In the early 1600s, a Dutch merchant fleet set sail under the banner of the Verenigde Oost-Indische Compagnie. With it travelled a novel legal form: the joint-stock company, armed with sovereign rights granted by the state. The Dutch East India Company, like its British and Russian counterparts, was authorised to wage war, collect taxes, and negotiate treaties. These were not just trading houses—they were tools of empire.
Three centuries later, the nature of empire has changed. Yet its corporate vessels persist. Today, global conglomerates—Apple, Amazon, Microsoft, JPMorgan Chase, Boeing—do not fly national flags or send gunships abroad. But they exercise influence across jurisdictions, shape policy, and structure global commerce through similarly expansive privilege. Their authority stems not from royal charters but from legal code—most notably, the U.S. Internal Revenue Code, rewritten in 2017 under the Tax Cuts and Jobs Act (TCJA).
The TCJA marked the most significant overhaul of U.S. corporate taxation in a generation. It replaced the previous worldwide system—under which foreign profits were taxed only upon repatriation—with a largely territorial regime. The centrepiece of this shift was the “participation exemption,” which effectively removed U.S. tax on most foreign income earned by U.S. corporations. In doing so, it recast the relationship between corporate power and the state, delivering a strategic advantage to the multinational groups best equipped to arbitrage across jurisdictions.
Framed as an effort to align the U.S. with international norms and bring back offshore capital, the TCJA also included headline-grabbing provisions intended to constrain abuse: GILTI (Global Intangible Low-Taxed Income), FDII (Foreign-Derived Intangible Income), and BEAT (Base Erosion and Anti-Abuse Tax). But their effectiveness has often proven more symbolic than substantive.
A Strategic Break with the Past
Before 2017, U.S. multinationals could defer tax on foreign earnings indefinitely, so long as those profits remained offshore. This created well-documented distortions, including the warehousing of cash abroad and the growth of intercompany structures in low-tax jurisdictions such as Ireland, Bermuda, and the Netherlands.
The TCJA promised to eliminate these distortions. It did so by dramatically reducing the incentive to keep profits abroad—because foreign profits were no longer taxed at home. A one-time repatriation tax unlocked an estimated $2.6 trillion in previously deferred earnings. But the deeper change was structural: foreign income would now remain exempt, by design.
This shift delivered more than a tax cut. It signalled a reorientation of U.S. tax policy away from global enforcement and towards institutionalising competitive advantage for American multinationals. Rather than tax their foreign profits, the U.S. would now shelter them.
The result? A modern analogue to the imperial charter—not granted by monarchs, but embedded in law.
Guardrails That Fail to Guard
The architects of the TCJA understood the risk: a territorial system could accelerate profit shifting. To address this, the legislation introduced complex anti-abuse measures. GILTI was one such measure—a minimum tax on foreign earnings above a routine return, assumed to be tied to intangible assets. But GILTI was compromised by its own structure.
The regime allows a 50% deduction, immediately halving the tax base. Foreign tax credits are limited to 80%, yet multinationals often generate surplus credits in high-tax jurisdictions (such as Germany or France) and use them to offset taxes owed on income routed through low-tax affiliates in Ireland or the Caribbean. Additional leeway comes from expense allocation rules and a high-tax exception that excludes foreign income taxed above a certain threshold. These layers create room for aggressive tax planning.
BEAT, a separate minimum tax aimed at curbing profit stripping through deductible payments to foreign affiliates, has also underperformed. It applies only to the largest companies, affects a narrow slice of transactions, and exempts cost-of-goods-sold—a loophole that multinationals have routinely exploited by embedding payments such as royalties within product pricing.
Taken together, these provisions were meant to serve as brakes. In practice, they have operated more like seatbelts worn loosely—offering the appearance of restraint while allowing the vehicle to speed ahead.
A Competitive Edge, Legislated
The advantages created by the TCJA are not incidental. They reflect the influence of the very firms that now benefit from them. American multinationals played a central role in shaping the legislation, both directly—through lobbying and policy consultation—and indirectly, via long-established narratives about global competitiveness and tax parity.
The outcomes are tangible. Lower effective tax rates. Greater flexibility in global capital allocation. Vast pools of offshore earnings recycled into share buybacks and M&A. For smaller domestic firms and foreign competitors, the terrain is no longer level.
Meanwhile, the U.S. has moved to defend its position. Efforts by other countries to impose digital services taxes or implement global minimum tax rules under the OECD’s Pillar Two have met with strong resistance. Executive orders threaten retaliation. In effect, the U.S. government now protects the legal charter it conferred on its multinationals—just as European powers once defended their chartered companies.
The Legacy of the Code
The VOC and EIC were not simply traders—they were instruments of state strategy, deployed through commercial vehicles. Their wealth and power reshaped the world. Today’s multinationals operate differently, but their relationship with the state is no less consequential.
The TCJA did more than reform the tax code. It formalised a new legal structure—one that enables profit shifting, enhances the power of capital, and reinforces the geopolitical footprint of American firms. The participation exemption is the cornerstone; GILTI and BEAT serve more as diplomatic cover than effective guardrails.
This is not empire in the old sense. There are no territorial acquisitions, no governors or garrisons. But there is governance—of markets, of data flows, of standards. And it is exercised by firms that derive their power from legal code, not sovereign charters. The result is a new corporate order, sanctioned not by decree but by deduction.
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