Tax Havens And Its Effects On America

Companies in the US are finding clever deceiving ways to get what they want. Many companies like Google are investing offshore to avoid American taxes. Others like the company Monsanto uses

The less taxes we pay, the more lives we save. The United States has the highest corporate tax rate of the 34 developed, free market nations that make up the Organization for Economic Cooperation and Development (DECD). Unlike other countries, the United States pays a marginal corporate tax rate of 35% at the federal level and 39.2% state taxes are accounted. This is causing thousands of corporations to move operations out of the United States and into other countries. Therefore, the United States should lower the taxes of big corporations.

The main objective of many companies is to minimize their tax obligations. Jeffers (2014) discussed the reason of why companies adopt tax inversion strategies. The researcher indicated that the income maximization is a major reason of companies attempting to reduce their tax liability (pp. 100-101). Tax inversion strategies provide companies an advantage to lower income tax rate. Today, U.S. corporations renounce its U.S. citizenship and move to low-tax countries. Companies that reincorporate oversees are not obligated to pay U.S. taxes on earning income (p. 99). Many countries implement tax competition strategies to attract and retain businesses. Well-known companies, such as Exxon Mobil, Hewlett Packard, Tyco, General Electric, PepsiCo, etc. take benefits of tax shelter opportunities overseas (p. 102). Other benefits of the jurisdiction abroad are flexible banking laws and simplified litigation processes.

“The United States has the highest corporate tax rate of the 34 developed, free-market nations that make up the Organization for Economic Cooperation and Development (OECD). The marginal corporate tax rate in the United States is 35% at the federal level… according to the 2013 OECD Tax Database. The global average is much lower, at 25%” (Fontinelle, 2014). Even though there are ways for businesses to decrease or even avoid these payments, this high figure deters foreign investors from considering the United States for business and sends them looking in more favorable countries like Canada or Ireland. Adding to pushing away potential foreign investors, U.S. firms flee to those tax favorable places to avoid it. “When these companies move their headquarters or create foreign subsidiaries, jobs and profits move overseas” (Fontinelle,

Upon learning about the Panama Papers, I was stock at how much we know about what is going on, but nothing significant has been done. One would think with all of the legal loopholes these corporations and countries are using. The law makers would work tirelessly to pass new laws that would reject them the ability to use those loopholes. One example would be, “Incorporating your hedge fund in a country with no corporate income tax even though all your fund's employees and investors live in the United States is perfectly legal.” Why is it legal to do this? Why do we allow people like George Soros to get away with doing this?

A tax haven is a country that offers foreign corporations and individuals relatively low corporate and income tax rates, with a politically and economically stable environment. Some tax havens are Switzerland, Hong Kong, Bermuda, Ireland, and the Cayman Islands. Although the businesses have moved across seas, the United States forces them to pay the corporate tax. Fortunately for the businesses, it they keep their income and money across seas they do not have to the pay the American corporate tax, Unfortunately this is ghastly for the United States Government businesses keep their products and profits over seas.

The United States of America has a marginal corporate tax rate of 35%, but after state taxes it reaches an astonishing 39.1%. That does not include the fact that there are additional taxes at some local levels. This is the third highest corporate tax rate in the world following only the United Arab Emirates, and Chad. It is true our tax rates are very high, and many American companies say that “they are not able to compete globally” because of these taxes. Still, they find a way to succeed through the loophole infested 72,000 plus pages of U.S. tax code. As a corporation if you could pay no income taxes why wouldn’t you? The answer to this would be because you have morals and ethics. No one ever said that making

It is widely known that Tax Havens have a terrible influence on the nations. For some individuals or corporations, Tax Havens do bring some tax saving; countries, however, suffer a long-term tax, and capital lose from Tax Havens. Nowadays, many countries are trying to eliminate the harmful effects that Tax Havens bring, but Tax Havens still exist in the world. The punishments do not act effectively as people expected. If policy makers want to solve the problems of Tax Havens, they need to understand the nature of Tax Havens and what create Tax Havens before making new regulations to restrict individual or companies’ foreign investment or business activities. Once they know the reasons, they can use a more efficient way to deal with Tax Havens. Many papers have discussed how bad Tax Havens are, and how many losses Tax Havens bring, however, there are fewer articles written about when do Tax Havens start and why do Tax Havens happen? The purpose of this journal is to help readers to understand why Tax Havens exist in the world in the first place and provide different thoughts for some governments.

