Living standards, jobs, and long-term economic growth are at risk because an increasing number of U.S. firms are likely to relocate overseas in response to America’s current “uncompetitive and anti-business” corporation tax rate, warns the boss of one of the world’s largest independent financial advisory organizations.
The prediction from Nigel Green, the founder and chief executive of deVere Group, which operates in 100 countries worldwide, came after the Chairman of the Senate Finance Committee, Roy Wyden (D-OR), once again spoke out against inversions, or mergers, in which U.S. companies move their headquarters to relatively lower tax jurisdictions, such as the United Kingdom and Luxembourg.
‘Uncompetitive, Anti-Business’ Taxes
“Unless the current corporation tax is slashed, it is highly likely that an increasing number of America’s multinationals will relocate to overseas jurisdictions with lower tax rates,” said Green. “The current U.S. rates are widely perceived in the corporate world as uncompetitive and therefore comparatively anti-business. This is evidenced by the fact that a growing number of American firms are considering such a move out of the U.S.”
He added, “The vast majority of American companies do want to remain headquartered in America, but with the tax code as it stands, and with obligations to shareholders, there is mounting pressure to consider overseas, lower-tax destinations.”
If America’s tax regime remains as it is, capital flight out of the United States “will soar” and cause investment to stall, which would hit productivity and harm wages, jobs, living standards, and long-term economic growth, Green said.
‘Corporations Don’t Pay, People Do’
“To the opponents of reducing corporation tax who cite that higher corporation tax is preferable to higher personal taxation, I say this: Corporations don’t pay corporation tax, people do. The burden of comparatively high corporation tax is carried by investors through lower returns, workers through reduced wages, and/or consumers through higher prices,” Green said.
He said significantly lowering the corporation tax rate would expand the tax base and increase government revenue.
“A reduction would instantly make the U.S. a more desirable location for businesses and investors. Essentially, it would powerfully tell the world that the United States is open for and supportive of business,” he said.
George Prior ([email protected]) is principal and founder of Prior Consultancy, an international communications agency in the United Kingdom and Spain. Used with permission of Prior Consultancy.