After the Apple controversy, U.S. corporate tax rates are again the subject of debate within the beltway. The need to reform the corporate tax code has intensified after it was made public that many multi-national companies use loopholes to evade taxes legally. The United States has the highest corporate tax in the world, which many blame as the reason for the tax evasion by U.S. companies.
Presently, there is a tax law regarding overseas profits where companies pay corporate taxes in the foreign country in which they make a profit, and also in the U.S. if their profits are brought into the country. This makes many large multi-national companies keep their profits overseas to minimize their tax liability, and the U.S. Treasury loses billions in revenue annually because of it.
When it was discovered that Apple was keeping the profits made in foreign countries, it created a controversy, but the company was unapologetic. It said that the level of corporate taxes in the U.S. forces companies to keep their profits overseas. The company called for major tax reform.
If the corporate tax rate is lowered to facilitate the profits from foreign countries to the U.S., it could bring in trillions in “free money.” The lower tax rate would encourage more multi-national companies to shift their profits from other countries to the U.S., and help minimize tax evasion.
If reform in the corporate tax code is made, while also keeping in mind the real problems that U.S. companies face, it will create a fairer and a more efficient tax code. The problem of tax evasion due to which the Treasury loses billions of dollars each year can be reduced through effective reform of the tax code.