Stateless Income

Preprint OPEN
Edward D Kleinbard;
(2012)

This paper and its companion, The Lessons of Stateless Income, together comprehensively analyze the tax consequences and policy implications of the phenomenon of “stateless income.” Stateless income comprises income derived for tax purposes by a multinational group from... View more
  • References (20)
    20 references, page 1 of 2

    REGIME ...................................................................................................... 715 A. Worldwide and Territorial Tax Paradigms .............................. 715 B. The Current U.S. Tax System .................................................... 717 C. Revenue Collections Under the Current System ....................... 722 D. Arbitrage and Domestic Base Erosion...................................... 724 E. The Tax Distillery ...................................................................... 725

    III. STATELESS INCOME IN OPERATION.................................................. 727 A. The Value of Stateless Income Tax Planning .......................... 727 B. Mechanics of Stateless Income Tax Planning ......................... 728 1. Business Earnings Stripping ......................................... 728 2. Transfer Pricing............................................................ 733 3. Legal System Arbitrage................................................. 737 C. How Large is Stateless Income? .............................................. 737 1. Cash Tax Liabilities ...................................................... 737 2. Accounting Evidence..................................................... 744

    IV. IMPLICATIONS OF STATELESS INCOME............................................. 750 A. The Fruitless Search for Source ............................................... 750 B. Capture of “Tax Rents”............................................................. 752 C. Domestic Base Erosion Through Tax Arbitrage ....................... 757 D. Competiveness of U.S. Firms: Statutory and Effective Tax Rates........................................................................................ 758 E. Competitiveness of U.S. Firms: Lock-Out ................................. 762 F. Summary of Implications ........................................................... 768

    V. RESPONDING TO A WORLD IMBUED WITH STATELESS INCOME ...... 770 16. Treas. Reg. § 301.7701-3(b)(2). That is the structure proposed in Darby

    and Lemaster, Double Irish, supra note 11. Like all federal income tax return

    materials, “check-the-box” filings are not publicly available. 17. In a 2008 video interview, John Herlihy, the manager of Google Ireland,

    At the time, Google Ireland employed 1350 employees, of whom 900 worked in the

    “online [sales] team,” 250 “on the technology side,” and 200 apparently in corporate

    xM&NR=1&feature=fvwp (last visited May 19, 2011). Google describes its Irish

    Google Dublin, http://www.google.ie/intl/en/jobs/dublin/ (last visited May 20,

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