Tag Archives: Corporate Tax

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There’s No Such Thing As Corporate Tax

The EU reaffirmed its commitment to fighting corporate tax avoidance through a statement by European Commissioner Pierre Moscovici. This should come as no surprise following recent financial scandals exposed through the Panama Papers and Luxleaks, and the ensuing international outrage towards corporations “not paying their fair share”. Yet, the push for higher corporate taxes disproportionately also affects ordinary citizens by increasing their tax burden.

Corporate tax avoidance is regularly said to be unfair to other taxpayers. Indeed, proponents of higher corporate taxes accuse multinational companies of de facto increasing ordinary citizens’ tax burden because these ones would be forced to compensate states’ budget shortfalls.

However, this artificial opposition between corporate and public interests is dishonest. When one argues corporations don’t pay taxes, the implication is that shareholders, workers and consumers are not taxed at all, which is completely untrue. All these people are taxed in various ways, including income tax and valued-added tax, among other costs imposed by national governments. The only purpose of this distinction is to push ordinary citizens to support higher corporate taxes without allowing them to realise they are the ones who are going to pay the bill.

In fact, a corporation is a legal fiction which aims to reduce transaction costs between physical stakeholders, which are shareholders, workers and consumers. Consequently, every fiscal cost imposed on corporations will necessarily be paid by these people. Therefore, as corporate taxes increase, shareholders’ dividends and workers’ salaries will decrease, while consumers will be forced to pay more for their purchases.

Read more at the The Daily Caller 

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The EU’s Decision on Apple Raises Questions for Americans

On August 30, the European Commission ruled that Apple would have to pay €13 million ($14.5 billion) in back taxes to the government of Ireland because it believes the country gave the company special tax treatment. The European Union (EU) says Apple paid taxes at a one percent rate between 2003 and 2014, well below Ireland’s 12.5% corporate tax rate. That rate, and even Ireland’s 12.5% tax rates, pales in comparison to the United States’ 39% tax on corporations.

As Americans, we should ask ourselves why we are taxing corporations at among the highest rates in the world —a rate that is nearly six percent higher than socialist France and Venezuela, an entire 19% more than the United Kingdom, and 22% more than Switzerland. These, with the exception of Venezuela, are all viewed as highly developed countries.

For reference, other countries that punish corporations at comparable levels to the U.S. include the United Arab Emirates, Chad, Suriname, and Congo. These are not countries the United States usually models itself after.

Americans complain about domestic companies moving offshore, while also arguing that we should tax those same companies at an even higher rate. Opponents of lowering the corporate tax rate say that lower taxes don’t spur growth and only serve to increase profits, without creating more jobs.

American companies are doing exactly what they would be expected to do when given the incentives that have been presented to them.

Continue reading at The Liberty Conservative.

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Politicians Who Support Ex-Im Should Embrace Corporate Tax Reform

On Tuesday, the House of Representatives voted—with the support of nearly all Democrats and a slim majority of Republicans—to reauthorize the Export-Import Bank, or “Ex-Im” for short. The credit-granting agency has been closed since June, when its charter expired. Bipartisanship is unusual these days, yet Washington can agree on supporting a program that leaves ordinary Americans as the losers. The Ex-Im Bank is corporate welfare at its finest.

The Ex-Im Bank provides subsidies to foreign customers of American companies such as Boeing and Caterpillar. Supporters of the Bank argue that it is beneficial to our trade balance, but over 98 percent of American exports do not depend on Ex-Im, and the 2 percent that do would likely be able to find financing elsewhere. As the research of the Mercatus Center’s Veronique de Rugy has shown, the Bank “fails to promote exports, create jobs, or support small businesses.”

Read the rest on Economics 21 here.

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Cutting the Corporate Income Tax Wouldn’t Cost Any Revenue

Complete elimination of the corporate income tax would boost the American economy by 6 percent in the long run — enough to raise other tax revenues and, over time, make the tax cut revenue-neutral.

The government would immediately lose $273.5 billion in annual corporate tax revenue if the tax were eliminated. But within roughly ten years, income, payroll, and other tax revenues would rise by an annual $273.9 billion as a result, according to the Tax Foundation.

As the above graph shows, the more the corporate income tax rate is cut, the higher economic growth rises. Increasing the corporate tax rate would hurt economic growth and might actually cost tax revenue. Every corporate income tax cut would boost revenue, with the highest revenue boost at about a 20 percent tax rate. However, a 20 percent tax rate would only boost economic growth by 3 percent, whereas eliminating the corporate tax would boost growth by 6 percent.

Read the rest at the Washington Examiner…

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Obama’s corporate tax reform needs improvement

On Sunday, the White House released the president’s proposed budget for fiscal year 2016, which includes a major corporate tax overhaul aimed at repatriating profits American companies earn abroad. At first glance, the proposal seems like a win-win for both the private and public sector by increasing government revenue and encouraging companies to invest in their U.S. operations. However, if implemented, the plan would only be a minor tweak to a fundamentally broken corporate tax code that puts American companies at a competitive disadvantage in the global economy.

Currently, the U.S. operates on a so-called “worldwide” system of corporate taxation, meaning that American companies are liable to pay U.S. taxes on profits they earn anywhere in the world on top of whatever taxes they owe to the country they earned the profits at. The U.S. corporate tax code is already a major obstacle for growth in itself with the a top statutory rate of 39.1 percent — the highest among OECD countries. Considering the additional taxes an American corporation would have to pay a foreign government, it could easily lose half of profits abroad.

As such, the tax code allows for American corporations to indefinitely defer their tax payments to the US so long as their earnings are not repatriated. In other words, American corporations can make money abroad free from the federal government’s reach so long as they don’t use it to pay U.S.-based employees or invest in domestic operations. As such, many American corporations like Apple, Google, Twitter, and Facebook have majorly expanded operations in lower-tax countries like Ireland, which currently holds a 12.5 percent corporate rate, while choosing to indefinitely defer tax payments to the U.S.. Consequently, American corporations have accumulated over $2 trillion of overseas earnings of which Uncle Sam has not received a cent.

Read the rest at Watchdog…