquisitions.15
13
Harry Grubert. “Foreign Taxes and the Growing Share of Multinational Company Income Abroad: Profits, Not
Sales, Are Being Globalized.” 2012. 65 Nat’l Tax J. 247.
14
Kimberly A. Clausing. “The Effect of Profit Shifting on the Corporate Tax Base in the United States and Beyond.”
2016. Tax Notes. http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2685442
15
Harry P. Huizinga and Johannes Voget. “International Taxation and the Direction and Volume of Cross Border
M&A.” 2009. 64 J. Fin. 1217.
CORPORATE INVERSIONS
An extreme way for a U.S.-based multinational to shift profits out of the U.S. tax base is for the
company to change its tax residence from the United States to another country by merging with a
foreign firm in a transaction called an inversion. Over the past several years, a dramatic increase in
actual and announced inversions has raised concerns about their effects on the U.S. tax base and on
domestic business activity. While current law subjects inversions that appear to be based primarily on
tax considerations to certain adverse tax consequences, it has become clear from the growing pace of
these transactions that for many corporations, these consequences are acceptable in light of the
potential tax and financial reporting benefits.
Expatriating or inverting to a low-tax country offers two primary tax benefits for a U.S. multinational.
First, the corporation can reduce or eliminate any residual U.S. tax on foreign earnings—both taxes
owed on foreign earnings that are unrepatriated at the time of the merger and future foreign earnings.
Second, the transaction allows the inverted company to reduce its taxes on U.S. earnings by stripping
taxable income out of the United States. Inverted firms can strip earnings by claiming deductions in
the United States for interest paid to the new foreign parent. Inverted firms often increase their
reported book earnings because their computed worldwide effective tax rate is reduced by the
transaction.
Genuine cross-border mergers can make the U.S. economy stronger by enabling U.S. companies to
invest overseas and encouraging foreign investment to flow into the United States. But these
transactions should be driven by genuine business strategies and economic efficiencies, not simply by
a desire to avoid U.S. taxes.
There is nothing illegal about corporate inversions. However, the ability of a multinational corporation
to take advantage of the many benefits of locating in the United States and then refuse to pay its fair
share of taxes points to a basic unfairness in the tax system. That is why the President has called on
Congress to stop corporate inversions and proposed two major anti-inversion measures. The first
proposal limits the ability of U.S. firms to invert by providing that if a U.S. firm combines with a smaller
foreign firm, the merged entity will be treated as a U.S. entity for tax purposes. The second proposal
limits the ability of foreign-controlled companies to strip the U.S. corporate tax base using interest
and reinsurance payments, addressing a major financial incentive for U.S. firms to seek inversions
under current law.
17. 16
Positive and Negative Externalities of Business Behavior
Business activity sometimes generates spillovers that benefit or harm other firms and the general public.
For example, one firm’s investment in basic research may lead to new discoveries that benefit not just
that firm but allow other businesses to develop new or better products as well. The beneficial effect of
one firm’s activities on another is an example of a positive externality. The private market may
underprovide research with spillover benefits because the firm paying for the research does not
incorporate the potential benefits to other firms when deciding how much research to invest in.
In fact, numerous studies find that the total returns to research and development are significantly larger
Though Congress has thus far failed to act, Treasury has used its existing authority under the tax
laws to reduce the tax benefits of—and when possible, stop—corporate tax inversions. Treasury’s
actions significantly diminish the ability of inverted companies to escape U.S. taxation. For some
companies considering mergers, inversions may no longer make economic sense.
To date, Treasury has taken action to:
• Prevent inverted companies from accessing a foreign subsidiary’s earnings while deferring
U.S. tax through the use of creative loans, which are known as “hopscotch” loans, and from
restructuring a foreign subsidiary in order to access the subsidiary’s earnings tax-free.
• Close a loophole to prevent inverted companies from transferring cash or property from a
foreign subsidiary to the new parent to completely avoid U.S. tax.
• Make it more difficult for U.S. entities to invert by strengthening the requirement that the
former owners of the U.S. entity own less than 80 percent of the new combined entity.
• Block a particularly blatant form of inversion known as a “third country” inversion, where
a U.S. firm merges with a firm based in one foreign country, but then locates its tax
residence in a third country—essentially cherry-picking the tax rules under which they
operate.
• Address “serial inverters” by ensuring that firms cannot avoid the existing anti-inversion
rules by acquiring foreign-owned corporate groups that themselves have grown larger
through inversions or acquisitions of U.S. firms.
• Limit the ability of firms to strip earnings out of the United States by treating certain
payments between related parties as non-deductible dividends instead of deductible
interest payments and otherwise strengthening the rules characterizing financial
instruments as debt or equity for tax purposes.
While these actions have helped slow the pace and reduce the tax benefits of inversions, only
Congress can put a stop to inversions. It can and should take action immediately. Ultimately, the
best way to address the more fundamental problems in our tax system that are highlighted by
inversions is through business tax reform that includes specific anti-inversion provisions. These
provisions will need to be in place even after business tax reform is enacted because there will
always be countries offering advantageous tax treatment where corporations can establish
residence for tax purposes if rules allow.
