New Tax Havens for US Multinationals
The US tax code encourages multinational corporations to move their productive operations out of the country. Findings from the video indicate that the reason to shift operations to international destinations is in part due to the need to find favorable tax rates and as well, due to the desire to satisfy the aspirations of shareholders. Despite the attempts by the Obama Administration to clamp down international tax evasion, many a multinational corporation is unwilling to submit taxes earned on foreign profits. The international tax rates are competitive enough to lure US multinationals to shift their operational activities to low-tax countries. On the other hand, the move by Weatherford to set up its headquarters in Zug just in paper and for purposes of “physical presence” is unethical (CBS News Video, 2011).
The US government should make changes on the corporate tax law such that US multinationals caught engaging in unethical practices should face severe penalties. Another possible option that will prevent the erosion of US companies in case the above-mentioned option fails to work is the reduction of tax rates to a value considered competitive to the international tax rates. Currently, the United States is the second to Japan in terms of corporate taxes, and if Japan reduces its tax rates, the United States will take the crown of being the leading country in charging the highest tax rates. Worse, the move to impose strict penalties on multinational companies evading tax through these strategies is the risk of foreign acquisition of US Companies. I think the US government should reduce the corporate tax rate to make the US environment attractive, and as well to increase the growth of the economy through employment creation.
Reference
CBS News Video (2011). The New Tax Havens. Retrieved from
http://www.cbsnews.com/video/watch/?id=7360932n&tag=contentMain;conten
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