Tax Reformation: A Reflective Evaluation on US Corporate Taxes

This report provides a reflective evaluation of tax reformation, focusing on the arguments for and against lowering corporate tax rates in the United States. It begins with an introduction to the topic, highlighting the debate surrounding corporate tax reforms and their impact on American multinational companies. The report then presents arguments in favor of lowering tax rates, emphasizing the potential for increased foreign direct investment and job creation. Conversely, it outlines arguments against tax reduction, discussing potential negative impacts on economic growth and organizational values. The reflective evaluation section synthesizes the information, offering the author's perspective on the issue, and concluding that tax rates should be lowered to enable companies to expand businesses with profitability. The report references case studies and empirical sources to support its claims, providing a comprehensive analysis of the topic. The conclusion reiterates the importance of tax reforms in shaping the economy and suggests that lowering tax rates in the US could lead to significant positive changes for businesses.

Assignment: 17021128745758
Title: Tax Reformation: A Reflective Evaluation
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Date: 14th February 2017
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Assignment: 17021128745758
Table of Contents
Introduction................................................................................................................................3
Argument in favour of lowering tax rates..................................................................................3
Arguments against the lowering of corporate tax rates..............................................................4
Reflective evaluation..................................................................................................................5
Conclusion..................................................................................................................................5
References..............................................................................................................................6
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Assignment: 17021128745758
Introduction
The corporate tax reforms are the most talked about topics identified in the past few years.
Certain loopholes or uncertain decision had been offered by the government in the context of
corporate business taxes that had affected the yearly turnover of the American multinational
companies (Chirinko, and Daniel J, 2010). As most of the American native organisations are
shifting overseas due to a lower rate of taxes in comparison to U.S, the discussion regarding
tax reformation and lowering the present tax rates would be presented in an argumentative
way. Based on the case study, several aspects reading American taxation would also be cited
in the following components.
Argument in favour of lowering tax rates
In the contemporary political context, one question has raised by the corporate world with
sheer potentiality that does the increment of corporate tax rates are able to destroy job
employment in America? Or do the lowering of corporate tax rates would help in increasing
job vacancies in the American multinational organisations (Bellak and Markus, 2009). To
answer these questions, an argument in the context of reducing corporate tax rates can be
presented in a supportive manner. Related to the case study, it is evident that the American
multinational organisations have to pay corporate taxes more than the rate of other foreign
countries than in the U.S (Devereux and Simon Loretz, 2012). Emerson had paid the
corporate taxes more than the half of $1.3 billion in the US, in comparison to other regions of
the world. Therefore, it would be beneficial to reduce the corporate tax rates in the U.S as the
foreign direct investment are supposed to get attracted. It has apparently been recorded that
lowering tax rates has influenced and instigated more FDI by the foreign multinational
organisation and this has managed the enhancement of the scope for more employment in the
native organisations (Feredea, Ergete and Bev Dahlby, 2012). The high tax rates are seen as
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Assignment: 17021128745758
the disincentive aspects, as it reduces the power of the multinational organisation in the US to
regain the increased amount of profit after tax paying. Therefore, in the case of the Emerson,
it is predictable that if the tax rates were low, then the company would be able to acquire the
ownership of APC, as it will be able to draw the repatriated profits similar to the French
company named Schneider Electric. As it is seen in the case study, that the French company
is able to possess the American organization APC while offering $0.5 billion more, it proves
the fact that foreign organizations have the ability to dominate shares of American
organization than the native organization possess shares of foreign organizations (Devereux
and Simon Loretz, 2012). Hence, it is beneficial for the native multinational organisation in
the U.S to acquire a lower corporate tax rate in order to obtain the larger amount of profit or
yearly turnover and lowering corporate taxes would lead to a more prosperous business
environment in America.
Arguments against the lowering of corporate tax rates
On the contrary, along with the beneficial aspects of lowering tax rates in America, there are
certain negative impacts regarding the tax reduction (Gale and Andrew A, 2014). Few
arguments against the tax reduction or reformation can be presented to show what
consequences are waiting in this regard. Thus, it is evident that many researchers have cited
that if the tax rates could be reduced then the economic growth would be affected and the
contemporary US corporate rates would lose its value in comparison to those of 1990’s in
such an era of a fast growing economy (Devereux and Simon Loretz, 2012). This could result
in reduced organisational values that depend mostly on the foreign direct investment.
Arguments have found regarding the cuts in the corporate tax rates and it was assumed that
high tax rates directly impacts on both American and foreign investments by the companies.
But several in-depth analyses by the experts has manifested the fact that tax rates hardly
influence the investment facts. As it is proposed in the case study that the corporate tax rates
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Assignment: 17021128745758
should be reduced from 35 percent to 25 percent so that the American multinational
organisation could also invest and have shares in the foreign companies as well (Chirinko,
and Daniel J, 2010). Though, it is evident that lowering tax rates could invite foreign
companies to invest in the US, but that benefit would be a small part of the profit gained by
the companies. Though there is a humongous demand of tax reduction in the US by the
corporate world.
Reflective evaluation
After going through the empirical sources related to tax reduction or tax cuts in the U.S, I feel
that tax rates at the corporate level should be reduced as through lower tax rates companies in
the US would be able to acquire more profit at the end of the year. At the same time, the
organization can have the ability to possess the shares of foreign companies and also would
obtain the capability to invest in the foreign multinational companies. In relation to the case
study, the French tax law is flexible enough to provide the scope to the companies to obtain
repatriated rate of profit drawn to the home country. Similarly, if the corporate tax rates are
lower than the present ones, therefore, American multinational organisations would be able to
acquire larger amount of profit after tax paying. The present tax rates are really high which
causes certain complications for USA companies to do business as seen in the case study, the
US company Emerson had failed to own the APC due to the offer made by the French
company Schneider Electric. The reason behind this was the French tax law that allows the
company to regain most of the profit out of its investment after tax paying that directly affects
economic growth.
Conclusion
To concludes, it is imperative to state that tax reforms could bring noticeable changes in the
economy of a region. As the high tax rates in the US causes the companies to pay more than
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the amount that they pay in other regions. Therefore, as per the argumentative structure of the
study, it can be asserted that tax rates should be lowered in the US for companies to acquire
scope to expand businesses with profitability.
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Assignment: 17021128745758
References
Bellak, Christian and Markus Leibrecht. "Improving Infrastructure Or Lowering Taxes To
Attract Foreign Direct Investment?". Perspectives On Topical Foreign Direct Investment
Issues By The Vale Columbia Center On Sustainable International Investment No. 6, June 3,
2009, 2009,.
Chirinko, Robert S. and Daniel J. Wilson. "CAN LOWER TAX RATES BE BOUGHT?
BUSINESS RENT-SEEKING AND TAX COMPETITION AMONG U.S.
STATES". National Tax Journal, December 2010, 63 (4, Part 2), 967–994, 2010,.
Devereux, Michael P. and Simon Loretz. "How Would EU Corporate Tax Reform Affect US
Investment In Europe?". Tax Policy And The Economy, vol 26, no. 1, 2012, pp. 59-
92. University Of Chicago Press, doi:10.1086/665503.
Feredea, Ergete and Bev Dahlby. "THE IMPACT OF TAX CUTS ON ECONOMIC
GROWTH: EVIDENCE FROM THE CANADIAN PROVINCES". National Tax Journal,
September 2012, 65 (3), 563–594, 2012,.
Gale,, William G. and Andrew A. Samwick,. "Effects Of Income Tax Changes On Economic
Growth". Economic Studies, 2014,.
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