At first blush, the worldwide reach of US tax jurisdiction seems...well,
reaching.  However, on close inspection, it makes sense, if you agree that
the US should tax its business citizens at all.

While we tend to sight the intent of various laws, the devil is always in
the detail.  For every tax law debated and passed, their are ten workarounds
already proposed by corporate tax lawyers and adopted by their management.
If the IRS slacked up, all the majors would find ways to have loss
operations in the US and profitable operations in some tax friendly nation.

The single greatest challenge for international corporations, in this area,
is avoiding double taxation at the hands of other governments.  The US tax
burden is understood and a given in corporate planning; its the greed of
third world governments that causes most of the headaches.  This isn't just
in the form of corporate income taxes either.

Frequently, other goverments impose payroll taxes to cover our equivalent of
SS, and its not necessarily limited to 7.5%.  The US corporation typically
reimburse the employee's portion, raising its cost to 15% plus on each
payroll dollar, without a chance of any employees every qualifying and
getting a single dollar out of the pay-in.  Make that 32% in Holland.

To add insult to injury, it is not unusual for the host government to deny
contributions for US Social Security, Medicare, and company pension burdens
as a deductible expense from their taxation of profits.  This is not such a
big issue if you have 100 executives spread around the world, but it becomes
one if you employ 2500 US citizens.

Fortunately, our IRS is enlightened in this area and allows offsets for
foreign taxes paid, whether or not justly.  Otherwise, you'd get into one of
those nightmares that can occur when you are medically insured with two
companies who are trying to push the burden on each other.

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