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US policy is creating an uneven playing field

USA
26 Sep 2014

First published in The Financial Times, 26 September 2014

Sir,

The examination of tax inversions is right to question whether the reforms will go far enough to dissuade US companies from considering a shift away from the clutches of the US taxman. What was not explored, however, is the obvious rationale for companies to consider inversion: US-based multinationals are simply trying to ensure they are on a level tax playing field with their non-US competitors.

The measures being taken in the US are at odds with several other jurisdictions across the globe who are taking steps to make their tax environments more attractive to multinational companies, recognising the investment and employment benefits they bring. The difficulty for the US is that any move to reduce the corporate rate and move to a territorial taxation system is unlikely to be welcomed by the voting public.

In the short term, the new rules may slow the drum beat of inversions, but in the long term, global business leaders will view the US as a tax trap – at a high rate with no escape hatch. As such, the US may be forced to make itself more attractive, or risk losing more of its biggest names in business.

The continued approach of the US on this issue is yet another example of antiquated tax policy that fails to create a pro-business environment. The country is creating an uneven playing field and losing out to those jurisdictions that recognise the benefits of a progressive tax policy.

Mr Frederic Donnedieu, Chairman of Taxand

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The continued approach of the US on this issue is yet another example of antiquated tax policy that fails to create a pro-business environment. The country is creating an uneven playing field and losing out to those jurisdictions that recognise the benefits of a progressive tax policy.

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