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Financial Standards Review

In: Business and Management

Submitted By jpan
Words 673
Pages 3
Jingwa Pan
Introduction
US corporations has been using loopholes to minimize their tax reported annually, however, recently president Obama have claimed that some actions should be taken to avoid those corporations taking advantages of these loopholes in tax regulations which have helped them avoid tax duties. Corporations’ taking advantage of such tax duties can cause unexpected results. Other hardworking corporations and individuals may have sense of unfair. This report will analyze the problems that exists about those corporations escape tax duties using the loopholes of tax regulations as well as an explanation on President Obama’s new claim about tax returns.
Problem statement
Inversions are transactions in which a U.S. company merges with a foreign company overseas to lower its tax burden.(citation 1) So far, tax avoiding corporate inversions lowers companies’ tax bills by allowing them to redomicile overseas even though their core operations and management usually remain in the United States. (citation 2) This is a loophole in tax regulation that corporations will take advantage of it by reincorporate overseas while lawmakers haven’t notice about it. A lot of investors and entrepreneurs has been looking for a good way to reduce the tax duties as much as possible. Since the U.S. has one of the world’s highest top rates which is 35%, although effective rates everywhere can be substantially lower depending on tax breaks and other incentives, the U.S. also is one of the few developed countries that still seek to tax their companies’ global earnings while most countries tax only profit earned inside their borders. (citation 3) Therefore, many US companies choose to relocate their companies to other low tax countries to reduce the impact on the results of operation by tax regulations.
Analysis
A lot of U.S. companies move its location overseas for several...

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