![handle is hein.journals/tulr91 and id is 39 raw text is:
2016] TWO CHEERS FOR THE FOREIGN TAX CREDIT 29
the fact that the Country B tax would have to be paid currently,
whereas much of EuroSub's profits are likely to be invested
indefinitely offshore so that the benefit from credits for the 25%
Country B tax would be significantly deferred and thus potentially
diminished in value.o' Whatever the reason, the tax minimization
strategy shown in Example 4 is a major reducer of the foreign tax
liabilities of U.S. MNCs,' and the alleged disincentive of the U.S.
foreign tax credit does not seem to do much to discourage the use of
the strategy.
Things would likely change if the United States were to adopt a
real worldwide, or full inclusion, system under which (1) deferral was
abolished; (2) the income of controlled foreign subsidiaries was
subject to a current U.S. tax with a credit for foreign taxes; and
(3) cross-crediting was severely limited. In this scenario, the tax
planning that creates zero-taxed foreign income in Example 4 would
seem to be truly pointless because the income would bear an
immediate, full U.S. tax even if it were permanently reinvested off
shore.o The manufacturing of stateless or homeless income
seemingly would end, and in the context of Example 4, the U.S. tax
take would surely be limited to the 10 percentage point excess of
the 35% U.S. tax over the U.S. credit for the 25% Country B tax.
Should USCorp's abandonment of the strategy to minimize
foreign taxes in Example 4 by moving income from high-tax Country
B to tax haven Country C be regarded as unfortunate so far as the
United States is concerned? We think not. At a time when the United
States is acting to protect its own tax base by seeking the assistance of
other countries and their resident financial institutions to gather
information regarding the foreign-source income of U.S. residents, it
would seem counterproductive to encourage U.S. residents to erode
737-50; see also CBO, OPTIONS FOR TAXING, supra note 7, at 14-17 (discussing profit shifting
techniques and their effects); IMF, supm note 3, at 17 (same).
108. See Sheppard, supra note 92 (reviewing a 2015 report by Moody's, Inc. showing
that cumulative foreign earnings reported as permanently invested offshore were $93 billion
for Microsoft, $70 billion for Apple, $47 billion for Google, and $74 billion for Pfizer).
Professor Shaviro observes that under the so-called new view of dividends, assuming
eventual repatriation and constant tax rates, deferral will not result in diminished present
value of foreign tax credits. Shaviro, supm note 33, at 83-85. He continues, however, to
point out that in practice these assumptions do not generally hold. Accordingly, deferral
introduces risk that foreign tax credits will not be fully utilized or otherwise not maintain
their full value. Id at 85-87.
109. See sources cited supo note 107.
110. SeeKEIGHTLEY & STuPAK, supmnote 28, at 15.](ViewImageLocal?handle=hein.journals/tulr91&div=5
&collection=journals&method=preview&ext=.png&size=3)
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