Introduction
Tax inversion is the art of merging a US based company with a foreign company in order to reduce on the amount of tax that a company is liable to. Tax inversion can also be said to be the process by which a parent company in US merge with another company from low-tax economy in order to benefit from this low tax regime. The main aim of tax inversion is to reduce on the amount that the US Company pays to the government. Corporates within the US pay up to thirty-five percent of their total profits as tax wages to the government, therefore, this concept of tax inversion is meant to waiver on this extremist tax charge by half. This process of merging with a foreign company in order to waive on the tax charged is considered by the federal government that the company is no longer US based, despite the fact that the sole beneficiary is the US Company. Investors do benefit many forms this procedure, capital gains on the cost of shares and dividends to these investors escalates.
This is a prudent strategic being taken by this US based company; it allows them to make maximum profits on their investments. Corporate inversion allows also the shareholders for these companies to earn maximum returns for their investments through capital gains. The rationale behind this is the presence of shares that are disposed of at low tax rate and high prices because of the existence of the new merger.
This practice of tax inversion can also be disapproved; this is because of the nature of ethics in the business environment. Every business undertaking its business within the economic zones of US is liable to a tax cut of up to 35% of its maximum profit returns. Therefore, evading this tax cut through the availability of a tax inversion can be termed as an economic crime. The entire methodology that this principle of tax inversion can, therefore, termed as unacceptable within the business environment. This is due to the sole reason that the federal government will not be able to realize maximum revenue collection, hence the presence of a deficit.
Works Cited;
Graetz, M. J. (2014). The Bipartisan 'Inversion' Evasion. The Wall Street Journal. Print.
Saunders, L. (2014). The ‘Inversion’ Tax Hit on Investors: Answers to Readers’ Questions, The Wall Street Journal. print.
