The Treasury Department issued a report to Congress on three international tax issues: U.S. earnings-stripping rules, transfer-pricing rules and the misuse of tax treaties.
The earnings-stripping study focuses on excessive payments of deductible interest by foreign-controlled U.S. corporations to related persons in whose hands that interest is partially or fully exempt from U.S. tax. The study notes that strong evidence exists of earnings stripping by foreign-controlled domestic corporations that have undergone so-called "inversion" transactions, in which the U.S. parent company of a multinational corporate group is replaced with a foreign parent in a low-tax or no-tax country.
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