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The Economics of Corporate and Business Tax Reform

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The Economics of Corporate and Business Tax Reform

CESifo Group Munich,

5 min read
5 take-aways
Audio & text

What's inside?

To understand why companies like Apple hold vast amounts of cash overseas, read this timely report.

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Editorial Rating

8

Qualities

  • Analytical
  • Well Structured
  • Overview

Recommendation

Corporate tax reform is a hot topic in today’s US political environment. Professor Dhammika Dharmapala looks at how America’s corporate tax structure has led to multiple anomalies, such as the practice of firms keeping earnings offshore and relocating their headquarters abroad for tax reasons. Dharmapala’s analysis looks purely at the economic aspects of corporate taxes, omitting the more controversial political facets, but it provides a useful framework for reform. getAbstract believes policy makers and business executives would benefit from this informative report.

Summary

Business tax reform is a major issue in the United States, which has a higher nominal corporate tax rate than other nations. It’s also the only top economy that continues to tax its US-based multinationals on their global earnings.

Thus, the US tax structure encourages several inefficient corporate behaviors. For instance, an enterprise is more likely to favor a location for business investment in which its post-tax return is higher, even if it could garner a better pre-tax return elsewhere. Research shows that for every one percentage point reduction in its tax rate, a nation gains 3.3% more in foreign direct...

About the Author

Dhammika Dharmapala is a law professor at the University of Chicago.

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