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.
In this summary, you will learn
- What benefits incorporating a company in a tax haven derives,
- How many US-based companies actually pursue this option and
- What factors may influence a firm’s choice of incorporation locale.
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.