The US is one of the world’s most heavily taxed countries when it comes to paying taxes. In every country, corporate tax laws are different, but the US has a unique set of rules and regulations that businesses need to abide by. Business owners must do their homework when debating the best options for their tax strategies. They should also keep up on changes in the law so they can maximize the benefits of existing deductions and write-offs. Many US companies have grown over the years because of the need for low-cost or no-cost corporate options. Now that corporate tax laws are so highly regulated, it is not uncommon for a business owner to find himself on the wrong side of the law.
An important point to consider is that corporate tax law is often a touchy issue, especially in the US. Business owners and entrepreneurs have grown increasingly annoyed with the over-regulation of the Internal Revenue Service (IRS). The US government is determined to collect its share of the billions of dollars in taxes owed by American companies. The tax code is notoriously complex and has spawned a variety of tax relief programs that have been repeatedly re-introduced in recent years.
It is not just American companies that have felt the repercussions of the ever-changing corporate tax law. European companies, as well as Asian ones, have had to deal with similar taxation issues over the past few decades. The European Union tried for many years to impose a similar type of tax on its companies. While attempts were initially successful, this idea was later dropped. A compromise was eventually reached that allows European companies to enjoy a number of tax advantages, including interest and dividend payments.
Because Europe is a large, densely populated area, the rules that apply there are often more strict. This is especially true with regard to international taxation. The new rules for paying taxes abroad, such as paying personal taxes in the country where your company operates, may be harder for smaller businesses to handle. Additionally, some companies may not be able to establish branches in foreign countries because they do not meet the stipulated legal requirements.
For corporations, the biggest detriment to their standing in the eyes of the Internal Revenue Service is the overseas tax haven. Tax havens offer large tax savings to US corporations and non-US companies alike. However, these savings are provided at the expense of the citizenry of the receiving country. Ultimately, it leaves the average citizen of the receiving nation to pay taxes on behalf of his or her country. In some cases, the amount of money received may be less than the amount that would have been paid if the corporate tax was paid in the citizenry’s country.
There is no doubt that the new laws will have a significant impact on corporate profits. In order to make up for this, large corporations are likely to undergo operational consolidations and buyouts. While smaller companies are unlikely to be put into a position where they have to close their doors, they are also not likely to grow rapidly. As such, analysts expect earnings to remain stagnant or fall slightly in the years to come. In the end, the new legislation will force companies to reevaluate their strategies and perhaps even re-evaluate their own laws.