What Mechanisms Can Be Used To Encourage U.S. Companies To Bring Back Their Overseas "Stranded Capital"?

A: THE U.S. IS AN OUTLIER AMONG THE MAJOR INDUSTRIALIZED NATIONS IN:

• Taxing its corporations on overseas profits (unless overseas cash is declared as “permanently reinvested”)
• Having a relatively high corporate tax rate of 35 percent

This has created bloated offshore cash pools among large U.S. corporations. In 2004 a repatriation tax holiday at a 5.25 percent tax rate enabled $360 billion worth of capital to be injected back into the American economy. Until Congress can get unified on long-term tax reform (possibly in 2017), another similar tax holiday would be a good idea to reduce these distortions caused by stranded capital overseas.

FRED HASSAN
Fred is the managing director at Warburg Pincus and former chairman of Bausch & Lomb. He has served as the CEO of several pharmaceutical companies and chaired significant pharmaceutical industry organizations.