gbaji wrote:
Timelordwho wrote:
This wrongness was especially glaring. So, your argument is that by generating more income for the government via taxing foreign enterprises that do business with the US, (and thus lowering the deficit), we create greater financial difficulties for the US???
They aren't taxing "foreign enterprises". They are taxing corporations with business holdings in the US, but also with holdings outside the US, who dare to attempt to protect the revenue they make outside the US from the long arm of the US tax law. While the law claims to only target a specific subset of those companies, it's so broadly written in the bill that it could be applied to almost any multinational corporation operating in the US. Certainly, every one of those companies will have to re-asses their international methodologies to ensure that they aren't likely to be found in violation of the new law (whatever it ends out actually saying).
Wrong, wrong, and more wrong. You really should do your research before spouting off such ridiculous bullsh*t.
The text of the bill containing said ammendment can be found here:
http://www.us.kpmg.com/microsite/taxnewsflash/2010/Jul/HR.847_Amended.pdf
The relevant section is under title III on page 117 of the PDF document, and it states:
IN GENERAL — Section 894 of the Internal Revenue Code of 1986
(relating to income affected by treaty) is amended by adding
at the end the following new subsection:
(d) LIMITATION ON TREATY BENEFITS FOR CERTAIN DEDUCTIBLE PAYMENTS.—
(1) IN GENERAL.—
In the case of any deductible related-party
payment, any withholding tax imposed under chapter 3
(and any tax imposed under subpart A or B of this part)
with respect to such payment may not be reduced under
any treaty of the United States unless any such
withholding tax would be reduced under a treaty of the
United States if such payment were made directly to
the foreign parent corporation.
(2) DEDUCTIBLE RELATED-PARTY PAYMENT.—
For purposes of this subsection, the term
‘deductible related-party payment’ means any payment
made, directly or indirectly, by any person to any
other person if the payment is allowable as a
deduction under this chapter and both persons are
members of the same foreign controlled group of
entities.
(3) FOREIGN CONTROLLED GROUP OF ENTITIES.—
For purposes of this subsection—
(A) IN GENERAL.—
The term ‘foreign controlled
group of entities’ means a controlled group
of entities the common parent of which is a
foreign corporation.
(B) CONTROLLED GROUP OF ENTITIES.—
The term ‘controlled group of entities’ means a
controlled group of corporations as defined in
section 1563(a)(1), except that—
(i) ‘more than 50 percent’ shall be substituted
for ‘at least 80 percent’ each place it
appears therein, and
(ii) the determination shall be made
without regard to subsections (a)(4) and
(b)(2) of section 1563. So, this only applies to companies headquartered in foreign countries which have no direct applicable tax-reducing treaty with the U.S. The existing tax code is amended to say that only control of "more than 50% of the total combined voting power of all classes of stock entitled to vote" is required to be considered a controlling group. This means that now any corporation for which over 50% of the stock is held by foreign interests is defined as a "foreign controlled group of entities" for the purpose of this restriction.
The effect of this restriction is that a U.S. subsidiary may no longer avoid paying taxes on income earned in the U.S. by making a deductible payment to another party within the corporation that resides in a country in which a treaty exists with the U.S. that might allow tax reductions before funneling the money back to the corporate headquarters residing in a country with no such tax-reducing treaty.
For example, let's suppose the following:
A) England has a treaty with the U.S. that reduces taxes on deductible payments
B) China has no such treaty
C) An corporation ("ABC CORP") is headquartered in China.
As the code exists now, A U.S. subsidiary of "ABC CORP" may transfer U.S. based income to a England-based subsidiary of "ABC CORP" via a deductible payment, thereby reducing the amount of tax owed on said income. The English subsidiary of said corporation may then transfer the funds to corporate interests outside of the boundary of the U.S. tax code.
It's a loophole that allows foreign corporations to avoid paying taxes that should be paid for income earned in the U.S. through the use of a third party subsidiary residing in a country that is a signatory to such tax-reducing treaties with the U.S., and it should be rightfully closed, especially if the funds lost to said loophole approach anywhere near the 7.4 billion required to fund the WTC bill.
It's not a "new tax", nor could it possibly be construed as such by any individual with a reasonable amount of intellect.
Edited, Aug 12th 2010 12:43am by BrownDuck 
