International Taxes

Report: US companies use complex maneuvers to lower tax bills

The study comes as Washington policymakers continue to debate corporate tax reform, with officials in both parties saying that the code needs to be scrubbed of loopholes that can distort economic activity.

{mosads}Republicans are also arguing that the United States should move away from a system that double taxes multinational companies. 

But the Obama administration has not expressed an interest in shielding corporate profits made abroad, a proposal preferred by many GOP lawmakers and business groups.

In its report, the OECD said that there was not wide-ranging data available on the cost of the maneuvers, but did estimate that $3.5 billion worth of revenue in the United States had been involved in some of the complex tax moves.

Italy and New Zealand have also settled cases in recent years that involved the tax tactics, the report found.

Generally speaking, the OECD found that companies are able to legally reduce their tax obligations by deducting the same costs in separate countries, claiming more than one credit for the same foreign tax bill and creating a deduction in one country without a matching inclusion in another.

Companies that profit off of capital instead of labor are in a better position to use those tactics, the research group found, and the tax measures can also give businesses incentives to invest abroad rather than at home.

The OECD also found that the United States and others have taken steps that have taken away some of the benefits companies get from playing off current discrepancies in the various tax codes. But the group also suggested that countries keep pushing on the issue, by continuing to share information and considering further targeted measures. 

But even with practically everyone agreeing the U.S. corporate tax code is badly outdated, Washington observers are also generally skeptical that Congress and the Obama administration can revamp tax laws that govern U.S. business this year.

“It is up to each country to decide how to approach the issues addressed in this report and what strategies would be the most appropriate in the context of, and the most consistent with, its rules and framework,” the OECD report found. “At the same time, in a world where economies are increasingly integrated, it is essential to consider how tax systems interact with each other.”


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