Page 13 - THE SOUTH CHINA BUSINESS JOURNAL
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C. TODAY
Proposed Changes to Combined with other pieces of tax reform, GILTI is Biden administration’s more punitive version,
International working. The U.S. has become a more attractive place known as SHIELD (Stop Harmful Inversions and
Taxes Will Make to domicile and reform has driven U.S. employment Ending Low-Tax Developments). Details are scant
U.S. Businesses and expenditures for property, plant, and equipment on SHIELD, but what is clear is that it would be
Less Competitive and Harm (PP&E) and research and development (R&D). a higher tax than BEAT. This would be another
American Workers tax increase on investment, further hurting the
If the committees raise the GILTI rate, apply a domestic economy and our workers.
By CURTIS DUBAY, U.S. Chamber of Commerce country-by-country reporting standard, and pursue
other ways to raise the tax the end results will be a Senate Finance and House Ways and Means are trying
less competitive tax system, less investment by U.S. to substantially raise taxes because they are tasked
businesses, and fewer jobs for American workers. with paying for the gargantuan spending bill Congress
Also, this would again make U.S. businesses is trying to pass through the budget reconciliation
attractive acquisition targets for foreign businesses. process. International taxes won’t be the only taxes
they raise to meet their needs, but the economic pain
The global community is trying to more heavily they inflict will still be immense and will reverse the
tax mobile IP income via a global minimum tax. It progress we have made in recent years.
does not make sense to unilaterally increase our
minimum tax rate and complicate the calculations Time to scrap the
while those negotiations are ongoing at the OECD. tax hikes and budget
Other countries should implement their own
minimum taxes (and eliminate their unilateral reconciliation and
digital service taxes while they are at it). U.S. policy start fresh.
doesn’t need to punish American companies.
The Senate Finance and House Ways and Means abroad, where businesses previously sold the IP
Committees are busy writing legislation to to escape what was once an uncompetitive tax Lastly, the committees are also considering
significantly raise taxes to offset the cost of the situation here in the U.S. changing the Base Erosion Anti-Abuse Tax
recently-passed $3.5 trillion budget resolution. (BEAT), which applies a tax to certain kinds of
One of the ways the committees will raise taxes is Happily, FDII worked! Because of it, companies intracompany transactions. They could adopt the
by increasing taxes on businesses, particularly on have retained IP in US or onshored IP, bringing
their international activities. Raising these taxes with it jobs, investment, and tax revenues. FDII has
will have severe negative impacts on U.S. workers also helped level the playing field among our global
and the U.S. economy. competitors who often offer much larger incentives.
The 2017 tax reform made our international Senate Finance and House Ways and Means are
system much more competitive than it was before. considering gutting FDII because they need more
A modernization of the system was decades in the money for all that spending. Doing so risks losing
making. And as we’ve noted, undoing that long- the jobs, investment, and revenues FDII has
needed update would drive our system backwards, brought with it.
closer to what it was before tax reform when U.S.
businesses were at a competitive disadvantage Further, FDII has only been around a few years.
in the global economy. Under that system, our Doing away with it now would be a sharp 180
businesses were prime acquisition targets by degree policy turn, which would be a jolt to
foreign companies. businesses that crave certainty. If companies don’t
think incentives for investment within our borders
One of the goals of reforming the international will stick in the tax code, they will treat any future
system was to encourage U.S. businesses to incentives much more warily. This will reduce
conduct more of their operations here at home. their effectiveness.
Tax reform did so by using a “carrot and stick”
approach – a mix of positive and negative Global Intangible Low-Tax Income, GILTI, is
incentives for international operations. the stick when it comes to IP income. It reduces
the incentive to shift intangible income from IP
Foreign-derived Intangible Income (FDII) is outside the United States by applying a minimum
the carrot. It incentivizes companies to retain tax on such “highly mobile” income. This too the
intangible property (IP) in U.S. or onshore IP from committees are trying to raise.
