A “Wake Up Call” for U.S. Tax Policy – Inversions, Planning & Corporate Tax Rates http://t.co/xI9Qg2qY1r guest post by John Richardson
— U.S. Expat Canada (@USExpatCanada) October 9, 2014
Although U.S. tax rates are important and must NOT be uncompetitive, the recent discussion of “inversions” and of Americans abroad “renouncing citizenship”, should prompt a rethinking of how the U.S. tax system should work. Who should be subject to U.S. tax? For what reason? On what kind of income?
This article is a must-read as it draws interesting parallels between the plight of American corporations abroad and American citizens abroad. Commenting gives us an opportunity to bring attention to our situation. You can read and comment here.
Here is an excerpt from this ingenious article:
What “inversions” have done is to have drawn attention to BOTH the problem of high U.S. corporate tax rates AND the reality that the U.S. claims the right to tax “foreign profits” that are NOT earned in the United States. Yes, the U.S. is the only country in the world that claims the right to tax profits that are earned in other countries. In the same way that the U.S. requires American citizens who do NOT live in the U.S. to pay U.S. tax on earnings outside the U.S., American Corporations are required to pay tax on profits that are earned outside the U.S. Significantly Americans living abroad are renouncing their citizenship in unprecedented numbers. (In fact the U.S. Government has just increased the “renunciation fee” by more than 400%.) President Obama has implied that “inversions” are the corporate equivalent of “renouncing citizenship”. U.S. companies are performing “inversions” – renouncing citizenship – at an unprecedented rate.
It is important to note that these “renunciations of citizenship” (whether personal or corporate) are NOT the result of high U.S. tax rates. They ARE the direct result of the uniquely American policy of claiming the right to levy taxes on money earned in other countries and (at least in the case of Americans abroad) on people who are NOT residents of the U.S. (Because U.S. citizens abroad also pay tax in their country of residence, they may be subjected to significant double taxation.) Once again, the United States of America is the ONLY modern country that has such a tax policy.