ACT 520 CSU Global Module 8 Transocean and the History of Tax Portfolio
Options #1: Case Study: Transocean and the History of Tax
Inversions
Read the attached
case study (Links to an external site.)
and then answer the following requirements:
Tax inversions have occurred infrequently over the past 30 years. Describe a tax inversion and the factors that impact a company’s decision to complete a tax inversion.
The earliest inversions were usually in tax haven countries. The companies subsequently relocated their headquarters to Europe. Why did these companies decide to move headquarters to European countries?
Most recent inversions either meet a substantial activity test or are accomplished through mergers. What companies are the most likely targets for these types of inversions?
A primary benefit of an inversion is avoiding U.S. tax on foreign-source income. How do multinational companies also use inversions to reduce U.S. tax on U.S.-source income?
Using the information in Table 2, calculate Transocean’s effective tax rate for each of the four years (1998, 2000, 2009, 2015). Estimate the dollar amount of the annual reduction in taxes for the initial move to the Grand Cayman Islands.
The
Congressional Budget Office (2017) (Links to an external site.)
reports that 60 inversion transactions have occurred. The CBO estimates that the average annual reduction in U.S. tax expense for these companies is $65 million. What is the amount of total annual revenue loss to the U.S. government? What is the amount of total annual revenue loss to the U.S. government as a percentage of total corporate taxes (search for the total corporate taxes in the CBO report or other online source)?
