A subsidiary is defined as a corporation controlled by a second corporation through partial or complete stock ownership of the voting class of security, interlocking directorate, lease, or community of interest. Many major corporations in the United States are either the "pure" or exclusive type of holding company or the "mixed" type of holding company, the latter owning a number of subsidiaries which may in turn be intermediate holding companies and/or operating companies. There are advantages to carrying such interests in separately incorporated and controlled companies, offering decentralization of management in separate boards of directors and officers, bypassing any undue taxation on "foreign" corporations, or those domestic to other states, by carrying local properties in subsidiaries domestic to the state of location. The United States generally defers taxation of the foreign-sourced earnings of a foreign subsidiary until the income is recognized by the parent company. For foreign operations that are established in low-taxed foreign countries, the use of a foreign subsidiary structure may serve to defer U.S. taxes, desirable because the deferred U.S. tax could then be used for expansion of the business or other investments (Valentine 103).

Liscio, J. "Europe 1992: A Truly Common Market?" Barron's (October 3, 1988), 89, 2036.

Schaffer, Richard B., Beverly Earle, and Filiberto August. International Business Law and Its Environment. New York: West Publishing, 1993.

One of the purposes of the creation of the European Economic Community has been to reduce regulations and increase competition. A Europe without borders is meant to increase investment, and so the use of subsidiaries by foreign companies should be encouraged rather than discouraged as was often the case in the past. Yet it is still true that individual states are trying in some cases to maintain control and may seek to protect their own industries at the expense of foreign investors. France is a case in point. Support for the EC has been strong from most French governments, but it has not necessarily been as strong in the business community or among the people. Those who oppose integration have used the fears of the public about certain issues of autonomy, concerns about specific industries, and a general fear of losing control of the borders as arguments, which has been effective in a France where immigration battles have been taking place over the last several years based on the perception that there are too many foreigners in France and that they are taking French jobs and destroying French culture. Tensions may have been inevitable given that the process of integration is largely capital-driven and that there were sharp divergences of interest between member states from the beginning of the process. Divergences between member states have been related to the balance of economic interests within each member state and to each state's role within the European and the larger world economy: