The 'check-the-box' rule, meant to cut red tape for companies, has inadvertently allowed them to avoid billions of dollars in taxes each year, and the government keeps balking at closing the loophole.
A simple rule meant to cut paperwork for U.S. companies has grown into one of the biggest multinational tax breaks around, costing the United States and other governments billions of dollars in lost taxes each year.
It thrives thanks to determined business support, including a campaign two years ago that forced the Obama administration to retreat from altering it, and tax professionals worldwide who exploit its benefits.
The rule is dubbed “check-the-box [1].” It allows U.S. companies to strip profits from operations in high-tax countries simply by marking an Internal Revenue Service form that transforms subsidiaries into what the agency calls a “disregarded entity.” Others have labeled them “tax nothings.”
Check-the-box allows companies to avoid the normal 35 percent U.S. corporate tax on certain types of income. The Treasury Department estimates that annual revenue losses from check-the-box have hit almost $10 billion. Other countries are also said to lose billions as income is shifted to places with low or no taxes, although there is no official estimate.
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The rule is dubbed “check-the-box [1].” It allows U.S. companies to strip profits from operations in high-tax countries simply by marking an Internal Revenue Service form that transforms subsidiaries into what the agency calls a “disregarded entity.” Others have labeled them “tax nothings.”
Check-the-box allows companies to avoid the normal 35 percent U.S. corporate tax on certain types of income. The Treasury Department estimates that annual revenue losses from check-the-box have hit almost $10 billion. Other countries are also said to lose billions as income is shifted to places with low or no taxes, although there is no official estimate.
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1 comment:
Thank you, Congress, for looking out so well for the American citizens. Oh wait ---you didn't do THAT. You got bribed and helped other (most of YOU are millionaires, too) rich people and corporations avoid taxes. Setting us bogus overseas subsidiaries and channeling profits to companies in Aruba. But thank you anyway for ALL the laws you've written to make sure the middle class pays their "fair share". We KNOW you have SOMEONE'S back, we just know it isn't OURS.
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