... Even for experienced international tax experts the technical and conceptual issues involved in determining where multinational profits should be located is enough to make one's head spin.
Multinationals... are saying... that if a subsidiary owns an intangible asset, it is entitled to the profit it generates no matter where real business activity (e.g., sales, R&D) occurs. It is easy for multinationals to shift ownership from the United States to a tax haven... To see why this approach is problematic, imagine if anybody with a business (say, an export business that manufactured in the US and sold into Europe) could set up a corporation in a tax haven, put assets of the business into that corporation, and claim that income is foreign source income neither subject to US or foreign tax. The major industrial economies would have their corporate tax bases depleted very quickly... The OECD and the IRS want to limit circumstances where this would be allowed to a very small number of cases where certain conditions are met. Multinationals want as few restrictions as possible.
View Marty Sullivan's opinion in its entirety on the taxanalysts® Blog.
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