Judging the New International Tax Regime: Testimony Before the U.S. Senate Committee on Finance

Abstract

The 2017 tax law made significant changes to the way the United States taxes multinational corporations on their cross-border income. The new legislation has, however, failed to solve old problems in the international system and also opened the door to new ones.The serious problems created, or left unaddressed, by the new regime, include the following: (1) The new international rules aimed at intangible income incentivize offshoring and largely preserve the profit shifting problem; (2) the new patent box regime will likely not increase innovation, causes WTO problems, and can be easily gamed; (3) the new inbound rules have too generous thresholds and can be readily circumvented; and (4) the new regime falls short of true international tax reform. This is the author's written testimony before the U.S. Senate Committee on Finance, at an April 24, 2018 hearing on the recent tax legislation.