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USC professor to testify on corporate tax havens

Outlining his proposals for tax reform, Edward Kleinbard testified before a subcommittee of the United States Senate Committee on Finance in 2011. (Photo/Jay Mallin)

USC Gould School of Law Professor Edward Kleinbard will testify on June 13 before the U.S. House of Representatives Ways and Means Committee in Washington, D.C., where he will outline his proposals for international tax reform.

Different tax planning strategies used by multinational corporations to shift income out of the United States and into low-tax jurisdictions will be examined at the hearing, which will include discussions on whether profit shifting is eroding the U.S. tax base and how companies are shifting profits among different foreign jurisdictions without affecting U.S. tax collections.

Kleinbard will testify that his experience and research shows that U.S. multinational firms, as well as multinational firms resident in other countries, engage in large-scale base erosion and profit-shifting. In his academic papers, he refers to this as the generation of “stateless income.”

Kleinbard recently commented widely about Apple’s overseas tax shelters after congressional investigators announced that the havens saved Apple billions of dollars. He has been interviewed by dozens of news outlets on the topic, including The New York Times, in which he said, “There is a technical term economists like to use for behavior like this … unbelievable chutzpah.”

In a New York Times op-ed on the matter, Kleinbard wrote: A recent “Senate hearing showcasing the international tax strategies of Apple Inc. demonstrated what happens when aggressive corporate tax planning collides with antiquated international tax laws: the generation of tens of billions of dollars of ‘stateless income’ — income taxed essentially nowhere in the world. In Apple’s case, this income should have been taxed in the United States. In other cases, the right answer could be that a multinational’s stateless income properly belongs to the firm’s ‘host’ countries, where its actual customers are located. But in no tax system ever constructed is the appropriate answer that business income should escape taxation everywhere in the world.”

Kleinbard said that though many reform proposals have been brought forth, transparency will pave the way for the legislative battles that are sure to follow.

Also testifying will be Pascal Saint-Amans, director of the Centre for Tax Policy and Administration at The Organisation for Economic Co-operation and Development, and Paul Oosterhuis, a partner at Skadden, Arps, Slate, Meager & Flom LLP.

Kleinbard joined USC’s law school in 2009 after serving as chief of staff for the U.S. Congress’ Joint Committee on Taxation, a nonpartisan office that assists Congress on every aspect of the tax legislative process.

USC professor to testify on corporate tax havens

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