Deferral
RSS Issue FeedBACKGROUND
The United States employs a worldwide tax system, meaning that our American companies are taxed here on their U.S. profits, taxed abroad on their foreign profits, and then taxed again when those foreign profits are brought back home. By contrast, virtually all foreign companies are taxed under a territorial system in which they pay taxes on their home country profits in their home country and on their foreign profits in the foreign country. Foreign profits are not taxed a second time when they are brought back home. Thus, the double taxation of foreign profits is avoided.
To offset the advantage of a territorial tax system and to help level the playing field between American worldwide companies and their foreign competitors, the U.S. government employs a system of tax credits and tax deferral. Deferral, which has been in the Internal Revenue Code in various forms since the 1960’s, allows U.S. companies to delay paying tax on foreign earnings until that income is brought home, i.e., repatriated.
CHAMBER POSITION
Limiting or ending deferral would hinder the global competitiveness of American worldwide companies, impede U.S. economic growth, and result in the loss of jobs – both at the companies directly impacted and companies in their supply chains. As businesses continue to struggle to stay afloat in a period of tepid economic growth, common sense suggests that raising taxes is not a good idea.
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