Why it is difficult to bring down the high corporate taxes in US ?

A major difference between other countries and US tax laws is that US charges taxes on global income of individuals and corporations.

This system is based on a differential basis : If a US based entity has paid 15% tax in its business in another country and the tax rate for it is 30% in the US, it has to pay additional 15% in US.

On the other hand, if a US based entity has paid 40% tax in another country, and the tax rate for it is 30% in US, it is reimbursed 10% by the US Government.

The nature of this law makes it very difficult for the US to reduce tax rate to lower than most other countries, as that would mean US will have to reimburse the extra taxes paid by US entities to do business in other countries.

 

Sanjeev Sharma

Consultant and Author of '5 Core Methods of Innovation'

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