In recent years U.S. multinationals have restructured themselves in a manner that allows them to greatly reduce their worldwide tax bill. This restructuring has been described in detail by the OECD andil and by the Joint Committee on Taxation. In a March 15 presentation at a conference on taxation and manufacturing at the Brookings Institution, expert tax attorney Paul Oosterhuis explained why in the wake of these restructurings U.S. tax rules provide a powerful incentive for U.S. multinationals to keep their manufacturing outside the United States.
... [P]rincipal holding companies in low-tax countries generate a lot of profit because of the transferred intangibles. This IP profit will be proportionately larger for multinationals that use and sell products with a lot of a technology...
... Oosterhuis suggests that the United States relax its foreign tax rules so that a U.S. manufacturing subsidiary could sell to a multinational's foreign subsidiaries without triggering U.S. tax and that a U.S. manufacturing subsidiary could pay royalties to the foreign holding company without triggering U.S. tax.
One of the most commonly voiced arguments against providing generous tax treatment of foreign profits of U.S. multinationals is that it provides an incentive to create jobs outside the United States. Oosterhuis... would level the playing field not by reducing tax benefits for foreign operations but by extending advantageous tax treatment received by foreign operations to U.S. operations that perform the same activities.
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