Threat of more businesses leaving U.S. due to high corporation tax

24 Jul

Following the Chairman of the Senate Finance Committee, Roy Wyden’s comments earlier this week, in which he spoke of his opposition to U.S. businesses moving their headquarters to other countries with lower taxation, it’s my opinion that unless the corporation tax in the States is reduced, more and more companies will follow suit.

Corporation tax rates in the U.S. are broadly viewed in the business world as anti-business and uncompetitive. Many American firms have no desire to move their head office out of the country, but as pressure from shareholders increases, a move to a lower tax destination is an option that increasingly has to be considered.

To my mind, the government needs to reduce corporation tax sooner rather than later. If the risk of capital flight continues to rise, the implications for the country could have devastating consequences. Investment could drop considerably, putting wages, employment, living standards and the economy as a whole at risk.

If the current rate of corporation tax is maintained, then a growing number of multinational companies in the U.S. will inevitably move out of the country into jurisdictions such as the UK or Luxembourg, which have comparatively lower tax rates.

As those opposed to the reduction of corporation tax believe that this tax being higher is better than increased personal taxation, I’d like to remind them that the burden of high corporation tax is shouldered by people. These include investors as they reap lower returns, by employees who could suffer wage cuts and by consumers who will inevitably suffer as prices rise.

However, if the corporation tax is reduced, the collection base would increase and there would also be an upturn in revenue – and the lower rates would overnight make the United States a more attractive location for wealth and job generating companies and investors.

Nigel Green deVere Group

Written 24th July



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