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Half of US foreign profits booked in tax havens: paper

AFP  |  Washington 

About half of all the foreign profits of US multinationals are booked in havens with topping the charts as the favorite, according to a new economic study on Monday.

And the benefits for the increase in profits have gone to shareholders, the paper showed.

US companies are by far the biggest users of havens, where they face effective rates of just seven percent, according to the study by economists and

"solidifies its position as the #1 tax haven," Zucman said on "US firms book more profits in than in China, Japan, Germany, & combined. Irish tax rate: 5.7%."

The research was made possible by the US tax cut in December 2017 that contained a mandatory repatriation of profits, which allowed researchers to calculate the final tax bill for the companies.

Because the 2017 law "allows these firms to repatriate their foreign earnings at a low rate...we now know that US multinationals have really had a high after-tax profitability on their foreign operations over the last decades."

This is phenomenon referred to as the "exorbitant tax privilege," and as a result "it has redistributed income to the benefit of their shareholders (some of which are foreigners)." No other developed -- except tax havens -- has as high a share of foreign profits booked in tax havens as the United States, most prominently in Ireland (18 per cent), Switzerland, and plus tax havens (eight percent - nine percent each).

The report shows "have seen their tax rates on foreign earnings fall from about 35 percent in the first half of the 1990s (close to the statutory US federal rate) to about 20 per cent in recent years." The tax reform dropped the top US corporate rate to 21 per cent from 35 per cent, taxing only profits earned on US territory.

Businesses have to make a one-time payment of eight per cent or 15.5 per cent, on repatriated foreign profits, depending on whether the assets are cash or investments.

(This story has not been edited by Business Standard staff and is auto-generated from a syndicated feed.)

First Published: Tue, September 11 2018. 00:40 IST