18. 17
than the private returns earned by the investors who fund it.16
This evidence suggests that the social
returns range from one to two times the private returns, a disparity which leads to private-sector
underinvestment in the absence of policies such as the Research and Experimentation (R&E) tax credit.
Studies that directly evaluate the R&E credit find that each dollar of foregone tax revenue through the
credit generally causes firms to invest at least one additional dollar in research and development.17
Not all spillovers are positive, however. Pollution, such as carbon pollution and particulate pollution from
burning fossil fuels, imposes costs on society from climate change and impairments to health. Because
firms do not bear the consequences of those costs, they may rely too heavily on pollution-intensive
activities. Greenhouse gas emissions impose significant environmental costs, which will only continue to
grow for future generations.18
Other pollutants, such as particulate matter and ozone, impose large
immediate social costs in the form of increased rates of mortality and morbidity, and reduced quality of
life.19
Many social costs of pollution are not borne by the firms making the decisions to invest in polluting
activities, so firms may overinvest in those activities.
Well-designed tax policies can encourage greater investments in activities with positive spillovers, like
research, and reduce reliance on pollution-intensive fuel sources.
II. The President’s Framework for Business Tax Reform
The President’s approach to business tax reform is intended to reduce the tax-induced distortions across
industries, assets, means of financing, and different forms of business, and to address problems in our
international tax system. These reforms are intended to encourage domestic investment and increase the
productivity of those investments, to simplify the tax code for America’s small businesses, to encourage
certain business activities with clear external benefits, like clean energy and research, and to rationalize
the tax treatment of multinational corporations—all in a way that is fiscally responsible over the short and
long run.
Eliminate Loopholes and Subsidies, Broaden the Base, and Cut the Corporate
Tax Rate
The President’s Framework would eliminate dozens of different tax expenditures and fundamentally
reform the business tax base to reduce distortions that hurt productivity and growth. It would reinvest
16
Bronwyn H. Hall, Jacques Mairesse, and Pierre Mohnen. “Measuring the Returns to R&D.” 2010. Handbook of
the Economics of Innovation 2.; Laura Tyson and Greg Linden. “The Corporate R&D Tax Credit and U.S. Innovation
and Competitiveness: Gauging the Economic and Fiscal Effectiveness of the Credit.” 2012. Center for American
Progress.
17
Bronwyn H. Hall. “Effectiveness of Research and Experimentation Tax Credits: Critical Literature Review and
Research Design.” 1995. Report for the Office of Technology Assessment, Congress of the United States.; Bronwyn
H. Hall and John Van Reenen. “How Effective are Fiscal Incentives for R&D? A Review of the Evidence.” 2000. 29
Research Policy.
18
U.S. Environmental Protection Agency (EPA). “Summary of Key Findings.” 2015. Climate Change in the United
States: Benefits of Global Action.
19
World Health Organization (WHO). “Fact Sheet No. 313: Ambient (outdoor) air quality and health.” 2014.
19. 18
the savings in reducing the maximum corporate tax rate from 35 percent to 28 percent and eliminating
the corporate alternative minimum tax. This combination of a broader base and a lower corporate rate
would alleviate the significant economic distortions identified above that cause businesses to base
investment decisions on tax rules rather than economic returns, and it would lead to greater parity
between large corporations and their large non-corporate counterparts. Furthermore, in conjunction with
the Framework’s proposal to modernize the international tax system and implement a minimum tax on
foreign earnings, the lower U.S. corporate rate would encourage greater investment here at home and
reduce incentives for U.S. companies to move their operations abroad or to shift profits to lower-tax
jurisdictions. Where appropriate, the changes could allow adequate transition periods to permit affected
parties to adjust to the new permanent tax rules.
The Framework would pay for cutting the corporate tax rate to 28 percent and for the business tax cuts
that were recently enacted by reforming U.S. international system and by broadening the tax base in three
major ways, including:
• Addressing depreciation schedules. Current depreciation schedules generally overstate the true
economic depreciation of assets. Although this provides an incentive to invest, it comes at the
cost of higher tax rates to raise a given amount of revenue. In an increasingly global economy,
accelerated depreciation may be a less effective way to increase investment and job creation
than reinvesting the savings from moving towards economic depreciation into reducing tax rates.
Several prominent tax reform proposals have proposed to scale back accelerated depreciation to
offset rate reductions, including the tax reform proposals put forward by Chairmen Camp and
Baucus. Other large countries have taken a similar approach: paying for rate-lowering corporate
tax reform at least in part by scaling back depreciation allowances.20
Tax reform also is an
opportunity to rationalize the relative lengths of depreciation schedules so that they better align
with the economic lives of assets; in so doing, tax reform would reduce tax distortions that lead
to misallocation of capital across assets and industries.
• Reducing the bias toward debt financing. A lower corporate tax rate by itself would reduce but
not eliminate the bias toward debt financing. Reform should take additional steps to reduce the
tax preference for debt-financed investment, such as by “haircutting” corporate interest
deductions by a certain percentage. A tax system that is more neutral towards debt and equity
will reduce incentives to overleverage and produce more stable corporate finances, making the
economy more resilient in times of stress. In addition, limiting interest deductibility would finance
lower tax rates and do more to encourage investment in the United States than many other ways
to pay for rate reductions.
