2.2.3: Territorial System
Move to a competitive territorial tax system. Other Information:
To bring the U.S. system more in line with our international trading partners’, we recommend changing the way we tax foreign-source
income by moving to a territorial system. Under such a system, income earned by foreign subsidiaries and branch operations
(e.g., a foreign-owned company with a subsidiary operating in the United States) is exempt from their country’s domestic corporate
income tax. Therefore, under a territorial system, most or all of the foreign profits are not subject to domestic tax. The
taxation of passive foreign-source income would not change. (It would continue to be taxed currently.)
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