Stateless Income

This paper and its companion, The Lessons of Stateless Income, together comprehensively analyze the tax consequences policy implications phenomenon “stateless income.” income comprises derived for purposes by a multinational group from business activities in country other than domicile group’s ultimate parent company, but which is subject to only jurisdiction that not location customers or factors production through was derived, company. Google Inc.’s “Double Irish Dutch Sandwich” structure one example stateless planning operation.This focuses on current policies planning. companion extends analysis along two margins, considering reliability standard efficiency benchmarks relating foreign direct investment, detail phenomenon’s design future U.S. this area, whether couched as adoption territorial regime genuine worldwide consolidation system.This first demonstrates rules governing investments often are misapprehended: practice do operate “worldwide” system taxation, rather an ersatz variant systems, with hidden benefits costs when compared regimes. claim holds analyzes these cash matter, lens financial accounting standards. rejects inconsistent data any suggestion law disadvantages firms respect effective rates they suffer, their territorial-based competitors.This paper’s fundamental thesis pervasive presence changes everything. privileges over domestic ones offering former prospect capturing “tax rents” — low-risk inframarginal returns moving high-tax countries low-tax ones. Other important include dissolution coherence concept geographic source, systematic bias towards offshore more surprising favor investment provide raw feedstock generation countries, erosion base debt-financed arbitrage, many instances deadweight loss, essentially uniquely United States exacerbation lock-out phenomenon, under price pay enjoy dramatically low accumulation extraordinary amounts earnings (about $1.4 trillion, most recent estimates) outside States.Stateless applied law’s means effect now operates fact kind lock-in effect: retain overseas profitably can redeploy, great frustration shareholders, who would prefer be distributed them. tension between shareholders management likely lies at heart demands U.S.-based adopt system. themselves greatly disadvantaged system, are. reward successful perspective should massive stock repurchases, instead tantalized glimpses enormous hoards just out reach.