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Karen V. Kole

Abstract

United States international tax policy in the 1980s and beyond, where are we going and why? The federal income tax has arguably taken a consistent approach to basic international issues since its inception. To this allegedly well balanced compromise between theory and practicality, an increasingly complex maze of rules has been added without much direction. The result is chaos with little apparent benefit. Contrary to the alleged intent of these piecemeal amendments, the changes have complicated, not simplified, the area of the international tax law. In trying to make an inherently imperfect system perfect, monumental administrative burdens have been imposed on United States multinational companies and on Internal Revenue Service personnel. The need for increased manpower and tax administration is costly and places United States companies at a competitive disadvantage with respect to foreign companies. These burdens may be necessary to achieve certain overriding goals. On the other hand, they may stem from an aimless movement of a Congress that is well intentioned but ill directed. Whether the costs are justified or baseless, the United States international tax law is currently unmanageable, unwieldy, and, at best, an area fraught with many unnecessary complexities. Indeed, the complexity of international tax disconcerts even the sophisticated tax planner as to whether his or her advice is actually sound and up to date. Furthermore, proposals for additional changes in the near future do not seem to help. This Perspective will examine the current status of international taxation in the United States with regard to the original and present policy goals of the United States government. Two significant changes enacted by the Tax Reform Act of 1986 ("the 1986 Act") will be reviewed as well as recent proposals in the international area. Finally, recommendations for the future direction of international taxation in the United States will be made.

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