Senate Finance Committee Holds Hearing on International Tax Reform

Led by Chairman Hatch, the Senate Finance Committee held a hearing on international tax reform, following the release of the Republican tax reform framework. The hearing and witnesses focused on the competitive disparity between foreign multinationals and domestic multinationals. The witnesses differed on whether a switch to a territorial system or stronger earning stripping provisions were the appropriate response.

Bret Wells, the George R. Butler Professor of Law at the University of Houston Law Center
Mr. Wells began by highlighting Senator Hatch’s commitment to corporate integration and advocating for a partial dividends paid deduction regime. He also underscored that corporate inversions were a symptom of the larger issue of foreign multinational competiveness and that reform should comprehensively address earnings stripping. His testimony ended with a case for a base-protecting surtax.
Read his full prepared remarks here.

Kimberly A. Clausing, Thormund A. Miller and Walter Mintz Professor Of Economics, Reed College
Dr. Clausing pushed back against the assumption that the US corporate tax rate made US multinationals uncompetitive. Instead of a territorial system, she advocated for a minimum tax on a country-by-country basis, rather than a global minimum tax.
Read his full prepared remarks here.

Stephen E. Shay, Senior Lecturer on Law, Harvard Law School
Mr. Shay also advocated for a country-by-country minimum tax, rather than a global minimum tax. He testified that the territorial system referenced in the current framework could leave the US tax system worse off with regards to the tax base.
Read his full prepared remarks here.

Itai Grinberg, Professor Of Law, Georgetown University Law Center
Mr. Grinberg’s testimony centered on the abnormality of the worldwide income approach employed by the United States and that the current system incentivizes the foreign ownership of business over US ownership from a tax perspective. He noted that foreign multinationals are better equipped to strip income out of the US tax base and proposed moving to territorial system.
Read his full prepared remarks here.

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