• Eliminating dozens of business tax loopholes and tax expenditures. The Framework starts from
a presumption that we should eliminate all tax expenditures for specific industries, with a few
exceptions that are critical to broader growth or address certain externalities. In particular, the
Framework would:
o Eliminate “last in first out” accounting. Under the “last-in, first-out” (LIFO) method of
accounting for inventories, it is assumed that the cost of the items of inventory that are
20
Alan J. Auerbach, Michael P. Devereaux, and Helen Simpson. “Taxing Corporate Income.” 2008. The Mirrlees
Review: Reforming the Tax System for the 21st
Century.
http://eml.berkeley.edu/~auerbach/taxing_corporate_income_march_II.pdf
20. 19
sold is equal to the cost of the items of inventory that were most recently purchased or
produced. This assumption overstates the cost of goods sold and understates the value
of inventories. The Framework would end LIFO, bringing us in line with international
standards and simplifying the tax system.
o Eliminate oil and gas tax preferences. The tax code currently subsidizes oil and gas
production through tax expenditures that provide preferences for these industries over
others. The Framework would repeal more than a dozen tax preferences available for
fossil fuels.
o Reform treatment of insurance industry and products. The Framework would reform the
treatment of insurance companies and products to improve information reporting,
simplify tax treatment, and close loopholes, including one in which corporations shelter
income using life insurance contracts on their officers, directors, or employees.
o Reform the measurement and character of gains. The Framework would reform the
treatment of capital gains, including modifying rules for like-kind exchanges, which allow
investors in certain assets to avoid realizing a capital gain—and thus to defer payment of
tax—through a transaction structured as an exchange rather than a sale.
Ultimately, achieving a lower corporate tax rate and reducing special-interest provisions will require
eliminating a wide variety of business tax exclusions, subsidies, and deductions. The proposals above,
described in detail in the President’s Budget, represent the first step in that process. 21
21
Additional details for specified proposals can be found in: Department of the Treasury. “General Explanations of
the Administration’s Fiscal Year 2017 Revenue Proposals.” 2016. https://www.treasury.gov/resource-center/tax-
policy/Documents/General-Explanations-FY2017.pdf
21. 20
WALL STREET REFORM AND TAXATION OF THE FINANCIAL SECTOR
In response to the 2008 financial crisis, the worst since the Great Depression, the Administration
achieved landmark reform of the Nation’s financial system in 2010 with enactment of the Dodd-Frank
Wall Street Reform and Consumer Protection Act. In the years since enactment, Federal agencies have
helped make home, auto, and short-term consumer loan terms fairer and easier to understand for
average consumers, improved transparency for investors in financial markets, and increased financial
firms’ planning for and resilience to future financial downturns. These actions are already curbing
excessive risk-taking, closing regulatory gaps, and making our financial system safer and more
resilient.
However, more work remains to be done as there is evidence that the financial sector represents a
large and growing share of the economy in a manner that may create obstacles to shared growth.*
Business tax reform can help address the downsides of an excessive financialization of the economy,
including through some of the specific measures proposed in the President’s Budget:
• Impose a financial fee: Excessive leverage undertakenby major financial firms was a significant
cause of the recent financial crisis and is an ongoing potential risk to macroeconomic stability.
The financial fee—a tax on large financial institutions based on the amount of their liabilities—
can help remedy this by reducing the incentive for large financial institutions to use excessive
leverage. The structure of this fee would be broadly consistent with the principles agreed to
by the G-20 leaders. The President’s proposal would take a direct action to combat the risk in
the financial sector and its implications on broader market volatility.
• Pay for doubling the budgets of key market regulators through increased transaction fees:
Expanding the budgets of the CFTC and SEC would allow them to improve monitoring of new
developments in the markets and to continue to fulfill their missions in increasingly complex
financial sectors. Fee funding the CFTC would shift the costs of regulatory services it provides
from the general taxpayer to the primary beneficiaries of the CFTC’s oversight, and fee rates
would be designed in a way that supports market access, liquidity, and the efficiency of the
Nation’s futures, options, and swaps markets. Additionally, increasing the transaction fees
that currently fund the SEC and imposing a similar fee to finance the CFTC would particularly
affect high-frequency traders, which could help reduce certain risks in the market.
• Close the carried interest loophole: Taxing “carried interest” as ordinary income rather than
tax-preferred capital gain would close a loophole for private equity and hedge fund managers.
In addition, increasing the tax rate on capital gains would reduce the tax benefit of the carried
interest loophole and any other strategy that involves converting income that would be taxed
at regular rates to income taxed at the lower rates on capital gains.
• Modernize taxation of certain financial products to prevent tax arbitrage: Modernizing the
taxation of financial products by taxing derivatives on a “mark-to-market” basis with gain or
loss treated as ordinary income would reduce the ability of financial institutions and
sophisticated taxpayers to craft financial products to arbitrage the disparate tax rules for
financial products.
* See, e.g., Robin Greenwood and David Scharfstein. "The Growth of Finance." 2013. 27 J. Econ. Perspect. 3; Luigi Zingales.
