An accounting trade journal – doesn’t exactly spark enthusiasm, does it? With the usual light skim through the latest issue of the PICPA (Pennsylvania Institute of Certified Public Accounting) Journal, however, I came across a fairly interesting and jargon-less article on corporate tax reform that delves into the issues with current tax laws, and some solutions for a comprehensive income tax reform. Highlights included the following data points:
- The Federal U.S. Tax Code has not had a major overhaul in 27 years
- The International Provisions of the code have not had a major overhaul in 51 years
- 32 of the 34 members of the Organization for Economic Co-operation and Development (OECD) have lowered their corporate tax rates over the last thirty years; the US has not
- The weighted average corporate tax rate of non-US members of the OECD is 30% compared with the US at 40%
- The US government taxes income on a global basis, regardless of where it is generated; 28 of the 34 members of the OECD tax income on a “territorial” or country-by-country basis
In our practice, we see the effects of antiquated tax legislation as high U.S. rates relative to the rest of the world manifest themselves in outsourcing work to other countries, establishing international headquarters outside of the U.S., and establishing labyrinth programs at global tax minimization strategies. There appears to be broad agreement between the House Ways and Means Committee and the White House on the details of an overhaul; if only we could get past budget approval, debt approval, and healthcare implementation issues! Perhaps if we put tax reform first, these other “hot topic” issues would follow in suit.