State unitary tax upsets foreign investors

Foreign investors seeking to set up operations in the United States - and some who are already here - are plenty unhappy with the tax attitudes of at least 12 states. That's because legislatures in those states have authorized the taxation of multinational corporations to be based on earnings of the company in that state plus state taxation on part of the corporate earnings worldwide.

Called the unitary tax, its legal precept has been upheld by US courts; and more state legislatures are considering adding it to their tax structures. Overseas investors call it unfair and discriminatory. Some - in areas that have had the tax for several years - have already relocated operations in states free from unitary tax regulation. Others have sent protesting delegations to officials of the US Treasury.

A tax of this kind, according to experts, (lucrative as it is for state revenues) can drive out more existing plants of foreign investors as well as prevent start-ups of new bases of operations.

Tax officials in California, where court cases on the matter were prominent, say they are considering declaring a five-year moratorium on unitary taxation so as not to deflect new multinational company investment for the time being. (States having unitary taxation are Alaska, California, Colorado, Florida, Idaho , Indiana, Massachusetts, Montana, New Hampshire, North Dakota, Oregon, and Utah.)

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