In the name of God, the Most Gracious, the Most Merciful,” here is my two cents on how we can tax foreigners (individuals, partnerships, & corporations) operating in GM.
1- Foreign companies & Nonresidents doing business in GM.
A. Taxable income for partnerships and corporations is determined by a formula. Income generated from activities within GM is divided by income generated from everywhere else then multiplied by the tax rate:
Example #1:
Company A filed an income tax return with GM reporting $1m in net profit. In a simple world, we would tax the $1m. If the tax rate is 10%, for example, then $100k is due.
Example #2:
Same scenario as above, but assume Company A generated $15m in total revenue, $5m from its activities in GM and $10m from activities elsewhere; resulting in worldwide $5m net income. Under this proposal, Company A’s taxable income is as follows: ($5m/$15m) X $5m X 10% tax rate= $167k due.
B. Personal income tax is determined by source of income, not tribal affiliation or place of residency. Individuals who live outside of GM but generate income from within GM must file yearly tax returns.
You might be thinking, all I did was set up a weird scenario with random numbers and percentages that make no sense. You’re not entirely wrong. But the truth is, there will always be companies and individuals who come to GM and play with their P&L at year end. Their strategy has many names depending on where they “live”. Some call it “profit shifting” or “transfer pricing”, others call it “cost allocation.” Same result.
Under our plan, GM will tax foreign companies and non-residents fairly in accordance with a formula that captures the true value of conducting business in the state of GM.
Written By Gar Wayne
@GarWayne_ IRS audit
