Sen John Kerry announced a plan today to cut US companies' overseas investment by forcing them to pay US income tax on profits of foreign investments. Considering that these companies also pay income taxes in most of these foreign countries on the same earnings, this would be a powerful disincentive for US companies to invest abroad.
Current tax laws allow American companies to defer paying taxes on income earned by their foreign subsidiaries until they bring it back to the United States. If they keep the money abroad, they avoid paying U.S. taxes entirely.Now maybe foreign politicians are different, and don't care about local jobs, investment, tax receipts, unemployment rates or the general welfare of their people, but this plan of Kerry's will strike into the heart of every 2nd-world politician's hope to move into the 1st world someday. I wonder if those foreign leaders Kerry keeps talking about were faxed this new plan... Posted by Kevin Murphy at March 26, 2004 08:41 AM | TrackBack
Kerry would require companies to pay taxes on their international income as they earn it rather than being allow to defer it. The new system would apply to profits earned in future years only, not retroactively.