U.S. Cross-border Tax Reform and the Cautionary Tale of GILTI
Daniel Bunn
Key Findings
The U.S. joined many other developed nations in adopting territorial provisions and anti-base erosion rules as part of the 2017 tax reform.
One major piece of that reform, that is not typical in other territorial systems, is a new definition of currently taxable foreign earnings, Global Intangible Low Tax Income (GILTI), which is taxed at an effective rate of 13.125 percent, with the rate set to increase after 2025 to 16.4 percent.
Recent research has shown that foreign earnings of U.S. companies remain taxed at similar rates even after the 2017 reforms, implying that while the structure of U.S. taxes on foreign earnings changed, the overall burden did not.
You’ve had a lot of manufacturing experience.
Willy Shih: I spent 28 years in industry. I confronted a lot of puzzles there, and I’ve been looking at them since coming here.
The interesting question relating to competitiveness had to do with my time at Kodak. In 1997, I took over the consumer digital business it was trying to build. That year Kodak shipped a few tens of thousands of digital cameras. One of the factories in Rochester, New York, had this highly automated assembly line where the engineers were attempting to manufacture digital cameras locally. You needed a whole bunch of electronic and optical components: electronic sensors, the tiny displays that show you your pictures, rechargeable batteries, consumer-electronic stuff.