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The Geometry of International Tax Planning after the Tax Cuts and Jobs Act: A Riff on Circles, Squares, and Triangles

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  • Michael P. Donohoe
  • Gary A. McGill
  • Edmund Outslay

Abstract

The enactment of the so-called Tax Cuts and Jobs Act of 2017 (TCJA) significantly changes the landscape for tax planning and compliance by U.S. multinational corporations (MNCs). The promised shift to a more territorial system actually results in a greater likelihood that more of a U.S. MNC’s foreign income is subject to current U.S. taxation. The TCJA complicates effective tax planning for such firms, forcing them to reexamine their existing global structures and financial arrangements (i.e., the “geometry” of international tax planning). We briefly review international tax planning before the TCJA as well as some key international tax provisions in the TCJA. We then provide a method to estimate the new Global Intangible Low-Taxed Income (GILTI) tax from a U.S. MNC’s financial statements when such information is not publicly disclosed and illustrate the effective tax rate (ETR) and GILTI tax effects for a small sample of public firms after the TCJA. Finally, we discuss some likely changes in international tax planning going forward.

Suggested Citation

  • Michael P. Donohoe & Gary A. McGill & Edmund Outslay, 2019. "The Geometry of International Tax Planning after the Tax Cuts and Jobs Act: A Riff on Circles, Squares, and Triangles," National Tax Journal, National Tax Association;National Tax Journal, vol. 72(4), pages 647-670, December.
    • Handle: RePEc:ntj:journl:v:72:y:2019:i:4:p:647-670
    DOI: 10.17310/ntj.2019.4.01
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    Cited by:

    1. Paul Demeré & Michael P. Donohoe & Petro Lisowsky, 2020. "The Economic Effects of Special Purpose Entities on Corporate Tax Avoidance," Contemporary Accounting Research, John Wiley & Sons, vol. 37(3), pages 1562-1597, September.
    2. Michael Overesch & Leon G. A. Reichert & Georg Wamser, 2023. "The Effects of the Tax Cuts and Jobs Act on the Tax-Competitiveness of Multinational Corporations," CESifo Working Paper Series 10310, CESifo.
    3. Mindy Herzfeld, 2021. "Designing international tax reform: lessons from TCJA," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 28(5), pages 1163-1187, October.
    4. Kelley, Stacie O. & Lewellen, Christina M. & Lynch, Daniel P. & Samuel, David M.P., 2024. "“Just BEAT it” do firms reclassify costs to avoid the base erosion and anti-abuse tax (BEAT) of the TCJA?," Journal of Accounting and Economics, Elsevier, vol. 77(2).

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