International tax planning in the shadow of the Treasury's proposed tax haven legislation;

              International Tax Planning in the Shadow of the Treasury's Proposed Tax Haven Legislation
by HUGH A. GARNETT Principal, Executive Office
Presented before The New York State Society of Certified Public Accountants, New York—October 1961
THERE is no assurance that legislation concerning "tax haven" cor­porations
will be enacted in the foreseeable future, and there is certainly no assurance that, if enacted, it will be in the form of the draft of legislation concerning tax-haven corporations proposed by the Treasury on July 28, 1961. There are, however, precautions that the international tax planner may want to take now, acknowledging that some legislation along the lines of the Treasury's proposals may be enacted in 1962. If you can, of course, defer new organization for foreign operations until the direction of the legislative winds on this subject is reasonably determinable. However, if you cannot defer new foreign organization or if you are faced with an existing organiza­tion,
there are plans that you can be making and steps that you can be taking now.
If you must plan now for immediate international organization, consider running two sets of plans concurrently. Plan first for the optimum situation under existing United States tax law, and, secondly, plan for the optimum foreign organization if the Treasury's proposals should be enacted. Next determine what the United States and foreign tax and other consequences of retreating from the first plan to the second one would be. You may find that you can so arrange your foreign organization now as to be in a good position under the pro­posed
tax-haven legislation without significant sacrifice from an optimum organization under existing legislation. Or perhaps you can organize in such a manner as to retreat to a good position under the proposed legislation with minimum United States tax, foreign tax, and other costs.
Let us review some of the transactions that the Treasury's pro­posed
legislation brands as "tax-haven transactions" in order to see what sort of organizational changes will allow avoiding such a classi­fication.
We know that, under the Treasury's bill, if a "controlled foreign corporation" has income from "tax-haven transactions," this income may be included in the gross income of a United States share-
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