An Easy Way to Squeeze a Lot of Taxes from Corporations That Try to Hide Their Profits Offshore

[FreeJoe]

16. It's not nearly that easy.

Take the hypothetical example of American Mining Company. They have operations in the US and abroad. Their overseas operations have generated $1 billion dollars in profits that they have retained but kept overseas. If we decide to tax it, that $1 billion dollars is worth $650 million dollars after taxes. On the other hand, if Australian Mining Company were to buy them, that $1 billion would still be $1 billion dollars. Australian Mining Company has probably been watching American Mining Company for years, watching to see if it makes sense to buy them. With this new tax plan, it certainly does. They aren't buying them for tax evasion reasons. They are just buying them because American Mining Company is now worth more to them than it is to US owners.

The United States is virtually the only country that tries to tax corporations on their overseas profits when they bring that money into the US. It was a nice idea, but it hasn't worked very well. Trying to tax them on their profits while those profits remain overseas just won't work. That's why no one is seriously putting forward the idea.

It would make much more sense to reform corporate taxes (trading fewer deductions in favor of rates more in line with other developed countries) and to try to crack down on bogus transfers of intellectual property.