By James Politi
US companies would repatriate as much as $1.6tn or the bulk of the cash they have stashed overseas if America overhauls the treatment of international earnings in a sweeping reform of the corporate tax code, a Republican-leaning think-tank said on Tuesday.
The American Action Forum led by Doug Holtz-Eakin, a former director of the Congressional Budget Office during the George W Bush administration is trying to build the case for the US to switch to a territorial tax system that imposes minimal taxes on foreign earnings.
The US is an outlier among developed countries because it uses a worldwide system of tax that imposes levies on foreign earnings when they are brought back to the US of up to 35 per cent, the high statutory¬†US corporate tax¬†rate.
The AAF study based on a survey of tax officers at the largest multinationals suggests a switch to a territorial system could lead to the repatriation of between $1.1tn and $1.6tn a higher amount than previously thought. Over time, this could lead to the creation of 3.5m jobs and boost US gross domestic product by $440bn, the AAF study concluded using the CBO's methodology for calculating the economic impact of fiscal stimulus.