"Does Finance Benefit Society?" 2015. 70. J. Fin. 1327.
22. 21
Strengthen American Innovation, Clean Energy, and Manufacturing
As noted above, a well-designed tax system can help address positive and negative spillovers of business
behavior by encouraging those activities that provide broader benefits and discouraging activities that
cause harm. The President’s Framework identifies three areas where targeted incentives are appropriate:
research and development, clean energy, and manufacturing.
To encourage greater innovation, make sustainable investments in clean energy and promote
manufacturing, the President’s Framework would:
• Expand and simplify the R&E credit. While the recent permanent extension of the R&E credit
provides certainty for businesses investing in innovation and appropriately recognizes the
positive spillovers research activity generates, further reforms should be made to make the credit
even more effective. Currently, businesses must choose between two different credit formulas,
including one so outdated that it takes into account the amount of a business’s research expenses
from 1984 to 1988. The President’s Framework would simplify the credit by repealing the
outdated formula, increase the credit rate from 14 to 18 percent, and enhance the credit for
pass-through businesses.
• Consolidate, enhance, and permanently extend key tax incentives to encourage investment
in clean energy while repealing fossil fuel subsidies. The President’s Framework would make
permanent the tax credits for the production of renewable electricity and investment in
renewable energy technologies. These reforms would provide a strong, consistent incentive to
encourage investments in renewable energy sources, like wind and solar. The production tax
credit and investment tax credit for renewable electricity generation were recently extended
for five years, but permanent tax incentives for clean energy investment are needed to meet
the challenge of climate change and address the harmful consequences of pollution. In
addition, the structure of the renewable production tax credit has required many firms to invest
in inefficient tax planning through tax equity structures so that they can benefit even when
they do not have tax liability in a given year because of a lack of taxable income. The President’s
Framework would eliminate the need for these strategies by making the production tax credit
refundable. In addition to these reforms to support clean energy, the President’s Framework
would eliminate tax subsidies for oil and gas as described above.
• Effectively cut the top corporate tax rate on manufacturing income to 25 percent by reforming
the domestic production activities deduction. The manufacturing sector plays an outsized role
in the U.S. economy and is particularly important for future job creation, innovation, and
economic growth.22
For this reason, the President’s Framework would reform the current
domestic production activities deduction. It would focus the deduction more on manufacturing
activity and expand the deduction to 10.7 percent, effectively cutting the top corporate tax rate
for manufacturing income to 25 percent.
22
For a review of the U.S. manufacturing sector, see generally: Department of Commerce. “The Competitiveness
and Innovation Capacity of the United States.” 2012.; President’s Council of Advisors on Science and Technology.
“Ensuring American Leadership in Advanced Manufacturing.” 2011.; P. Gary Pisano and Willy C. Shih. “Restoring
American Competitiveness.” 2009. Harvard Business Review.; Erica Fuchs and Randolph Kirchain. “Design for
Location? The Impact of Manufacturing Off-Shore on Technology Competitiveness in the Optoelectronics
Industry.” 2010. 56 Mgmt. Science 2323.; Michael Greenstone et al. “Identifying Agglomeration Spillovers:
Evidence from Winners and Losers of Large Plant Openings.” 2010. 118 J. Pol. Econ. 536.
23. 22
INNOVATION BOXES
An innovation box is a special tax preference that applies a separate, lower, tax rate to income derived
from patents and other types of intangible business property, such as copyrights, trademarks, trade
secrets, and other forms of intellectual property (IP). Innovation boxes and related regimes in other
countries vary in their tax rate, in the types of eligible IP, in the scope of qualifying income, and the
treatment of IP-related expenses.
Advocates of an innovation box in the United States argue that applying a low tax rate to income
associated with intellectual property provides an incentive for investments in research and innovation,
can improve the international competitiveness of businesses that rely on IP by reducing their taxes,
and can address concerns about the erosion of the U.S. tax base to lower-tax jurisdictions by
encouraging firms to locate their IP in the U.S. for tax purposes.
Measured by the criteria of economic efficiency, the innovation box comes up short as a desirable tax
policy tool. Compared to the R&E credit, an innovation box is less effective in encouraging innovation.
The R&E credit provides benefits to firms undertaking new research which results in spillovers that
enhance the productivity of businesses and workers economy-wide (including research that is difficult
to commercially exploit). The evidence of the R&E credit’s success is why the Administration
supported permanent extension and continues to propose further enhancements.
By contrast, a U.S. innovation box would be costly and offer little potential to improve the overall
domestic economy. Unlike the R&E credit, an innovation box has much less “bang for the buck”
because it would provide windfall tax benefits for IP already in existence. In the United Kingdom, the
introduction of a low-tax patent box reduced corporate tax revenues, even when companies reported
more innovation-related income.* In the United States, the revenue costs of a similar tax incentive
are likely to be especially large because of the disproportionately large share of innovation-related
income U.S. multinationals earn from currently-taxed foreign royalty payments and the much larger
domestic market. In essence, an innovation box is just another variation on a “race to the bottom” in
the taxation of multinational firms, where countries compete to have the lowest tax rate on certain
corporate activities, without concern for the funding of necessary public goods and services.
