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Debating Foreign Tax Havens

The New York Times’ latest “Room for Debate” feature asks whether secret overseas tax havens are a “Global Tax Dodge or Economic Boon.”

In my contribution, I explain that the U.S. tax code, by encouraging multinationals to use accounting techniques to shift their profits to foreign tax havens, invites corporate tax avoidance:

The extent of this profit shifting was made clear by a recent Congressional Research Service analysis that found that U.S. multinationals reported 43 percent of their overseas profits came from tax havens like Bermuda, even though few of their actual foreign investments (7 percent) or foreign workers (4 percent) were in those countries.

Elements of the U.S. tax code that encourage profit shifting not only help tax havens thrive but also drain U.S. revenues and create a bias against domestic firms and firms that don’t have access to sophisticated tax expertise.