06 July 2007

Income Taxes On Multinationals

This article makes a solid argument that the current U.S. tax system for multinational companies is broken. Right now, income is apportioned by country, foreign income in a country can be offset by taxes paid locally in that country, and income taxation from foreign subsidiaries can be deferred utnil repatriated. The result is low tax collections from foreign income that is perpetually deferred, and an incentive to create an appearance that income comes from sources abroad.

The alternative proposal suggested would be to have multinational enterprises report worldwide income on a consolidated basis, and then, allocated income internationally in proportion to the ultimate sales the company makes in each country.

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