The HMRC looses an estimated sum of £40 billion annually through tax evasion and avoidance. Tax evasion is a criminal act which perpetrators can face prosecution for it, while tax avoidance can be seen as using the loopholes in the tax law to avoid paying the right amount of tax required. HMRC are using the following strategies to tackling the problem of tax avoidance; making tax law robust against avoidance and engaging with customers on to seal any loophole in the tax avoidance industry.

Tax havens also refer to countries which have a system of financial secrecy in place. It should be noted that, financial secrecy can be used by foreign individuals to circumvent certain taxes (such as inheritance tax on money, and income tax of the interest on the money you have on your bank account. Because the requirement of paying taxes on these funds can not be transmitted, as the funds themselves are invisible to the country the individual is from, such taxes can be avoided. Earnings from income generated from real estate (i.e. by renting

From the panama papers and other data leaks, users of tax havens revealed are categorized by two types, the multinational groups, such as Google, Amazon and Apple, and the individuals. The individuals, whose details are still in secret partly, are more likely to use tax havens in order to “evade” taxes by hiding their assets and wealth in secrecy (Miller and Oats, 2016). The multinational groups tend to use tax havens to “avoid” and defer the tax payment on profits legally. The tax haven governments offer favourable tax planning opportunities for the multinational groups and companies by reducing their tax rates and the reduced worldwide average tax rate (Miller and Oats, 2016). The rest parts will more focus on the corporate users of tax haven, especially FDI and

What is tax avoidance? Tax avoidance is the utilization of the legal privileges provided to citizen or company of a country by its government. Tax avoidance is the legal right of an individual provided by the government to reduce the tax burden and decrease the level of tax evasion. But why it is problem? Why is big corporate tax issue? It is issue because; a company’s moves its tax home from the U.S. to another country where its taxes will be lower. To accomplish the move, the company merges with a foreign company in order to form a new foreign company. The original American headquarters and most business operations remain in the U.S. Moving company from one country to other frees a company from substantial tax liabilities in the U.S.

According to US Treasury (2009), each year the US government may lose more than $345 billion revenue because a variety of tax avoidance. Moreover, the UK government also faces the problem of losing tax, with £40 billion each year (HM Revenue and Customs, 2010). In recent years, an increasing number of

We have one of the most complex/complicated tax system in the world and the government are very serious and hard on businesses paying their right level of Tax. We were at one point at a very low Tax code which a lot of businesses took advantage off. This wasn’t a bad thing at all but now large business and small ones are all complaining about the rise in corporation Tax. I hope one day we will revert back to a low tax code that will encourage more and more entrepreneurs and overseas companies to start their own business and invest in our economy. Tax has always been a big issue for businesses on a wide scale and talks with MP’s and the Government is constantly ongoing on the subject. In recent years we have seen like of Google, Yahoo, HP, Gumtree and many other large multinational company’s move the base of operation overseas, away from the UK as a result of the amount of Tax they were paying. If I had a business such as they do, I would do the exact same thing and move my headquarters away from the UK to pay less tax as the government is not willing to do anything about reducing corporation tax for businesses in the UK.

Milos (2013) concluded the challenges in the identification of the tax evasion methods developed by companies and by individuals, as well as the difficulty to eliminate tax evasion, however optimistic in finding potential solution to minimize and diminish tax evasion concerns (p.171). Milos suggest the creation of effective fiscal control is necessary rather than dramatic punishment, implementation of feasible legislative system, increase tax awareness or tax education among citizens, and implementation of clear, concise, simple, precise and stable fiscal or taxation laws to fight tax evasion (p.171). Milos recommended several approaches to fight against tax evasion that must be implemented at once: