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Tax Haven Incorporation for US Headquartered Firms
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Tax Haven Incorporation for US Headquartered Firms

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Editorial Rating

7

Qualities

  • Innovative

Recommendation

Legal tax avoidance – including the use of tax havens – has reduced corporate tax bills to a pittance in countries where companies make big profits. But professors Eric J. Allen and Susan C. Morse put the lie to the common belief that more and more US-based multinationals are incorporating in tax havens. Their research spans years of data and indicates that only about 3% of firms exploit that loophole. Given the dramatic scope for US tax planning, why would companies pay taxes they can legally avoid? getAbstract recommends this well-researched paper – with its handy synopsis of relevant US tax law – to business executives and tax professionals.

Take-Aways

  • The United States’ tax law offers great scope in tax planning for US-based firms with international operations.
  • The incorporation of a parent company in a tax haven offers more potential for tax reduction in the US than just the offshore incorporation of subsidiaries.
  • Few US businesses choose to incorporate in a tax haven early in their development.

About the Authors

Eric J. Allen is an assistant professor of accounting at the Marshall School of Business, University of Southern California. Susan C. Morse is an assistant professor at the University of Texas’s School of Law.


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