Senate GOP's 'Revenge Tax' Still Packs Punch Despite Changes
Tax attorney Joshua Odintz was quoted in a Bloomberg Tax article about the so-called "revenge tax" proposed by the U.S. Congress. Bills in the House and Senate include a version of Section 899, a series of provisions that would increase taxes on foreign-owned companies through raising rates and expanding the application of the base erosion and anti-abuse (BEAT) tax. More specifically, the bills target the undertaxed profits rule (UTPR) and digital services tax (DST). However, the Senate's version differentiates between the UTPR and DST, labeling UTPR as "extraterritorial" and DST "discriminatory." Under the Senate bill, the rate increase applies only to foreign taxes that are extraterritorial, while the "super BEAT" applies to foreign taxes that are either extraterritorial or discriminatory. This means that a business whose parent company imposes a UTPR would be subject both to the rate increase and expanded BEAT tax. Mr. Odintz shared his insights on why lawmakers opted for a harsher treatment of the UTPR.
"DSTs are bilateral issues, and some countries have exited their DSTs or put them on hold," he said. "Whereas, the UTPR, that is the real sin that Senate Finance and Ways and Means are going after. So perhaps that, that is the reason for why they put a greater penalty on UTPR."
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