Recalling Inversions : vimarsana.com

Recalling Inversions


Recalling Inversions
 
The U.S. tax code became increasingly uncompetitive from the late 1980s onward, resulting in a series of corporate expatriations, or inversions, whereby firms would reorganize abroad to escape the U.S. tax system.
This phenomenon largely ceased following the enactment of the Tax Cuts and Jobs Act (TCJA) in 2017; since the TCJA’s passage, not a single major inversion has been reported.
The Biden Administration is proposing to return the United States to its former uncompetitive tax system, replete with higher corporate rates and an outmoded international tax regime, that saw inversions occur with some regularity.
 
 
The United States was slow to recognize the significance that corporate tax policies can have on the international competitiveness of its firms. While the United States has been home to the world’s most innovative enterprises, that innovation often came despite a tax code that became singularly disadvantageous to the nation’s businesses. Over time, this disadvantage widened to the point that U.S. firms were induced to pull up stakes and move to host nations with more competitive tax environments. Known as inversions, these conspicuous casualties of obsolete tax policies have bedeviled policymakers, who tried through regulatory fiat to stem the flow of inversions. Despite these efforts, the trend persisted until the United States substantially reformed its tax code through the Tax Cuts and Jobs Act (TCJA) in 2017. Since the TCJA’s passage, no major inversions appear to have been completed, while at least one major inversion has been reversed. The Biden Administration is proposing tax policies that would move the United States closer to the tax system, characterized by high corporate rates and an outmoded international tax regime, it had when inversions were occurring with some regularity.

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