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  •   James G. S. Yang

  •   Leonard J. Lauricella

Abstract

The United States (U.S.) has a new tax law known as The Tax Cuts and Jobs Act of 2017 (TCJA) [1].  It imposes many new provisions dealing with international tax from a U.S. perspective, including several that were designed to prevent the erosion of the U.S. tax base.  This article discusses the reasons for these new anti-base erosion provisions and explains how they work.  It points out some of the international tax planning techniques used by U.S. and other multinational corporations to shelter income from high taxes.  It discusses the temporary and in some cases permanent disallowance of deductions for interest expense, the disallowance of royalty expenses, and the new base erosion and anti-abuse tax (BEAT).  This paper also presents examples and offer tax planning strategies.

Keywords: Tax Cuts and Jobs Act of 2017, Worldwide Tax System, Territorial Tax System, Controlled Foreign Corporation, Base Erosion Payment, Base Erosion and Anti-abuse Tax

References

“Tax Cuts and Jobs Act of 2017,” P.L. 115-97, enacted December 22, 2017.

C. Dulaney, “Repatriation Frenzy is just Starting,” The Wall Street Journal, June 28, 2018, Vol. CCLXXI No. 150, p. B10.

L. Hoffman, and D. Mattioli, “Burger King in Talks on Canada Deal,” The Wall Street Journal, August 25, 2014, p.A1.

L. Hoffman, “The Tax Inversion Wave Keeps Rolling,” The Wall Street Journal, July 8, 2014 p. C1.

S. Schechner and N. Trentmann, “Foreign Companies Fret About U.S. Tax, The Wall Street Street Journal, February 14, 2018, p. B5.

Organization of Economic Cooperation and Development (OECD, 2013), “Action Plan on Base Erosion and Profit Shifting,” 2013, available online at https://www.oecd.org/ctp/BEPSActionPlan.pdf, retrieved June 1, 2018.

OECD (2015). “Base Erosion and Profit Shifting Project: Action 15: A Mandate for the Development of a Multilateral Instrument on Tax Treaty Measures to Tackle BEPS,” available online at https://www.oecd.org/tax/beps/beps-action-15-mandate-for-development-of-multilateral-instrument.pdf, retrieved June 1, 2018.

OECD (2016), “Multinational Convention to Implement Tax Treaties Related Measures to Prevent Base Erosion and Profit Shifting,” Paris, France, December 24, 2016, available online at http://www.oecd.org/tax/treaties/multilateral-convention-to-implement-tax-treaty-related-measures-to-prevent-BEPS.pdf, retrieved June 1, 2018.

Internal Revenue Code (IRC) §163(j)(3).

Ibid §267A.

Ibid §59A(e)(1)(B).

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How to Cite
Yang, J., & Lauricella, L. (2020). Problems of Base Erosion and Anti-Abuse Tax. European Journal of Business and Management Research, 5(4). https://doi.org/10.24018/ejbmr.2020.5.4.44