Business Inversions Do Not Leave Taxpayers “Holding the Bag”
17th February 2016
First, the new post-inversion company will typically chose to bring more of their foreign earned income back to the U.S. than they would as an American based company. This is because they are no longer subject to the international taxation system of the U.S. tax code, and as the study notes, this means money invested in the U.S. economy.
In other words, if an American company owns a foreign company, the American company has to pay taxes on its operations and that of the foreign company, even if the foreign company didn’t do any business in the U.S. (Thanks a lot, Congress.) The other way around, the American company and the foreign company only have to pay taxes in the places where they have operations, which is HOW THE REST OF THE WORLD WORKS.
Second, post-inversion company typically pays more in revenue to the US treasury post- inversion, even as their marginal tax rate decreases. It is important to note that the hysteria that inverted companies are abandoning the U.S., post-inversion companies continues to pay taxes on their U.S. operations.
Lastly, the authors found concerns over earnings stripping – the transferring of assets to low-tax jurisdictions – is overstated and not used to the extent that critics of inversions contend.