Skip to comments.Is Heritage Right About Repatriation?
Posted on 10/07/2011 8:02:20 AM PDT by 92nina
This week, JD Foster and Curtis Dubay from the Heritage Foundation wrote an article arguing that repatriation was a bad idea right now. ATR disagrees with this (and this seems to be a departure from prior Heritage Foundation policy on this, as well). Below are our reasons why:
What Is Repatriation? Under U.S. tax law, a company that earns a profit overseas must, in general, pay income tax to the overseas government AND to the IRS if they bring the remaining profit back to the U.S. The company gets a credit for the foreign income tax paid, but the difference between the foreign tax and the U.S. 35 percent rate must be paid to the IRS. In practice, deferrals and other tax rules allow companies to keep foreign after-tax earnings locked overseas, but that money generally remains unavailable to be used in the United States.
This is known as a "worldwide" tax system. All conservatives agree that we should move toward a "territorial" tax system, which most of the developed world already uses. Under a territorial system, the IRS would only seek to tax those profits earned in the United States. U.S. companies with foreign-source profits would be free to leave those profits overseas or bring them home without any further tax consequences.
The U.S. tried repatriation recently. In 2005, companies were allowed to bring back foreign source profits at a tax discount. Rather than having to pay the difference between the foreign tax rate and the U.S. tax rate of 35 percent (tied for highest in the developed world), the companies instead could pay a de facto repatriation tax rate of 5.25% to the IRS--a bargain in most cases. Over $300 billion was repatriated that year under this arrangement...
Read more: http://www.atr.org/heritage-right-repatriation-a6503#ixzz1a6kFgdJh
(Excerpt) Read more at atr.org ...
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