As I was sitting down to draft this review of Chris Sanchirico’s paper, I ran a simple search on Google News: “‘U.S. Companies’ and Tax”. Here are some of things I learned skimming through search results returned by major news outlets: “U.S. Companies” now stash over $2 trillion overseas in order to avoid taxes (NBCNews, Nov. 12, 2014); “U.S. Companies” use mergers to shift their legal address to low-tax jurisdictions in a strategy known as “inversion” in order to reduce their U.S. tax bill (Bloomberg, Oct. 28, 2014); and, one of Congress’ top priorities for 2015 is a tax reform aimed at “helping” “U.S. Companies” avoid the U.S.’s “highest-in-the-world corporate tax rates”, in order to grow the economy (CNBC, Nov. 17, 2014).
Clearly, the taxation of “U.S. Companies” plays a major role in public discourse. Roughly speaking, the two sides of the debate can be outlined as follows: U.S. multinational corporations either pay too much (because our tax system is not competitive compared with the rest of the world), or too little (because our tax system is riddled with loopholes). We need to reform our tax system so “U.S. Companies” are at par with their foreign competitors; or, we need to tighten our tax rules so as to make sure that “U.S. Companies” share the burden. While political views differ, the terms of the debate seem clear. Whichever side of the debate one takes, something must be done about how we tax “U.S. companies.”
Sanchirico, however, questions the core terms of the debate: “When we speak of ‘U.S. multinationals,’ what do we mean by ‘U.S.’? More specifically, to what extent are these ‘U.S.’ companies owned by non-U.S. investors?” Sanchirico’s ultimate answer is quite a shocker: we have no idea what we are talking about when we speak of “U.S. Companies,” at least in terms of who owns these companies. Continue reading "So Who, at the End of the Day, Owns Google (or Apple, or Microsoft, or Pfizer…)?"