Offshore Financial Tax Havens and Solution
Offshore financial tax havens and solution
Tax havens generally exist to protect offshore profits and keep them a secret from governments. After The Economist published a special report named “Storm Survivors” about offshore finance problems, Jeffery Kadet proposed a “worldwide-full inclusion” system to fix the offshore financial problem. Most countries use “territorial” or “deferral” tax systems. Either system is better than Kadet’s “worldwide-full inclusion” system, because the “territorial” and “deferral” systems would prevent multinational businesses from shifting their money to tax havens. They would avoid making those companies pay double tax on foreign earned income to their home countries and to foreign countries. The “territorial” system also would give companies more competitive opportunities on a level playing field in the world. On the other hand, the “deferral” system would allow multinational companies to delay paying their income taxes on offshore profits; companies can use the deferred income tax money to expand their offshore business.
The “territorial” tax system would dampen multinational companies from shifting their profit to offshore tax havens, because they will pay income taxes only to the countries where they earned income. The “territorial” tax system is very beneficial for U.S based foreign subsidies, because they would not need to pay the income taxes which they earned offshore to the U.S. Right now the U.S has a high marginal corporate income tax rate, which is 35% (Wessel 2010). Under the current U.S. worldwide tax system, some companies allocated their revenue to tax havens instead of paying huge amounts of taxes back to U.S government. Using the “territorial” tax system could fix the tax loopholes, and shift overseas income back to the U.S. In addition, it will reduce higher budget deficits and increase job creation in the home country. Kadet suggested that “a foreign tax-credit mechanism would prevent the double taxation”
Tax havens generally exist to protect offshore profits and keep them a secret from governments. After The Economist published a special report named “Storm Survivors” about offshore finance problems, Jeffery Kadet proposed a “worldwide-full inclusion” system to fix the offshore financial problem. Most countries use “territorial” or “deferral” tax systems. Either system is better than Kadet’s “worldwide-full inclusion” system, because the “territorial” and “deferral” systems would prevent multinational businesses from shifting their money to tax havens. They would avoid making those companies pay double tax on foreign earned income to their home countries and to foreign countries. The “territorial” system also would give companies more competitive opportunities on a level playing field in the world. On the other hand, the “deferral” system would allow multinational companies to delay paying their income taxes on offshore profits; companies can use the deferred income tax money to expand their offshore business.
The “territorial” tax system would dampen multinational companies from shifting their profit to offshore tax havens, because they will pay income taxes only to the countries where they earned income. The “territorial” tax system is very beneficial for U.S based foreign subsidies, because they would not need to pay the income taxes which they earned offshore to the U.S. Right now the U.S has a high marginal corporate income tax rate, which is 35% (Wessel 2010). Under the current U.S. worldwide tax system, some companies allocated their revenue to tax havens instead of paying huge amounts of taxes back to U.S government. Using the “territorial” tax system could fix the tax loopholes, and shift overseas income back to the U.S. In addition, it will reduce higher budget deficits and increase job creation in the home country. Kadet suggested that “a foreign tax-credit mechanism would prevent the double taxation”