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In a book by economists Saez and Zucman, they state the following:

In 1936, dozens of wealthy Americans had created offshore shell companies, to which they had transferred the ownership of their stock and bond portfolios. The shell companies, instead of their flesh-and-blood owners, collected dividends and interest, thus escaping American taxation. The government was quick in changing the law to render this operation explicitly illegal. From 1937 on, any income earned by foreign holding companies controlled by Americans would become immediately taxable in the United States. Instantly, owning foreign holding companies to avoid taxes became pointless.

Would this still be possible nowadays? Also, how would it relate to the fact of those earnings may be doubly taxed (domestically and abroad) ?

An old man in the sea.
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  • Why shouldn't it be possible, leaving asides concerns like lobbying? Whether double taxation would occur would depend on whether there is a tax treaty. Of course, the point of offshoring is that the target country asks for little to no taxes. – amon Jan 20 '21 at 09:46
  • If it wasn't for the extreme right-wing bias, abusive mod-team, and generally unfriendly community, I'd say this is a question for politics. There's a lot to be said about why this wouldn't happen whether or not it's a legal impossibility. – Comic Sans Seraphim Jan 20 '21 at 15:18
  • @amon Well, I didn't know... I never had a law course/subject, but I remember many years ago a debate about taxation on my country and they said something couldn't be done, otherwise it would be doubly taxed... this got stuck at the back of my mind, and today, as I was reading the book, I remembered it... – An old man in the sea. Jan 20 '21 at 19:47
  • @Studoku thanks for the suggestion. I'll try it there anyway. We never know... =D ;) – An old man in the sea. Jan 20 '21 at 19:48
  • Note that the US is one of two countries to tax their citizens and even some non-citizens on their worldwide income, even if they live and work entirely overseas (FATCA). That's absolutely double taxation, unless there's relief through a tax treaty. – amon Jan 20 '21 at 21:09
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    The relevant tax laws are among the most complex in the U.S. tax code and there isn't a lot of middle ground between an almost dismissively shallow answer (there are ways to get significant tax benefits from foreign incorporated companies that are owned in some sense by U.S. persons) and into the hellish weeds that would take a thirty page summary to even begin to get a grip on it. I worked as a staffer for a member of Congress on the House Ways and Means Committee for a while, and that was the project that was always too big to get our arms around and figure out a solution to. New loopholes. – ohwilleke Jan 21 '21 at 00:23
  • @amon There are lots of outs in the U.S. system and lots of exceptions to the general rules in foreign systems with the net result that there is less of a difference that a surface level analysis would lead you to believe. – ohwilleke Jan 21 '21 at 00:25

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