The International tax code and the U.S. tax code interacts in many ways and not just big
corporations anymore. These taxes are affecting all types of businesses as the world gets
smaller through the internet, we all get more susceptible to them. Although I’m talking
like it’s a virus that you will get sick from that isn’t the case you may feel sick after
paying but it won’t make you sick. Like double taxation when a company or an entity
pays their taxes based on where they were earned and then when the parent company gets
the profit home and has to pay taxes on the same profit this is called double taxation.
Another is foreign tax credits this is the relief from the double taxation your home
country may offer you once you have retained your earnings or profit. There are many
different codes that are different however and now more than ever US. companies are
finding that they need using both reporting systems to help investors and others that read
these reports (US Department of the Treasury, 2003).
b b b Do you think that the new tax act helped or further complicated the tax code? For
individuals it made it more advantageous for most of us to claim the standard deduction
opposed to the Itemized deduction however that is not what we are talking about this is
more about the entities or businesses. It permanently lowered corporate tax rates from
35% to 21% know I am not saying that is great but it’s a big difference. The way the
TCJA was set up was to pay for the corporate tax cut in other ways such as businesses
will be required to deduct research and experimentation cost over five years instead of
immediately. Also, the deduction for business net interest expense will be limited to 30%
of EBIT rather than then them receive the whole 30%. Full expensing for short-life
business investments will begin phasing out etc... (Watson, 2022)
Have we become more competitive with other countries? The TCJA moved
towards a territorial tax system by exempting foreign profits from domestic taxation
(Watson, 2022). Also, it enacted anti-base erosion provisions targeted at high return
foreign profits, intangible income, and income taken out of the US. (Watson, 2022). The
four main components of the new international tax system are the participation
exemption, the GILTI, the FDII, and the BEAT. This type of change should give the
American companies at least a much more level playing field.
Why is international tax so important to the U.S. tax code? This could be answered
in one world globalization. In another one of my courses here at SNHU we talked about
how our environment, or our culture help shape policy. This is no different with
companies except now they are all close together remember because of the internet. So
now they must use the best parts of other systems to help their own among other things.
References
US Department of the Treasury. (2003, 07 15). 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. Retrieved from U.S.
Department of The Treasury: https://home.treasury.gov/news/press-releases/js555
Watson, G. (2022). Details and analysis of Cancelling the Scheduled Business Tax Increases in
Tax Cuts and Jobs Act. Retrieved from Taxfoundation.org: https://taxfoundation.org/tax-
cuts-jobs-act-business-tax-increases/