Innovation boxes also work against the broadly shared goal of simplifying the tax system. New tax
rules and compliance checks would be needed to determine precisely how much income was
associated with particular innovations. For instance, it would be difficult to determine how much of a
drug company’s income is due to investment in developing a patented drug versus investment in the
manufacturing plant itself or in advertising and marketing activities. Corporations would have strong
incentives to attribute as much income as possible to the tax-favored innovation to take advantage of
preferential tax rates. These difficulties would lead to disputes between the IRS and taxpayers,
resulting in increased hiring of lawyers and accountants instead of increased innovative activity.
The President’s Framework, which provides support for innovation more efficiently through the R&E
credit and which tackles the problems within our international tax system with a reform centered on
the minimum tax, provides a better approach to addressing these challenges.
* Rachel Griffith, Helen Miller, and Martin O'Connell. “Ownership of intellectual property and corporate taxation.” 2014. 112
J. Pub. Econ. 12.
24. 23
Strengthen the International Tax System to Encourage Domestic Investment
International reform should improve on the current broken and inefficient system under which firms must
pay tax at the full U.S. tax rate but only when profits are repatriated. There is considerable debate as to
how to reform the international tax code. One approach is to switch to a pure territorial system under
which all active foreign income would be subject to zero or nominal U.S. tax. However, a pure territorial
system could aggravate, rather than ameliorate, many of the problems in the current tax code. If foreign
earnings of U.S. multinational corporations are not taxed at all, firms would have even greater incentive
to locate operations abroad. Furthermore, corporations would have greater incentive to use accounting
mechanisms to shift profits out of the United States. And the incentives for corporations to invert to low-
tax jurisdictions in order to reduce their U.S. tax burdens through earnings stripping would remain.
Alternative reform proposals to address the problem of profit shifting by providing a costly tax preference
through an “innovation box,” as described above, would only exacerbate the race to the bottom in
international tax rates.
Tax reform must balance the need to reduce tax incentives to locate overseas with the need for U.S.
companies to be able to compete overseas for the investments and operations absolutely necessary to
serve and expand into foreign markets in ways that benefit U.S. jobs and economic growth. This will be a
difficult and complex undertaking but one that should be guided by the criteria of what system best
promotes the jobs, growth, and standard of living of American workers and their families.
In 2015, as part of the Budget, the President released a detailed international tax plan built on the reform
principles expressed in the Framework for Business Tax Reform. The President’s plan, which is centered
around a new per-country minimum tax on foreign earnings, would improve on the current system in
three broad ways:
• Reducing firms’ ability to avoid the U.S. tax system by shifting profits overseas. The minimum
tax on foreign earnings would ensure that no matter what tax planning techniques a U.S. firm
engages in, and no matter where it reports its profits, it would still face a tax rate of at least 19
percent. Unlike the current system, there would be no “deferral” of tax—the minimum tax would
apply to profits in the year they are earned. The minimum tax would stop our tax system from
generously rewarding companies for moving profits offshore. In addition, other elements of the
plan would make it harder to shift profits overseas by limiting interest stripping, transfer pricing
abuses, and inversions.
• Reducing the incentive to shift production overseas. The current system encourages firms to
shift production overseas to take advantage of indefinite tax deferral on the resulting earnings—
and to establish a legal toehold in a foreign country to enable even more earnings to be shifted
there on paper. The minimum tax would also reduce these incentives by ensuring that the
earnings of U.S. multinationals’ foreign subsidiaries are taxed on a current basis at a rate of at
least 19 percent.
• Increasing the global competitiveness of U.S. corporations. American multinationals often have
legitimate non-tax reasons to locate production overseas, either to serve local markets or
because of specific competitive advantages to overseas production. Other countries with
territorial systems effectively do not tax firms on their overseas production, and so those firms
incur no taxes when earnings are distributed to the parent company in its home country (that is,
upon “repatriation”). In addition, foreign resident companies that produce locally face only that
25. 24
country’s corporate tax rate. In contrast, U.S. companies face relative high explicit or implicit
repatriation taxes, and therefore may operate at a tax disadvantage. In order to balance the two
goals above with the desire not to disadvantage American multinationals vis-à-vis their
competitors, the plan sets the global minimum tax rate lower than the full 28 percent rate
proposed for reform—and offers a deduction for income from active business investment.
Specifically, to achieve these objectives, the President’s plan would:
Institute a 19 percent minimum tax on foreign earnings
Foreign earnings would be subject to current U.S. taxation at a rate of 19 percent less a foreign tax credit
equal to 85 percent of the per-country average foreign effective tax rate. The minimum tax would be
imposed on foreign earnings regardless of whether they are repatriated to the United States, and all
foreign earnings could be repatriated without further U.S. tax. Thus, under the proposal, all active earnings
of foreign subsidiaries of U.S. firms (controlled foreign corporations, or CFCs) would be subject to U.S. tax
either immediately or not at all. Passive or highly mobile income such as dividends, interest, rents, and
royalties would continue to be subject to full U.S. tax on a current basis under the existing “Subpart F”
rules.
