December 01, 2002
Minor Memos. A study in Tax Notes Magazine in November reported, “The effective rate of tax on profits generated by foreign affiliates of US corporations was more than halved between 1983, when it stood at 49.6%, and 1999, when it had declined to 22.2%.” This is not surprising when one considers that the 1990’s were a period when companies were adopting ever more elaborate ownership structures to reduce taxes on foreign projects. The study found that half the reduction in effective tax rates was due to shifting of earnings from project countries to tax havens. The other half was due to government decisions to cut taxes. In 1999, US multinational corporations reported that 45% of their foreign earnings were earned in 13 countries considered tax havens . . . .The IRS turned down a request by a utility in November for a “change in accounting method” that would allow it to depreciate certain tools and shop equipment — like lathes, band saws and hydraulic presses — over seven years rather than the 15 or 20 years it uses for its power plants. The IRS said the equipment belongs in the same depreciation class as the power plants.