International tax: Deferral and Deferment

Deferral and deferment may seem like synonyms, but international tax folks always use the word deferral for the tax break that multinationals get on foreign income — I’ve never heard deferment.  Here is an example:

What is offshore “deferral”?

The United States has a worldwide tax system. That means U.S. citizens and companies generally must pay federal income taxes on all their income, wherever in the world they earn it. The feature of the tax system known as “deferral” allows U.S. multinational companies to delay paying U.S. taxes on overseas profits as long as they keep those profits offshore.

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But Michigan has here an “Application for Deferment of Summer Taxes.”

We used deferment when referring to the military draft.  Does deferment contain the idea that if one waits long enough, the duty will go away?  Does deferral mean the bill eventually comes due in all cases?

Or does deferment carry the connotation that someone else has to perform this duty if I don’t?  (I was thankful to get a draft deferment during the Vietnam War, but I understood that someone else would have to go if I didn’t.)   A deferment was a form of privilege (or luck).   That’s what the multinationals  are doing — letting someone else step up.

Just starting to think about this.  Neither opponents nor supporters of this tax benefit for U.S. multinationals call it “deferment.”  I am supposed to debate the merits of this tax break  next week at a law school nearby, so am trying to look at it with fresh eyes .

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Author: patoglesby

From 1982 to 1990, I worked in tax policy for Committees of the United States Congress. In recent years, I was Adjunct Lecturer at UNC-Chapel Hill's Business School and then Adjunct Professor at its Law School.

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