To help maintain international competitiveness, the minimum tax base would be reduced by an allowance
for corporate equity (ACE). The ACE allowance would provide a risk-free return on equity of the CFC
invested in active assets. In effect, this would allow U.S. based firms to exclude from tax all costs
associated with foreign investments—including the cost of equity financing—providing an even playing
field for U.S. firms operating abroad relative to their foreign competitors. At the same time, however, it
would ensure that companies cannot avoid U.S. tax on excess profits, such as those shifted abroad.
Foreign source royalty and interest payments received by U.S. persons would continue to be taxed at the
full U.S. statutory rate but, in contrast with current law, could not be shielded by excess foreign tax credits
associated with dividends. Foreign branches would be treated like CFCs. Interest expense incurred by a
U.S. person that is allocated and apportioned to foreign earnings on which the minimum tax is paid would
be deductible at the applicable minimum tax rate on those earnings. No deduction would be permitted
for interest expense allocated and apportioned to foreign earnings for which no U.S. income tax is paid.
Impose a one-time tax on unrepatriated earnings
Because the global minimum tax eliminates taxes on the repatriation of earnings, some adjustment must
be made to account for the large stock of unrepatriated earnings on which no U.S. tax has been paid. One
approach would separately track that stock of earnings, and tax it upon repatriation. That approach,
however, would be administratively burdensome, inequitable by treating firms differently depending on
their repatriation history, and overly generous by allowing continued deferral plus a lower corporate tax
rate.
Consequently, the President’s plan would impose a mandatory one-time tax on CFCs’ previously untaxed
earnings at a reduced rate of 14 percent. A proportional credit would be allowed for the amount of foreign
taxes associated with such earnings. The accumulated income subject to the one-time tax could then be
repatriated without any further U.S. tax. The revenue from the one-time tax is dedicated primarily to
funding transportation infrastructure investment.
26. 25
Restricting deductions for excessive interest to curb “earnings stripping”
Claiming deductions for interest is a common technique used by multinational firms to erode the U.S. tax
base. Under current law, foreign multinational groups are able to load up their U.S. operations with
related-party debt and use the interest deductions to shift up to half of their U.S. earnings to low-tax
jurisdictions. This ability gives foreign multinationals a competitive advantage over purely domestic firms,
which have to pay U.S. tax on all of their earnings from U.S. operations. The proposal would address over-
leveraging of a foreign-parented group’s U.S. operations relative to the rest of the group’s operations by
limiting U.S. interest expense deductions to the U.S. subgroup’s interest income plus the U.S. subgroup’s
proportionate share of the group’s net interest expense.
Limit inversions
The President’s plan would limit inversions by preventing firms from acquiring smaller foreign firms and
changing their tax residence as a result. In addition, the proposal would prevent firms from changing their
tax residence to any country where they do not have substantial economic activities if their operations in
the United States are more valuable than their operations in the other country and they continue to be
managed and controlled in the United States.
Close loopholes and stop strategies that facilitate base erosion and profit shifting
While the minimum tax and the reduction in the corporate rate would reduce the incentives for erosion
of the U.S. base by domestic firms, the difference in tax rates would still provide a tax advantage for firms
able to shift profits to their foreign affiliates. And more importantly, foreign-owned and inverted
corporations would still have strong incentives to strip earnings out of the United States to low-tax
jurisdictions. Hence, additional reforms are necessary to reduce incentives to shift income and assets
overseas. Therefore, the President’s plan tightens rules governing cross-border transfers of intangible
property and closes loopholes by expanding the scope of the existing “Subpart F” rules. It restricts the use
of “hybrid” arrangements that take advantage of differences in tax rules to generate so-called “stateless
income”—income that is not subject to tax in any country.
These proposed reforms to the U.S. international system are consistent with the cooperative efforts of
the United States and other countries to establish principles for addressing the shared challenge of base
erosion and profit shifting by multinational firms. At the June 2012 G-20 Summit, the leaders of the world’s
largest economies identified the actions of multinational companies to reduce their tax liabilities by
shifting income into low- and no-tax jurisdictions as a significant global concern. The leaders instructed
their governments to develop an action plan to address these issues. The resulting action plan to address
base erosion and profit shifting (BEPS) was endorsed by President Obama and other world leaders at the
2015 G-20 Summit. The BEPS project made a number of recommendations and the OECD and G20
countries have committed to minimum standards in the areas of: requiring country-by-country reporting
of income, assets, employees, and taxes paid; fighting harmful tax practices; improving dispute resolution;
and preventing “treaty shopping.” In the area of transfer pricing (where concerns about profit shifting
were prevalent), existing international standards have been updated and strengthened. With respect to
recommendations on hybrid securities (treated as debt in some jurisdictions and as equity in others) and
on rules governing interest deductibility, countries have agreed on the general tax policy direction
reflected in the Administration’s proposals, which would require Congressional action in the United
States. The BEPS project also generated guidance based on best practices that focus on the areas of
disclosure and “CFC” rules (rules for taxing mobile income of foreign subsidiaries). Finally, participants
27. 26
agreed to draft a multilateral instrument that countries may use to implement the BEPS work on tax treaty
issues. All these steps have established principles for appropriate taxation of multinational firms and have
set the stage for the OECD and G-20 countries to implement these approaches in their own tax systems.
