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Inversions highlight antiquated US tax system
First published in International Tax Review, 22 August 2014
Far from representing the lack of economic patriotism of US companies the trend of inversions out of the US is indicavative of just how antiquated the US tax code is.
The US' federal tax rate of 35%- which can effectively rise to 40% with state and local taxes- and its system of taxing companies on their worldwide, places the country as an outlier. Inaction is akin to the US moving backwards on an anti-competitive path because other jurisdictions are continuining to reform their practices to attract more investment. The US tax code means the country is not only struggling to attract new investment, it is also failing to maintain existing levels of investment.
"It is unsurprising then, that a number of businesses are exploring corporate tax inversions- a transaction whereby a foreign corporation acquires a US company so as to remove non-US business expansion from the reach of the US corporate tax system," said Frederic Donnedieu, chairman of Taxand.
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