Why is it easier for a US Corporation to set itself up in the Cayman Islands than it is for a self-employed person to deduct the expenses of his home office?
US Senator Bernie Sanders (Ind. VT.) recently “introduced a bill to stop profitable
corporations from sheltering income overseas in the Cayman Islands and other
tax havens to avoid paying U.S. taxes. The legislation also would end tax
breaks for companies that ship jobs and factories overseas.”
Sanders stated that: “Eighty-three of the Fortune 100
companies in the United States have used offshore tax havens to lower their
taxes, according to the most recent Government Accountability Office study.”
At a news conference, Sanders showed a photo of a
building in the Cayman Islands that is the registered address of more than
18,000 companies.
In my opinion, the following proposed rules and laws should be adopted:
(1) The
IRS should develop place of business requirements that would prohibit companies
from using phony addresses, as do apparently the 18,000 companies referred to
by Sanders.
(2) The
IRS has stringent rules for the small businessperson who might want to deduct a
home office. Shouldn’t the rules for
companies claiming an overseas address be at least as realistic as the home
office ones? See IRS publication 587 and
IRS Form 8829.
(3) All
vendors doing business with the US Government should certify in their bids how
much US income tax attributable to the vendor's business activity (whether it is a corporation, a
subchapter S corporation, a partnership, a self-employed person, or any other
entity) was paid in the past three years.
(4) The
US Government should not do business with any vendor that paid no US income tax
attributable to the vendor’s business activity in any of the past three years.
(5) Any
exception to this law, for example for national security purposes, may be made
by the US President or the appropriate Cabinet Secretary only after an
Executive Order is published.
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