Simplify and Cut Taxes for America’s Small Businesses
America’s small businesses face a tax code that is unduly complex. Often, these firms, unlike large
businesses, are not engaged in complex transactions, and yet they must spend significant time and
resources trying to comply with the tax code. Small businesses are disproportionately burdened with tax
compliance, and the cost of this burden is substantial.
In 2004, small businesses devoted between 1.7 and 1.8 billion hours and spent between $15 and $16
billion on tax compliance. On average, each small business devoted about 240 hours complying with the
tax code, and spent over $2,000 in tax compliance costs. An overwhelming share of the time burden is
due to recordkeeping, while most of the money burden is spent on compensation for paid tax preparers.23
For some small businesses, the cost of tax compliance is particularly burdensome. In 2004, 9.7 percent of
small businesses spent over $5,000 in tax compliance and 11.2 percent devoted in excess of 500 hours to
compliance. Moreover, for very small businesses, the burden of tax compliance can approach the total
amount of taxes paid. For example, for small businesses with between $10,000 and $20,000 in annual
receipts, the money burden of compliance is between 6.8 and 7.8 percent of receipts while the time
burden amounts to about half—between 51.9 and 52.9 percent—of total receipts.24
The high compliance cost for small businesses is a drag on innovation and entrepreneurship. Outlays for
tax preparation and recordkeeping are resources small business owners could have invested elsewhere.
The large amount of time spent on recordkeeping and understanding tax provisions means that small
business owners have less time and energy for innovation and business development. There are other
costs to complexity as well. Frustration with the tax code may eventually lead to weakened compliance
and a higher gap between taxes owed and taxes paid. Moreover, complexity weakens the ability of tax
policy to achieve its intended purpose. For example, small business owners might not take advantage of
investment incentives, such as the President’s proposed expansion of section 179 expensing provisions,
if they feel the tax code is too complex overall to understand.
We have made considerable strides in reducing this burden. President Obama has signed into law
numerous tax cuts for small businesses. In December, Congress significantly simplified and cut taxes for
small businesses by permanently extending enhanced section 179 expensing, and also made permanent
a provision excluding investments in small businesses from capital gains tax. However, more work needs
to be done. Tax reform should make tax filing simpler for small businesses and entrepreneurs so that they
can focus on growing their businesses rather than filling out tax returns, and it should cut their taxes.
The President’s Framework proposes several tax cuts and tax simplification measures, the end result of
which is that the vast majority of small businesses would not pay any tax on amounts reinvested in the
business and almost all small businesses would pay taxes based on an income measure closer to their
23
Donald DeLuca et al. “Aggregate Estimates of Small Business Taxpayer Compliance Burden.” 2007. IRS Research
Bulletin.
24
Id. The tax burden can also vary by industry, with small businesses in manufacturing, construction, and retail
trade devoting more time to compliance than businesses in other industries.
28. 27
bank statement: deducting their expenses—including funds reinvested in their businesses—and paying
tax based on their profits. Specifically, the President’s Framework would:
• Allow small businesses to expense up to $1 million in investments. Since taking office, the
President has secured increases in the maximum amount of qualified investments that small
businesses can expense to $500,000—with that provision made permanent at the end of 2015.
Under the President’s Framework, and as proposed in the Budget, small businesses would be
allowed to expense up to $1,000,000 of qualified investments. This expansion would provide
significant tax relief to America’s small businesses and would allow them to avoid the complexity
of tracking depreciation schedules.
• Allow cash accounting for businesses with up to $25 million in gross receipts. Cash accounting
is much simpler than the accrual accounting generally required by the tax law. Cash accounting
does not require tracking payables and receivables and does not require complicated calculations
that allocate costs to inventories and other assets, and that stipulate when such costs can be used
to reduce taxable income.
• Simplify additional accounting rules for small business and harmonize eligibility. Current law
contains several small business exceptions from various accounting requirements based on a
taxpayer’s average annual gross receipts. Exception thresholds vary between $1 million and $25
million of gross receipts, depending on the specific accounting rule and the legal status and
business activity of the taxpayer. The Framework would simplify and expand these exceptions by
creating a uniform small business threshold at $25 million in average annual gross receipts—thus
exempting more than 99 percent of all businesses. Satisfaction of the $25 million gross receipts
test would allow any small business to use the cash method of accounting (as described above),
not apply the uniform capitalization rules, and use alternative inventory methods of accounting.
• Quadruple the deduction for start-up costs. This proposal would quadruple the amount of start-
up expenses entrepreneurs can immediately deduct from their taxes from $5,000 to $20,000.
This offers an immediate incentive for investing in starting up new small businesses, and it also
simplifies accounting for small businesses, which must otherwise write off start-up expenses
over a 15-year period.
• Reform and expand the health insurance tax credit for small businesses. This credit, created in
the Affordable Care Act, helps small businesses afford the cost of health insurance. The Budget’s
proposed reform would allow small businesses with up to 50 workers to qualify for the credit (up
from 25), provide a more generous phase-out schedule, and substantially simplify and streamline
the tax credit’s rules.
