International Taxation: Information on Federal Contractors With Offshore Subsidiaries

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A letter report issued by the General Accounting Office with an abstract that begins "Every year, U.S.-based multinational corporations transfer hundreds of billions of dollars of goods and services between their affiliates in the United States and their foreign subsidiaries. Such transactions may be a part of normal business operations for corporations with foreign subsidiaries. However, it is generally recognized that given the variation in corporate tax rates across countries, an incentive exists for corporations with foreign subsidiaries to reduce their overall tax burden by maximizing the income they report in countries with low income tax rates, and minimizing the ... continued below

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United States. General Accounting Office. February 2, 2004.

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Description

A letter report issued by the General Accounting Office with an abstract that begins "Every year, U.S.-based multinational corporations transfer hundreds of billions of dollars of goods and services between their affiliates in the United States and their foreign subsidiaries. Such transactions may be a part of normal business operations for corporations with foreign subsidiaries. However, it is generally recognized that given the variation in corporate tax rates across countries, an incentive exists for corporations with foreign subsidiaries to reduce their overall tax burden by maximizing the income they report in countries with low income tax rates, and minimizing the income they report in or repatriate to countries with high income tax rates. Various studies have suggested that U.S.-based multinational corporations appear to engage in transactions such as these that shift income from their affiliates in high-tax countries to subsidiaries in low-tax countries to take advantage of the differences in tax rates in foreign countries. In 2002, GAO reported that 4 of the 100 largest publicly traded federal contractors are incorporated in a "tax haven" country that either does not tax corporate income or taxes the income at a low rate. As a follow-up to the report, Congress asked us to determine which, if any, of the 100 largest publicly traded federal contractors we identified in our 2002 report have subsidiaries that are incorporated in a tax haven country. Congress further asked us to determine, to the extent possible, which of these subsidiaries are Foreign Sales Corporations, a type of corporation that can exempt a portion of its foreign sales income from U.S. tax."

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Government Accountability Office Reports

The U.S. Government Accountability Office (GAO) is an independent, nonpartisan agency that works for the U.S. Congress investigating how the federal government spends taxpayers' money. Its goal is to increase accountability and improve the performance of the federal government. The Government Accountability Office Reports Collection consists of over 13,000 documents on a variety of topics ranging from fiscal issues to international affairs.

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  • February 2, 2004

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  • June 12, 2014, 7:50 p.m.

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United States. General Accounting Office. International Taxation: Information on Federal Contractors With Offshore Subsidiaries, report, February 2, 2004; Washington D.C.. (digital.library.unt.edu/ark:/67531/metadc298796/: accessed July 17, 2018), University of North Texas Libraries, Digital Library, digital.library.unt.edu; crediting UNT Libraries Government Documents Department.