Shifting Earnings Overseas; FASB Codification
US Companies Shifting Earnings Overseas
FASB Codification Topic #740
U.S. companies are saving $100 billion a year by shifting profits overseas
by Ranae Merle; May 10, 2016
Reviewed by LuAnn Bean
According to a study released in May 2016, U.S. multinational companies are saving $100 billion a year by shifting profits overseas to lower their tax bills. “In addition to merging or buying smaller foreign firms and moving their headquarters overseas to lower their tax rates, known as an inversion, companies also assign patents to subsidiaries in countries in which the profits made from them will be taxed at a lower rate” (Merle, 2016: U.S. companies are saving $100 billion a year by shifting profits overseas).
Video: Tax Havens Explained with Maps (https://www.youtube.com/watch?v=t3Qjcb0_9OU&feature=youtu.be)
Transcript of video( http://explainedwithmaps.com/tax-havens/)
Randomly select and answer 1 of the following statements to spark class discussion:
Reminder: the goal is to engage with your classmates; simply posting your answer is insufficient to earn credit for discussions
Questions to spark class discussion:
- Is shifting profits overseas tax fraud? Why or why not?
- Explain the mechanism companies are using to shift profits overseas.
- Which countries are companies shifting profits to and why (be specific)?
- Propose U.S. Congressional acts that could mitigate the lost of tax revenue caused by companies shifting profits overseas .
- Describe the risks of shifting cash from illegitimate organizations to legitimate financial markets.
- Does shifting earnings overseas impact earnings per share for US shareholders? Be specific.
Related articles:
China Plans to Get Tough on Corporate Tax Evasion; (https://www.marketwatch.com/story/china-plans-to-get-tough-on-corporate-tax-evasion-2016-05-18-64852224)
New rules would make it more difficult for large companies to avoid taxes by shifting profits among different countries
by Anonymous; May 18, 2016
Ending the One-Two Corporate Tax Punch; Jason Furman is right about the ‘stupid’ policy on overseas income. (http://www.vennstrategies.com/newsroom/in-the-news/2550-wsj-ending-one-two-corporate-tax-punch)
Domestic policy also isn’t so bright.
by Reardon, Brian; Nichols, Tom; February 26, 2016
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