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As President Donald Trump’s new tax plan seems to be getting stronger and receiving bigger support, many have taken time to dissect its main characteristics, in an attempt to understand how it will affect US-based businesses and the new “permissions” it grants for bigger companies in terms of revenues and overseas operations. What many consider the main concern the tax plan seems to champion is the loose definition it provides the amount of taxes a company is compelled to pay.
Implementing what has come to be known as a territorial system in which any US company with operations outside the country would only have to pay taxes to the territory in which they are making earnings, the new plan would cut corporate taxes from 35 to 20 percent. The GOP-backed idea is generating some concerns, given the very real possibility of having many companies move their operations to well-known tax havens, where they would be free from paying any percentage whatsoever.
So, if there is a company that has settled in a territory where there are no taxes to be paid, they would legally be protected by this bill. This is the panorama the worries economists in the US, mainly because it creates an unstable scenario for millions of workers in the United States who would be greatly affected by the move.
As if it weren’t enough, word about a 10% tax rate determined by a company’s global profit has been getting stronger. In this scenario, any company with overseas presence would only have to pay a 10% based on their total revenue around the world, so if they have operations in a tax haven and a separate second location, it would be mandatory for them to pay taxes only on the second location.
What the tax plan considers to be a 10% of global profits consists mainly of revenue made via tangible investments like equipment, labor or even office supplies. So, if any company decides to move profitable operations gathered through intangible items to a tax haven, they would still not have to pay taxes– their revenues would be intact thanks to a smart move.
As it seems, the worrying details are in the tiny writing, for many consider this to be a comfortably laid panorama for multinationals to shift their operations elsewhere while not paying taxes to the US government, legally. A direct result would be the loss of millions of jobs due–in part–to corporate greed, which will aim to generate revenues, regardless of where the company might be based or if its equipment and office supply is a registered tangible item.
Although it was first advertised as a strategy to keep jobs and earnings on national grounds, the Republican-created international tax plan seems to fail to do so– the direct benefit from its implementation would only be seen by big companies who know a thing or two about moving their profits between specific locations around the world.
On a separate note, it would probably be a good idea for someone to get Mr. Trump some editing software, especially for those late night tweets.