According to Mindy Herzfeld, contributing editor to Tax Notes International:
- The U.S. corporate income tax rate is much higher than corporate tax rates in most other countries. The United States is one of the last remaining countries to use a worldwide system. The combination of these two key attributes of the U.S. tax system penalizes U.S. multinationals relative to their foreign competitors and has encouraged a wave of inversions over the last 20 years that the IRS and Congress have been unable to stop.
Lee Sheppard, contributing editor of Tax Notes, writes:
- Pharma companies are running out the door so fast that they don't care where they land initially. The fact of inversion is more important than the first stop. Any inversion requires some group restructuring because the immediate result is a sandwich structure. Some companies are even willing to consider inverting into high-tax European countries because once they are in the European Union, it is fairly easy to form an Irish or British holding company.
Sheppard is one of the nation's most widely read and respected tax commentators. Named one of the Global Tax 50 most influential players in international taxation in 2012 by International Tax Review, Sheppard specializes in financial issues and the taxation of multinational corporations. Her articles have included commentary on treaty issues, transfer pricing, European tax developments, and cutting-edge financial issues such as derivatives, hybrid securities, and hedge funds. Sheppard holds a law degree from the Northwestern University School of Law.
Chief economist and contributing editor Martin A. Sullivan explains:
- In the current muddled state of affairs, some businesses invert and others do not. That may lower taxes and make some American companies more competitive, but it is not leveling the playing field. In addition to all the efficiency-draining distortions that result from unequal taxation, inversions are big complicated deals that are costly to implement. On top of that, the benefits provided are uncertain because companies cannot be sure that Congress or the IRS won't change the rules before their deal is done. Inversions provide tax benefits that Congress never intended to enact into law. Given all the pernicious characteristics that inversions share with tax shelters, it is hard to see why Congress should not be more inclined to treat them like tax shelters and move expeditiously to shut them down and raise revenue.
Sullivan is an expert on federal tax reform. He has written over 500 economic analyses for Tax Analysts’ publications and is the author of two books on tax reform, including the recent Corporate Tax Reform: Taxing Profits in the 21st Century. Sullivan taught economics at Rutgers University and served as a staff economist at the U.S. Department of the Treasury and later at the Joint Committee on Taxation. He graduated magna cum laude from Harvard College and received a PhD in economics from Northwestern University.
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