The Tax Cuts and Jobs Act made things more complicated in terms of
international taxation. The biggest complication was introducing a
minimum tax on Global Low Tax Intangible Income which started at
about 10% in 2018, increasing over time. Foreign income can be
frustrating enough as it is taxed at the local level of the country and in
the US even if there are foreign tax credits involved. These tax credits
are minimal as they only offset in relation to the foreign income and
do not aid in any other U.S. income. This does not keep the U.S
competitive with other foreign countries as our tax rates are generally
higher compared to foreign countries. Foreign countries that
investment in the U.S. deal with lower rates and complications vs. the
U.S. investing abroad. While it may not keep us competitive, having
an international tax is important for U.S. tax code. With Globalization
growing over the years, companies are looking overseas to grow their
businesses. The only way for the U.S. to offset companies leaving
investments within the states is to tax those that go abroad. By
increasing taxes in foreign assets, its incentives companies to stay
within the U.S. borders.
References:
Olson, Pamela (July 15, 2003). Testimony of Pamela Olson, Assistant
Secretary for Tax Policy, United States Department of the Treasury
before the Senate Committee on Finance on International Tax Policy,
and Competitiveness. https://home.treasury.gov/news/press-
releases/js555
Tax Policy Center (May 2020). What Are the Consequences of the
New US International Tax System?
https://www.taxpolicycenter.org/briefing-book/what-are-
consequences-new-us-international-tax-system
