How Should Foreign Profits Be Taxed?
What do Microsoft, General Electric, Cisco, Merck, and Google have in common? All of these icons of American business now earn more than half of their profits outside the United States. As shown in Table 8-1, ten years earlier most of their profits had been domestic. More than ever before major U.S. corporations are truly multinational businesses. These companies may lobby for the research tax credit and other domestic tax breaks, but it is the tax treatment of foreign profits that is by far their most important tax issue. Far more than any other factor, low taxes on their foreign earnings contribute to the low effective tax rates they report to shareholders.
KeywordsTerritorial System Foreign Earning Foreign Prof Export Profit Worldwide System
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