Abstract
Estimates of over 20 billion of tax revenue are lost to our economy because of corporate inversions. Therefore, lawmakers are actively exploring ways to stop the hemorrhaging of corporate tax-revenues, tighten restrictions on corporate inversions, and to find ways to collect on defer tax revenues. From a business prospective, corporate inversions are nothing less than prudent, innovative, business strategies to enhance corporate profits. However, it’s undoubtedly having a significant impact on U.S. tax revenues and ultimately reducing domestic investments. Ireland is now the most popular new home to many U.S. Corporations, especially within the pharmaceutical industry. The advantageous tax incentives offered by Ireland is a “no-brainer,” when compared to the heavy taxes levied upon domestic business. Since the Tax Reform Act of 1986, there has been no major tax reform to the United States Tax System. Despite the various proposals and recommendations made to address this growing economic issue, all concern parties are in consensus that the United States Tax System needs reform.
Highlights
C orporations’ tax is the third largest source of federal revenues and approximately 2 % of the U.S Gross Domestic Product (GDP)
Estimates of over 20 billion of tax revenue are lost to our economy because of corporate inversions
Lawmakers are actively exploring ways to stop the hemorrhaging of corporate tax-revenues, tighten restrictions on corporate inversions, and to find ways to collect on defer tax revenues
Summary
C orporations’ tax is the third largest source of federal revenues and approximately 2 % of the U.S Gross Domestic Product (GDP). Over the years, this source of revenue is diminishing due to corporate inversions. Multinational Corporations whose parent companies are base in the U.S are migrating to foreign jurisdictions that provide significant tax incentives, along with other fringe benefits. Companies involved in inversions, have never disclosed that tax incentives were their primarily reason for migrating. The U.S Corporations benefits greatly with tax-savings and the foreign countries benefits with large capital inflows and investments, stimulating their economy. For the purpose of this article, we will explore what are Corporate Inversions, what impacts it has on the U.S economy, what roles CPAs play, and what preventative measures are available to combat this issue?
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