{
  "id": "R44013",
  "type": "CRS Report",
  "typeId": "REPORTS",
  "number": "R44013",
  "active": true,
  "source": "EveryCRSReport.com",
  "versions": [
    {
      "source": "EveryCRSReport.com",
      "id": 441172,
      "date": "2015-04-30",
      "retrieved": "2016-04-06T19:08:26.125397",
      "title": "Corporate Tax Base Erosion and Profit Shifting (BEPS): An Examination of the Data",
      "summary": "Congress and the Obama Administration have expressed interest in addressing multinational corporations\u2019 ability to shift profits into low- and no-tax countries with little corresponding change in business operations. Several factors appear to be driving this interest. Economists have estimated that profit shifting results in significant tax revenue losses annually, implying that reducing the practice could help address deficit and debt concerns. Profit shifting and base erosion are also believed to distort the allocation of capital as investment decisions are overly influenced by taxes. Fairness concerns have also been raised. If multinational corporations can avoid or reduce their taxes, other taxpayers (including domestically focused businesses and individuals) may perceive the tax system as unfair. At the same time, policymakers are also concerned that American corporations could be unintentionally harmed if careful consideration is not given to the proper way to reduce profit shifting. \nConsistent with the findings of existing research, the analysis presented in this report provides indications that the magnitude of profit shifting may be significant. For example, of the $1.2 trillion in overseas profits American companies reported earning in 2012, $600 billion was attributed to seven \u201ctax haven\u201d or \u201ctax preferred\u201d countries: Bermuda, Ireland, Luxembourg, the Netherlands, Singapore, Switzerland, and the U.K. Caribbean Islands. The Netherlands was the most popular location to report profits, accounting for 14.1% of all overseas earnings of American companies. Further analysis reveals that the share of profits reported is significantly disproportional to the amount of hiring and investment made by American companies in these countries. \nData on the foreign direct investment (FDI) positions of American companies are also analyzed. Examining FDI data allows for an indirect investigation into the degree of profit shifting. The FDI data show that the same seven \u201ctax haven\u201d or \u201ctax preferred\u201d countries accounted for nearly half (47%) of the worldwide FDI position of the United States. The data also show that an increasing share of FDI is being held via holding companies. The report discusses that some of the increased use of holding companies may be tax motivated. Lastly, data from the International Monetary Fund (IMF) and the United Nations (UN) on the location of the FDI positions of all countries indicate that profit shifting is likely an international issue.\nSeveral policy options for addressing base erosion and profit shifting are briefly discussed. Included in the discussion are the tradeoffs and considerations involved in moving closer to either a pure worldwide tax system or a pure territorial tax system. The adoption of a minimum tax or a formula apportionment system is also discussed, as well as the effects of modifying current tax policy such as broadening the definition of Subpart F income or reducing corporate tax rates. The report concludes with a discussion of the Organisation for Economic Co-operation and Development (OECD) Base Erosion and Profit Shifting (BEPS) plan, which may have implications for American corporations even if the U.S. does not adopt the OECD\u2019s recommendations.\nThis report is intended to assist Congress as it considers what, if any, action to take to curb profit shifting. It is one of several CRS products related to the subject of profit shifting. Where appropriate, reference is made to related CRS products that discuss the more technical issues in the international corporate tax debate.",
      "type": "CRS Report",
      "typeId": "REPORTS",
      "active": true,
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      "topics": []
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  ],
  "topics": [
    "Economic Policy"
  ]
}