This article will attempt to describe how the U.S. international tax system hinders the competitiveness of U.S.-based multinational corporations in the global economy by increasing their economic burdens. Additionally, this article will discuss how these corporations have expatriated themselves to lower tax jurisdictions to increase competitiveness in the global market. The Stanley Works Corporation's recent proposal to reincorporate in Bermuda to decrease its own tax liability will be used as an example. Part I of this article provides a brief overview of the two main methods employed by countries to tax income derived by its own corporations from their operations in other countries: the exemption system and the worldwide system. Part II explains the system of international taxation embodied in the U.S. Internal Revenue Code. Part III will describe how corporations change their country of residence to take advantage of the tax reduction. Specifically, this section discusses the methods that U.S. corporations undertake to remove themselves from the full taxing jurisdiction of the United States and how the setup of the Internal Revenue Code makes it advantageous for corporations to undertake this maneuver. Part IV discusses the recent attempt of the Stanley Works Corporation to move to another country to reduce the amount of tax it pays to the U.S. Government. Part V explains how the recent wave of corporate inversions has affected the U.S. economy because of the large reduction of corporate tax base. Part VI examines how the U.S. Government plans to respond to this corporate epidemic and the reform measures planned to remedy future considerations. Finally, section VII describes a proposal for reform that would increase the ability of U.S. multinational corporations to compete in the global marketplace while retaining a significant amount of corporate tax dollars to help sustain the U.S. economy.
"When Good Tax Law Goes Bad: Stanley Works' Recent Dilemma And How The Internal Revenue Code Disadvantages U.S. Multinational Corporations Forcing Their Flight To Foreign Jurisdictions,"
Syracuse Journal of International Law and Commerce:
1, Article 8.
Available at: http://surface.syr.edu/jilc/vol31/iss1/8