Restore Fiscal Responsibility
The federal budget deficit has fallen by about three-quarters since 2009, from a peak of nearly 10 percent
of GDP to 2.5 percent of GDP in fiscal year 2015. While great progress has been made in bringing the
federal deficit down, the United States still faces a medium- and long-term deficit, in part reflecting the
legacy of past policies that were not paid for at the time they were enacted and that will continue to add
to deficits and debt in the future. Most recently, this past December, Congress enacted many important
elements of the President’s vision for business tax reform, but did so without paying for the costs. While
29. 28
business tax reform has the potential to help the economy, these benefits could be more than offset if
the reform effort adds to the medium- and long-run deficit challenge. Reforming the business tax system
must be done in a fiscally responsible manner, including paying for December’s business tax cuts. In
addition to paying for those tax cuts already enacted, the President’s Framework would fully pay for all
other incentives extended or enhanced within business tax reform.
Furthermore, reform must not lose revenue in the short-term or long-run, which is why the President’s
Framework would not use temporary revenues associated with timing shifts to pay for tax cuts with long-
run costs (such as permanent corporate tax rate reductions).
Fiscally responsible business tax reform poses a particular challenge because many of the policies
proposed to offset the cost of a lower corporate tax rate affect the timing of revenues. For example,
changes in the timing of depreciation allowances shift deductions between years but do not change the
number of dollars ultimately deducted. Using policies with higher initial revenues to “pay for” permanent
tax cuts over ten years generates large revenue losses in the long run and therefore is not fiscally
responsible. For example, as shown in Figure 7, if the one-time revenues from the Administration’s
proposed toll charge on unrepatriated profits were used to offset the ten-year cost of a permanent
reduction in the corporate income tax rate, a package that appears revenue-neutral in the first ten years
would lose roughly $380 billion in the second decade, and even more thereafter. For this reason, the one-
time revenues raised by business tax reform should be matched with one-time investments or deficit
reduction, as the President’s Framework proposes.
30. 29
Conclusion
Tax reform is difficult in any environment, but the President firmly believes that the economic benefits of
a more efficient business tax system represent an opportunity for economic growth and improved living
standards that we should seize. In the four years since the release of the President’s Framework for
Business Tax Reform, the need for reform has only grown more apparent. The most recent wave of
corporate inversions poses a long-term threat to the U.S. tax base that Congress should act now to stop,
even while it continues to deliberate on broader reform.
The President remains committed to working with Congress to make pro-growth business tax reform a
FISCALLY RESPONSIBLE USE OF TRANSITION REVENUES TO INVEST IN INFRASTRUCTURE
As part of the transition to a reformed business tax system, the President’s plan would impose a one-
time toll charge of 14 percent on the more than $2 trillion of untaxed foreign earnings that U.S.
companies have accumulated overseas, raising nearly $300 billion. Because these revenues are one-
time in nature, they should be matched with one-time costs. The President proposes to dedicate these
transition revenues to a significant one-time infrastructure investment, which would be both pro-
growth and fiscally responsible. Temporary revenues do not justify long-term costs, such as a
reduction in the corporate tax rate, which would ultimately increase deficits and debt.
The economic importance of robust infrastructure is well-established. Maintaining a well-functioning
system of roads, airports, railways, and waterways is crucial to the American economy. Businesses
must be able to easily and reliably move their products to market. Workers and consumers must be
able to rely on a well-designed transportation network so that they can safely and easily get back and
forth to work, to stores, and to visit friends and relatives. Furthermore, investing in infrastructure
creates jobs for Americans in construction and many other related industries.
Unfortunately, America’s roads, bridges, and other transportation systems are badly in need of
upgrades and repairs. For example, about two-thirds of America’s major roads are rated in less than
good condition and one quarter of U.S. bridges need rehabilitation, replacement, or significant
maintenance and repair to remain in service or do not meet current design standards and traffic
needs. Furthermore, our transportation system is not equipped to address growing challenges,
including climate change, congestion, and increased urbanization.
The President proposes a transformational investment in infrastructure through his 21st
Century Clean
Transportation Plan. Using the one-time revenue from transitioning to a new international tax system,
as well as revenue from a new oil fee, the President’s plan would transform our transportation system
using targeted Federal investments to stimulate State and local investments in smarter, cleaner, and
regional transportation systems, and to accelerate the adoption of low-carbon technologies,
autonomous vehicles, and intelligent transportation systems. It would also expand transportation
options for communities around the country and increase the resilience of the nation’s infrastructure,
without adding to the deficit.
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reality. There is sincere interest in business tax reform from many Members of Congress across the
political spectrum and meaningful overlap among the proposals offered by Democrats and Republicans—
even as there are critical differences. This updated Framework accounts for new developments in the
business tax system and reiterates the President’s core principles—including that tax reform should make
the code more efficient, strengthen manufacturing and innovation, fix the international system, simplify
and cut taxes for small businesses, and restore fiscal responsibility—to set the stage for Congress and the
Administration to work together to reform the business tax system.