23 AMCHAM SOUTH CHINA
Proposed Changes to Combined with other pieces of tax reform, GILTI is Biden administration’s more punitive version,
International working. The U.S. has become a more attractive place known as SHIELD (Stop Harmful Inversions and
Taxes Will Make to domicile and reform has driven U.S. employment Ending Low-Tax Developments). Details are scant
U.S. Businesses and expenditures for property, plant, and equipment on SHIELD, but what is clear is that it would be
Less Competitive and Harm (PP&E) and research and development (R&D). a higher tax than BEAT. This would be another
American Workers tax increase on investment, further hurting the
If the committees raise the GILTI rate, apply a domestic economy and our workers.
By CURTIS DUBAY, U.S. Chamber of Commerce country-by-country reporting standard, and pursue
other ways to raise the tax the end results will be a Senate Finance and House Ways and Means are trying
less competitive tax system, less investment by U.S. to substantially raise taxes because they are tasked
businesses, and fewer jobs for American workers. with paying for the gargantuan spending bill Congress
Also, this would again make U.S. businesses is trying to pass through the budget reconciliation
attractive acquisition targets for foreign businesses. process. International taxes won’t be the only taxes
they raise to meet their needs, but the economic pain
The global community is trying to more heavily they inflict will still be immense and will reverse the
tax mobile IP income via a global minimum tax. It progress we have made in recent years.
does not make sense to unilaterally increase our
minimum tax rate and complicate the calculations Time to scrap the
while those negotiations are ongoing at the OECD. tax hikes and budget
Other countries should implement their own
minimum taxes (and eliminate their unilateral reconciliation and
digital service taxes while they are at it). U.S. policy start fresh.
doesn’t need to punish American companies.
The Senate Finance and House Ways and Means abroad, where businesses previously sold the IP
Committees are busy writing legislation to to escape what was once an uncompetitive tax Lastly, the committees are also considering
significantly raise taxes to offset the cost of the situation here in the U.S. changing the Base Erosion Anti-Abuse Tax
recently-passed $3.5 trillion budget resolution. (BEAT), which applies a tax to certain kinds of
One of the ways the committees will raise taxes is Happily, FDII worked! Because of it, companies intracompany transactions. They could adopt the
by increasing taxes on businesses, particularly on have retained IP in US or onshored IP, bringing
their international activities. Raising these taxes with it jobs, investment, and tax revenues. FDII has
will have severe negative impacts on U.S. workers also helped level the playing field among our global
and the U.S. economy. competitors who often offer much larger incentives.
The 2017 tax reform made our international Senate Finance and House Ways and Means are
system much more competitive than it was before. considering gutting FDII because they need more
A modernization of the system was decades in the money for all that spending. Doing so risks losing
making. And as we’ve noted, undoing that long- the jobs, investment, and revenues FDII has
needed update would drive our system backwards, brought with it.
closer to what it was before tax reform when U.S.
businesses were at a competitive disadvantage Further, FDII has only been around a few years.
in the global economy. Under that system, our Doing away with it now would be a sharp 180
businesses were prime acquisition targets by degree policy turn, which would be a jolt to
foreign companies. businesses that crave certainty. If companies don’t
think incentives for investment within our borders
One of the goals of reforming the international will stick in the tax code, they will treat any future
system was to encourage U.S. businesses to incentives much more warily. This will reduce
conduct more of their operations here at home. their effectiveness.
Tax reform did so by using a “carrot and stick”
approach – a mix of positive and negative Global Intangible Low-Tax Income, GILTI, is
incentives for international operations. the stick when it comes to IP income. It reduces
the incentive to shift intangible income from IP
Foreign-derived Intangible Income (FDII) is outside the United States by applying a minimum
the carrot. It incentivizes companies to retain tax on such “highly mobile” income. This too the
intangible property (IP) in U.S. or onshore IP from committees are trying to raise.
23 AMCHAM SOUTH CHINA
