Rate tables released by the Organization for Economic Corporation & Development (OECD) confirms U.S. has the “highest burden” of corporate taxes than any other leading country. As allegations of businesses dodging U.S. tax make public headlines, Stuart Varney, of Varney & Co., reported to Fox News feelings of concern among American citizens and U.S. based businesses. Varney generalized his consensus that “all levels of the country” are affected by the sting of high tax rates, not just the corporate arena, which are at 39.1 percent.
The White House’s approach to lowering the tax burden has drawn speculative attention into the country’s Tax Laws. The Tax Foundation measured the United States against 134 countries and their reports were as many expected . Their analysis broadened the average American’s understanding of the U.S. Tax rate and how it held up against other countries. The federal tax ordinances are wrapped in regulation and ambiguity and that OECD report confirms that the U.S. has the highest corporate tax rates in the industrialized world.
Varney also reported that a new policy will ensure American based corporate owners are not allowed to evade taxes by purchasing foreign companies and then transferring complete ownership overseas. Even though this policy seems to address the bulk of the problems in the debate on inversion, this policy still has its loop holes. Varney confirms the fact that nothing stops a foreign business from purchasing an American Corporation and then re-positioning that business under foreign ownership.
Next is the question of who is really investigating and enforcing tax evasion policies? OECD was founded in 1961 and is the organization for industrialized governments whose mission is to advise on foreign taxation policies.
Worldwide Tax Summaries published by the PwC, a tax consultancy, lists the 34 countries in the organization that make up the industrialized world; four countries were recently added in 2010, among them were Israel, Chile, Estonia, and Slovenia. It has been reported by Fox News that many of the companies allegedly accused of inversion have migrated their businesses to countries such as Germany and Ireland.This has shocked many since these countries are members of the organization, in part, to receive counselling and advice against such activities. Based on the OECD Committee chart, by PwC, these two countries, along with the US, are not only members, but they are founding members of the OECD.
The committee’s mission states that it is committed to promoting policies that improve economic and social well-being of people around the world, and to set international tax standards, such as, the OECD Tax Convention which manages and transfers key responsibilities for Pricing Guidelines. The OECD also brings a resolution for issues such as tax competition with economies not affiliated with OECD, as well as cases of tax evasion tax proceedings on environmental issues.
Deloitte published the 2014 tax guides and highlights The Obama Administration’s attempt to put up barriers, in hopes of protecting IRS interests, as a defense against American foreign corporate structures. The tax report highlights updates of 2014 rules of the Foreign Account Tax Compliance Act (FATCA). Theses new rules are designed to prevent a U.S. person from evading tax laws through foreign accounts and entities. The FATCA rules are now found as a new chapter in the Internal Revenue Code (Chapter 4) in 2013. It aims at addressing perceived tax abuse by U.S. persons through the use of offshore accounts.
The report clearly outlines new rules that will require foreign financial institutions (FFI’s) to provide the Internal Revenue Service (IRS) with information on certain U.S. persons invested in accounts outside of the country. It also requires that certain non-U.S. entities to provide pertinent information about any U.S. owners. Deloitte adds that there will be “penalties that can be enforced by imposing a 30 percent tax withholding” on U.S. source income. This is income that is not normally subject to a withholding.
The fixed or determinable annual or periodical (FDAP) payments policy for withholdings for FATCA went into effect on January 1, 2014. FATCA withholding for FDAP gross proceeds will begin January 1, 2015, but will not fully go into effect until after 2016. These new FATCA rules come in addition to previous requirements that are detailed and enclosed in the tax laws. The new law allows actions to be taken against U.S. taxpayers and tax agents that either fail to disclose information or fail to perform sufficient due diligence on who pays taxes.
Now whether media outlets are exaggerating the magnitude of the high corporate tax rate, data from the OECD confirms that Japan is only trailing the U.S. by 2.1k percent and France by 4.7 percent. So “high” is definitely relative. As data shows, many countries are contenders. As the undisputed holder of the highest corporate tax rate, recent IRS changes are clear about its policies and the position of the U.S. government: pay your taxes, do not invert business ownership overseas, and failure to comply has consequences.
By Carolette Wright