31 07 2017

Bipartisan Support For Territorial US Tax System, BEPS Measures

Orrin Hatch (R - UT) has said that members of Congress from both parties support replacing the US worldwide tax basis system for a territorial tax system.

Hatch, the Chairman of the Senate Committee on Finance, spoke of the need to reform the US international tax system. The US is one of only a handful of territories that levies tax on a worldwide basis. This means that multinational entities pay US corporate tax on foreign profits when they are repatriated, as well as those arising in the US. Hatch said that this system is "antiquated" and has resulted in multinationals keeping vast reserves offshore to avoid US taxation.

"Currently, a huge amount of capital, as much as USD2.5 trillion or maybe more, held by US multinational companies is effectively locked-out of the US and unavailable for investment here at home," said Hatch.

He added: "If we're going to put together an effective tax reform package, we'll have to find a way to tackle these issues. The most obvious way, of course, would be a combination of reducing our corporate tax rates, transitioning to a territorial tax system, and ensuring protection of the US tax base from things like earnings stripping and profit shifting. That approach, as it turns out, has bipartisan support. These matters represent a significant portion of our tax reform efforts, and we already know it is one where Republicans and Democrats can agree, at least in concept."