Corporate Responsibility and Tax Evasion
Corporate responsibility has become one of the most contentious topics in the modern American economy. The subject has sparked a level-headed debate around the board, attracting market economists, businessmen, and even people. This problem was brought to light recently when the EU commission requested that Apple Inc. incur unpaid sums of cooperate obligation as a result of the corporation's attempts to avoid tax assessment over the years (Brownlee, 2016). The case of Apple Inc. raised questions about tax evasion, and other topics including tax returns. It was evident that Apple Inc (Bhattarai, 2016) utilized smart measures to conspire to deliberately avoid assessment both at home and in other countries overseas.
Tax Regulations and Overseas Establishments
Based on this, the question of what prompts such corporations to go to such levels has always lingered. The answer to this might lie in the current tax regulations and standards in the U.S today. Currently the U.S recommends a taxation of 35 percent on overseas establishments only when such profits are taken back to the U.S (Bhattarai, 2016). For this reason, most of the major corporations have moved to keep their main branches and production plants abroad (Brownlee, 2016). For instance, Microsoft has profits amounting to 76 billion dollars in overseas account which are exempted from tax. This is just among the many other big corporate organizations that have their plants abroad due to their ambition to evade the corporate tax.
Proposed Solutions
Right before his departure from office, former U.S president had initiated a reform to the tax law that gives the privilege of tax exemption to corporate organizations in their overseas profits. If this succeeds, it is expected that these corporations will choose the location of their plants and headquarters based on business reasons and not tax reasons (Brownlee, 2016). Using this regulation, the U.S will be able to hold into account corporations that are taking advantage of this tax haven to evade paying their taxes.
Another valid proposal has been that taxes on these corporations be shifted to shareholders and stakeholders rather than the corporations themselves. In this way, it will be possible to level taxes on their profits without regard of where they have based their plants. Proponents of this strategy have continually claimed that it is an objective way of ensuring tax is paid regardless of where corporation choose to base their plants.
Best Proposal: Obama's Tax Law Reform
Obama’s proposal seems to be the most viable and practical plan based on its principles. This is because, apart from ensuring the corporate organizations pay their taxes, the tax law will come with reforms that reduce the corporate duty in the U.S from 35% to 28% (Bhattarai, 2016). In essence, this will improve the competitiveness of the U.S market which currently rates poorly among its peers.
The Role of the Federal Government in Corporate Tax Reforms
The tax reform, just like any other major government policy, falls squarely in the docket of the federal government. It is important to note that any issue that involves tax and majorly impacts the U.S economy will most definitely attract the attention and influence of the federal government. It follows that, the federal government will always seek to recommend, oversee and even influence the setting up and application of such laws (Brownlee, 2016). In fact, most of the tax codes of the states in the country are in line with the framework of the federal government in one way or the other. It is expected that the federal government comes up with reforms that either cushion, or benefit the various states on a larger scale (Bhattarai, 2016). Coming up with important economic regulations such as tax reforms are among the most important functions of the federal government.
References
Bhattarai, K., Haughton, J., & Tuerck, D. G. (2016). The economic effects of the fair tax: analysis of results of a dynamic CGE model of the US economy. International Economics and Economic Policy, 13(3), 451-466.
Brownlee, W. E. (2016). Federal Taxation in America. Cambridge University Press.
