How to Avoid a ‘Revenge Tax'
Now that Congress has your attention, you may be wondering how to escape the supposed new 'revenge tax' lawmakers are writing. The proposal has stirred up considerable, although disingenuous, alarm in some quarters but rejoice: Escaping it is simple.
We speak of Section 899, included in the House version of the budget bill now wending its way across Capitol Hill. It would create a retaliatory surtax with a maximum rate of 20% on nationals (individuals and companies) of countries that impose 'unfair foreign taxes' on U.S. businesses. A recent Wall Street-and-media freakout branded this a protectionist sledgehammer, but it's a narrowly tailored response to specific foreign tax overreaches.
Congress is reacting to taxes other governments want to impose on American firms under the aegis of the Organization for Economic Cooperation and Development. Pillar one of the OECD's global corporate-tax project envisions new excess-profits taxes on the world's largest companies, mainly American and largely in tech and pharma. Europe's current crop of digital-services taxes are precursors.
Pillar two imposes a 15% corporate alternative minimum tax globally, and allows other jurisdictions to impose 'top-up taxes' if a company's home country doesn't collect enough tax under the rules.
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