The Supply Chain Report explores the evolving landscape of international corporate taxation, drawing insights from notable economic discussions and policy suggestions. A pivotal resource in this exploration is the book “Tackling the Tax Code: Efficient and Equitable Ways to Raise Revenue,” authored by Nunn and Shambaugh in 2020. This publication, notable for its contributions from leading economists and experts, delves into an array of potential reforms aimed at creating a tax system that is both progressive and conducive to economic growth. Among the various topics covered, the book examines proposals for implementing a value-added tax, a financial transactions tax, and reforms in wealth and inheritance taxes. Additionally, it underscores the significance of enhancing the enforcement and administration of tax laws, including both existing and proposed regulations, through bolstering the capabilities of the Internal Revenue Service.
A critical aspect of the book is its focus on rectifying inefficiencies in the corporate and international tax systems. Kimberly Clausing, in particular, offers a noteworthy policy suggestion designed to efficiently and equitably increase revenue collection from U.S. multinational corporations. This proposal is currently under the scrutiny of the U.S. Congress, which is weighing its merits and implications.
Our report further elaborates on these issues by presenting an analysis from The Hamilton Project in collaboration with the Tax Law Center at NYU Law. This analysis offers a comprehensive background on the international corporate tax reforms being contemplated by U.S. legislators. Specifically, it examines the interaction between these domestic proposals and a new global agreement on international corporate taxation. The report addresses several key areas:
- The current legal framework that permits U.S. multinational corporations to significantly reduce their global tax liabilities by transferring profits to lower-tax jurisdictions.
- The ongoing efforts to reform the U.S. approach to taxing multinational corporations, building upon the foundational principles established in the 2017 Tax Cuts and Jobs Act (TCJA). These reforms aim to increase tax revenue and curb the shifting of profits to minimize tax obligations.
- The relationship between the proposed U.S. tax reforms, the congressional deliberations, and the international agreement on corporate taxation. This analysis emphasizes the objective of maintaining the United States’ competitive position as an attractive base for investment and corporate headquarters.
The report concludes with an exposition of six critical facts that shed light on the objectives and driving forces behind the current reform initiatives. It is important to note that this analysis is centered on reforms being considered by the U.S. Congress and the new international tax agreement, and does not delve into other domestic or global tax reform alternatives that could lead to substantially different outcomes in tax legislation.
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